Accounts receivable automation (ARA) is a software-enabled process designed to assist businesses in streamlining and expediting payment collection processes more efficiently and effectively, while keeping an eye on crucial accounts receivable KPIs such as DSO and Aging reports.
Before accounts receivable automation, it was difficult to accurately forecast cash flow and collections performance. Below are five benefits of accounts receivable automation:
1. It reduces the risk of billing errors
AR automation reduces manual data entry, invoice chasing, and other error-prone processes – decreasing billing errors that can have costly repercussions for a business.
Improved customer experience: Team focus can allow teams to provide more attention to customers who require it, leading to reduced churn rates and higher cash flows. Employee happiness increases productivity; this results in lower churn rates and greater cash flows.
Automated AR can also assist businesses by expediting payment processing by quickly creating and issuing invoices – significantly reducing days sales outstanding (DSO) and improving cash flow. Furthermore, this system helps companies avoid bad debt write-offs by tracking payments to reduce delinquency; and sending reminders or alerts via email or SMS when an invoice is due for payment.
2. It reduces the risk of delinquency
Payment collection may not always be top of mind for many organizations, yet it can have a dramatic effect on cash flow and customer relationships. When done effectively, automated AR processes can reduce involuntary churn rates while strengthening customer engagement by offering timely communications with relevant information to customers.
AR automation helps streamline financial operations and drive efficiency, accuracy, and growth for businesses of all sizes. Not only does accounts receivable automation benefit finance departments; sales and customer service teams who work directly with customers also reap its benefits as they can provide invaluable feedback regarding client experiences and needs to help refine AR procedures for optimal client experiences during order to cash cycle processes.
3. It reduces the risk of fraud
Handling tasks manually creates more opportunities for error, with potentially severe financial repercussions for revenue and cash flow.
AR automation helps mitigate these errors by eliminating or substantially reducing manual intervention in key accounts receivable processes like invoicing, accepting payments, and reconciling invoices to payments owed. This makes it easier to detect and correct mistakes that might otherwise remain undetected.
Automated payment reminders provide customers with regular and timely updates regarding their outstanding balances, helping to reduce late payments and streamline the collections process. They also allow finance and sales teams to collaborate more closely together in clearing away roadblocks to collection efforts for faster payments, reduced DSO, and enhanced cash flow.
4. It reduces the risk of customer service issues
Accounts receivable is the essential cog in any business engine, yet its proper management can be challenging. This vital function has an impactful influence on budgeting, revenue goals, and the overall growth of any organization.
Organizations using automation systems to process payments faster can reduce customer payment lag times and risk, ultimately helping lower bad debt risk.
Automation can save time, money, and staff resources by freeing staff up for more pressing duties that contribute to the company’s success. Employees freed of tedious manual tasks are less prone to errors and provide superior customer experience with reduced customer retention rates. By offering convenient payment options such as self-service portals and accurate invoicing solutions to their customers, organizations can boost their reputation while building loyalty amongst their customer base.
5. It reduces the risk of data loss
Accounts receivable processes are notoriously complex, and while people will always play an integral part, human errors can add significant expense. Automating helps reduce human errors, thus saving both time and expense.
Integrating accounts receivable and accounting systems together ensures that accurate information is readily accessible, thus minimizing delays in payment processing. Likewise, two-way integration ensures that information remains current.
Accounts receivable automation will save your business money and allow it to expand. A well-managed system makes collecting payments on time easier, cutting your DSO and staying ahead of the competition while strengthening customer relations and increasing cash flow. But before diving in with AR automation, be sure that its technology suits you and your team’s needs.
