Why you should automate your AR process

Accounts receivable (AR) automation refers to the use of technology to automate the accounts receivable process.

It includes tasks such as creating and issuing invoices, managing customer credit, and handling payments and collections.

It can also involve replacing paper-based and manual methods with digital solutions.

The biggest benefits of AR automation are reduced costs and faster cash flow. In addition to better customer service, security and management insight.

An AR system that can be integrated with order management and an accounting software can maximize the return on the automation investment.

Introduction

It should not be a surprise that automation is the most rapidly expanding area of technology investment. Any technology that reduces human intervention is a manifestation of the ongoing process of evolution in the workplace.

According to a research by Gartner, automation is expected to have a net positive impact on the global economy, generating an estimated value of US$15 trillion by the end of the decade.

From small to large businesses, organizations are implementing smart technologies to increase efficiency, productivity, and address the changing workforce. This is being done in order to remain competitive in a continually evolving environment.

The process of accounts receivable (AR) poses a variety of challenges for businesses of all sizes. Those responsible for managing accounts receivable are consistently under pressure to improve their methods and increase cash flow.

Automation can often provide a solution to the difficulties associated with AR and help managers maintain the financial health of their business.

Challenges of manually taking care of AR

Manual processes, including those related to accounts receivable, are often inefficient and prone to errors. This can lead to slowed cash flow and increased instances of bad debts. This is particularly problematic for companies with high volumes of AR transactions.

Errors in manual AR accounting can also harm future sales by causing issues such as lost documents, incorrect data on invoices, or incorrect invoice delivery. These problems can lead to extra work and collection difficulties for the company and frustration for the customer.

Manual AR processes are hard to monitor, secure, and they can be vulnerable to fraud.

What Are the Benefits of AR Automation?

Using AR automation can help businesses save money and improve their cash flow by streamlining their order-to-cash cycle, i.e., the company’s activities between making a sale to a customer and receiving payment. AR automation helps also to shorten the order-to-cash cycle, allowing businesses to receive payment more quickly. This is especially effective when combined with other systems like order and inventory management.

AR automation can help to decrease the number of days it takes for a sale to be paid, known as days sales outstanding (DSO). It does this by streamlining invoicing processes and improving cash flow, which increases a company's liquidity.

Streamlining the AR process also helps to reduce the number of human errors. This helps improving the accuracy of the AR process, reduces the risk of fraud, and improves the customer relationships.

Studies demonstrate that AR automation can significantly lower the costs of processing invoices and collecting payments. While different studies report varying statistics. The American Productivity & Quality Center (APQC), for instance, estimates a reduction of 45% in invoice processing costs when using automated AR instead of manual processes.

On the other hand, the Association for Financial Professionals (AFP) reports that the average cost of processing an invoice is $7.50, while the average cost of collecting a payment is $5.50. The APQC reports a reduction in invoice processing costs of 50% when using automated AR instead of manual processes.

This result is similar to other data indicating significant cost reductions when using automated AR instead of manual processes. These savings stem from reduced labor, improved workflow, and lower overhead costs.

How Tresorbase can help

We can assist finance leaders who are seeking to improve efficiency, productivity, and optimization in their accounts receivable processes.

Tresorbase provides a comprehensive AR solution that fully automates your accounts receivable.

You can create invoices, automatically send them to your customers. Connect your bank accounts and track payments, create dunning workflows to reduce late payments, and also share a customer portal with your customers to allow them to pay online.

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.