Automating the accounts receivable process has been an important initiative for many companies in the past few years. A study conducted by PYMNTs reveals that half of surveyed companies cite manual processes as their biggest challenge for managing their AR[1].

There are many benefits to automating the AR flow. Let’s start with 3 benefits that most companies would expect to see if switching to a more automated accounts receivable process.

Accelerate Cash Flow
Automating the collection process will speed up the payment cycle and help you get paid faster. The sooner customers receive their invoices, the sooner they can pay. Mailing physical invoices to customers extends the length of the payment cycle because regular mail can take days to be delivered. However, sending electronic invoices and posting them online for customers to view is immediate. With the rise in the Days Sales Outstanding (DSO) averages, especially those in the B2B industry, companies should be focusing on process improvements that encourage timely payments. According to PYMNTs, up to 88% of firms were able to reduce their DSO by automating their accounts receivable process[2].

Automation can also help reduce late payments. Payment reminders are a great way to encourage customers to pay on time, but finding the resources to send out payment reminders can be difficult. That is where automation comes in. You can create reminder templates and then schedule them to go out on a recurring basis for any outstanding invoices.

Reduce Manual Labor
The collection process can have quite a few steps: delivering the invoice, sending a reminder, collecting and processing payment info, sending confirmation receipts, and applying the payment. The more steps in the process that remain manual, the slower the payment cycle will be. Manual labor also increases the chances of billing mistakes, which can delay the customer’s payment. Automating the process to cut down on manual entry and human error reduces the time it takes to process a payment and decreases the chance of creating more work to fix any mistakes.

Improve Visibility and Reporting
In order to have proper reporting and visibility across departments, you need the data shared in real time. If a payment is processed manually, say taking a check to the bank or processing a credit card on a physical payment terminal, the payment is still missing from your accounting system until it is manually entered. Therefore, from a record perspective, the customer hasn’t yet paid, which throws off the reporting and can even delay delivery of products and services to the customer. By automating the AR process, specifically the application of approved payments to their associated documents, companies can pull real-time reports of their outstanding AR as well as improve the efficiency of delivering goods and services to their customers.

Saving time and improving business processes are often the perks that companies can foresee with automation, but now let’s dive into a few benefits that may not have crossed your mind.

Increase Employee Satisfaction
Hiring has become increasingly difficult, so companies should focus on retaining the talent they already have. Employees are more likely to stay at companies where they feel valued and are engaged. Bogging your teams down with tedious tasks can create stress and fatigue while making them feel less appreciated. Reducing repetitive, manual tasks gives employees more time to focus on creative, higher-valued projects, which increases engagement and morale. Happy employees are not only more likely to stay but have also been reported to be 21% more productive[3].

Decrease Cost
Some might see automation as an increased cost to their business due to software fees. However, by implementing automation software, you can reduce your overall cost. For example, paper billing not only includes the direct cost of materials like paper, ink, envelopes, and stamps, but it can also incur indirect costs like loss of productivity and negative cash flow. Plus, the cost goes up with each additional invoice, meaning as your business grows, so will your costs when using a manual process. Automation can eliminate the cost of paper billing and keep operating costs low as you scale.

In addition, for companies processing credit cards, there are ways to reduce processing fees by sending more data during a transaction. Credit card transactions are categorized as Level 1, Level 2, or Level 3 based on how much detail is provided at the time of processing. If merchants can send more data with the transaction, card brands will view it as carrying less risk and therefore offer lower rates. You can read more about this process in our Level 2 and Level 3 purchase card details blog.

Sending Level 2 and Level 3 data could mean sending 10s if not 100s of additional fields with the payment card data for a single transaction. Doing this manually is error-prone and impractical. However, this process is easily automated with the right technology. Processing Level 2 and Level 3 data with a payment platform that can automatically extract the required data fields will be just as easy for your team as processing a basic Level 1 transaction and will save you money in the process.

Strengthen Customer Loyalty
Companies often try to strengthen customer loyalty by offering incentives, promotions, and discounts. But if we want customers to continue to buy from us, we also need to make the bill paying process as easy as possible. If they cannot easily make a payment, or if their products or services are often delayed, customers will be more likely to search for a new vendor. By automating the AR steps on your side, you can improve your customers’ experience because they will receive their invoices on time and be notified of upcoming due dates. By automating the bill paying process for your customers, you can reduce their workload. For example, you can offer customers the ability to sign up for automatic payments so they can have their payment method processed on a recurring basis without the need for human interaction.

For more information on automating your accounts receivable process, contact us at 1-909-482-4701 or sales@nodus.com.

Sources:
[1] B2B Payments Innovation Readiness Playbook 2020 | PYMNTS
[2] B2B Payments Innovation Readiness Playbook 2020 | PYMNTS
[3] 20 Incredible Productivity Statistics 2023 | Zippia