What AR Automation is and why you should care

What is Accounts Receivable (AR) automation?

Accounts Receivable, Order To Cash, Invoice To Cash, Credit Management. Depending on the size and type of business it might be called in a different way.

But there's no doubt. Sending invoices, receiving payments, providing credit and understanding your company's cash flow are critical to the success of every organization.

What's wrong with a manual AR process?

Nothing.

Whatever tools you've been using so far has probably helped you well.

But will the same process work in 2, 3 or 6 months? Often the answer is no.

An AR process based on Google Docs or spreadsheets works well for a few invoices/month, but what happens when you start having +100 invoices/month?

I was chatting with a finance director of a recently IPOed company, with +300 people.

They had +$4.850.000 of overdue invoices. Reducing the amount of outstanding invoices was also part of their OKRs.

Did that help? No. Did hiring interns help? No.

Finance teams have so many competing priorities. That's why reducing the amount of manual work is critical.

Modern companies also need better collaboration between finance, customer success and sales. Putting again more pressure on the finance team.

If this was not enough, manually producing and sending invoices to customers is inefficient and error prone.

What AR automation gives you

Time, reduce costs, prevent errors and give insights.

One of the common complaints finance leaders have is not spending enough time on critical things.

Sending invoices to customers is important. But understanding how to increase your margins or expand into a new segment is way more critical.

AR automation enables finance teams to reduce the amount of manual work. Less manual work means less risk of human error and more time to spend on higher-value tasks.

And a more automated sales-to-cash process means better DSO metrics (Days Sales Outstanding).

Choosing the right AR software

Now, what are the things an AR software should have?

Customer onboarding

When you add a new customer you need to collect its business data. Run proper credit checks and verify if the VAT is legit or not (that's a must in the EU).

And if you are onboarding lots of new customers every month that is something you want to automate.

Invoicing and Billing

Depending on your type of business a simple way to create invoices might be enough. For more complex cases you might need a billing engine.

Either way not all the AR software include an invoicing component. You might have to create invoices through your ERP or accounting software.

Collection and Dunning

It's important to follow up promptly with your customers as soon as invoices are overdue.

Reducing your DSO is the best way to improve your cash flow.

Your AR software should enable dunning automation. And keep the Customer Success and Sales Teams in the loop about late payments.

Customer portal

A customer portal gives your customers direct access to invoices, amount overdues and to a simple way to pay.

It's the best way to reduce the number touch-points between your finance team and customers. The last thing you want is to keep getting emails saying "please send me a copy of your last invoice".

Credit management

If you are selling on credit you need to consider the revenue risk attached to every new and old customer.

Balancing revenue and the risk of non-payment is critical to profitability. And the AR software should provide dynamic reporting and alerts.

Highlighting customers at risk and provide real-time analysis on customers' payment trends.

Reconciliation

Once you receive a payment from your customer, your AR software should reconcile the payment with the invoice and mark it as paid.

Syncing the transaction with your ERP or accounting software.

That's critical as finance teams spend lots of time around matching bank transactions with open invoices.

Integrations and APIs

Does the AR software has the integrations I need? Does it have APIs I can use to extend it?

Some common integrations you need to check are with accounting software or ERPs.

Report and Intelligence

The secret power of an AR platform is to provide real-time intelligence on the status of your receivables and cash-flow.

You should have instant visibility on all customer accounts and invoice statuses.

Payment trends, DSO, cash-flow forecasting, expected day of payment, and continuous credit checks.

Up-to-date information simplifies managing risk exposure and creating strategies to improve your cash-flow.

Sales to Finance

In a sales-driven company, the customer/invoice volume depends on your salespeople. More salespeople means more customers.

Contract, billing and expansion are driven by sales. And you don't want any bottleneck between the sales-to-finance motion.

The AR software should streamline that process. And reduce any friction between "close-won" and cash collection.

That's why a CRM-To-AR integration is important. It enables your sales team to operate at full speed.

How Tresorbase AR Solution can help

Tresorbase provides a comprehensive AR Solution that fully automate your accounts receivable.

You can create invoices, automatically send them to your customers. Connect your bank accounts and track payments. Or create dunning workflows to reduce late payments.

And if you are looking for ways to smooth your Sales to Finance motion we integrate with Hubspot and Salesforce. Giving you a fully automated Sales to Cash solution.

Want to learn more? Check our AR Automation product.