Automating Accounts Receivables in 2024: Challenges and Solutions

1. What are Accounts Receivables?
2. Could a lack of automation be holding back your business?
3. What is streamlining in Accounts Receivable?
4. What causes delays in Accounts Receivable?
5. How can automation in Accounts Receivable help my firm?
6. Where could you go wrong?

If you have arrived here, you’ve been stressed about managing the Account Receivables and Account Payables for your clients at your firm. Managing this function across multiple clients with various scales of business could be very daunting. But with technology today, it can be made simpler.

First, let’s understand Accounts Receivables in a second.

What are Accounts Receivables?

Accounts receivables, or AR, are the financial lifeblood of any business. They're like the promises of payment waiting to be fulfilled by your customers. Accounts Receivable is created when a company lets you purchase their goods or services on credit.

Could a lack of automation be holding back your business?

61% of accountants say that manual tasks are taking up their time and preventing them from focusing on more strategic work. (Xero)

Firms that have not automated their AR process take an average of 45 days to collect payments, while firms that have automated their AR process take an average of 22 days to collect payments. (Ardent Partners)

Precision and consultation are one of key reasons why your clients stick with you. Especially, when it’s got to do with your clients receiving money. We empathise with you dealing with this complex process which is time-consuming, error-prone, and detrimental to your clients cash flow. Let’s give a name to these inefficiencies.

• Inefficient Communication:Coordinating with clients for approvals and payments is a time-consuming process.
• Delayed Invoices:Manually generating and sending invoices can lead to delays and missed opportunities.
• Inconsistent Process:Different employees might follow different processes, leading to inconsistencies and confusion.

It's not just about efficiency; it's about optimising your cash flow, reducing errors, and delivering a better experience to your clients.

What if there is a way to solve this, once and for all?

Workflow automation in Accounts Receivables is the silver lining to these challenges.

What is streamlining in Accounts Receivables?

Streamlining in Accounts Receivables is the process of you standardising the AR process for your clients, just once, not having to change the process, unless required.

Over 60% of clients prefer to use Online Payments, Automated Payment Plans and Mobile Application as their preferred mode of Payment. (Accounting Trends Report, 2021).

Most companies have these steps in their AR process.

For one-time payment:

1. Goods or service provided by the company.
2. Invoice is generated.
3. Invoice is sent with payment terms.
4. Wait to be paid.
5. Acknowledge the payment.

For multiple bills to be paid by a client:

1. Share outstanding balance in full.
2. Confirm payment method.
3. Client makes payment.
4. Wait to be paid.
5. Acknowledge the payment.

What causes delay in Accounts Receivable?

1. Manual process : When financial transactions require manual approvals or multiple layers of authorization, the process can become slow, particularly if the necessary individuals are unavailable.
2. Sending incorrect invoices : A lot of manual work during this process is prone to errors and can be time consuming. Having to deal with this in large volumes could cause a significant amount of delay.
3. Not following up in due time : Accountants get really busy with their routine and yes, it does slip in mind. It could also be a difficult conversation to have with the client. In a digitally connected world, follow ups should be timely to ensure cash flow.
4. Not adopting modern modes of payment : We live in a world of Apple Pay, Samsung Pay, QR payment apart from the bank transfers. It’s important that organisations adopt such conveniences for their clients to enable on time payment.

How can automation in Accounts Receivable help my firm?

According to a study done by Ardent Partners, Accounts Receivable automation can help

• Reduced days sales outstanding (DSO) by an average of 20%
• Increased AR collections by an average of 15%
• Reduced AR processing costs by an average of 30%
• Improved AR accuracy by an average of 90%

Automation in Accounts Receivable or in accounting needs to be aided by technology. It also involves you creating an environment for clients to make the payment. A technology with a client portal which can send constant reminders to clients until payment is made

1. Almost no error -Ensure you are choosing the products and service from an approved price book system and generate the invoice. The process begins by creating an invoice diligently after the good or service has been provided.
2. Timely follow up -Once the invoice is generated, our Accounts Receivable automation steps in to gently remind your clients across various communication channels, ensuring that timely payments are made. No need to worry about being intrusive when collecting payments; money is money.
3. Improved Communication and Collaboration -Workflow automation fosters improved communication between your firm and your valued clients. This means your clients can effortlessly review and give their approval to invoices, while your team keeps tabs on the progress of each transaction, ensuring transparency and responsiveness.
4. Streamlined Collections -The technology keeps a watchful eye and, if needed, sends out friendly reminders and automated collection notices. It even takes the initiative to kickstart follow-up actions, all designed to simplify the process of recovering outstanding debts.
5. Data Accessibility -Centralised file management ensures that all financial documents and records are readily accessible, simplifying audit processes and client inquiries.

Where could you go wrong?

The only place where you could go wrong is not considering Account Receivable automation for your firm. The inefficiencies translate into

• Increased Manual Work : Manual data entry, invoice generation, and approval processes can be time-consuming and error-prone.
• Delayed Invoicing : Manual invoicing may result in delays, causing your clients to receive bills later than expected.
• Data Entry Errors : Human errors in data entry can lead to inaccuracies in financial records, affecting your financial reporting and decision-making.
• Inefficient Communication : Coordinating with clients for approvals and payments can become a slow and cumbersome process.
• Inconsistent Processes : Different employees may follow different processes, leading to inconsistencies, confusion, and lack of standardization.
• Cash Flow Issues : Delays in receiving payments can affect your cash flow, potentially impacting your ability to meet financial obligations.
• Client Dissatisfaction: Clients may become frustrated with slow, manual processes and a lack of transparency in payment status.
• Collection Challenges : Managing and tracking overdue payments and debt collection can be complex and time-consuming without automation.
• Compliance Risk : Manual processes may increase the risk of non-compliance with tax and accounting regulations.
• Resource Drain : Valuable human resources are tied up in repetitive, manual tasks rather than focusing on higher-value activities.
• Lack of Data Insights : Manual processes make it challenging to access real-time data and analytics for informed decision-making.

In essence, without automation in accounts receivable, your business may experience inefficiencies, delays, errors, and client dissatisfaction, which can ultimately affect your cash flow and financial stability. Adopting automation can help address these challenges and lead to a more efficient, accurate, and client-friendly accounts receivable process.