Accounts Receivable Software Definition
Accounts receivable (AR) Software is a type of accounting software designed specifically for managing and tracking the money that is owed to a business by its customers for goods or services delivered. It plays a crucial role in the accounts receivable process.
Features of Accounts Receivable Software
Here are some key functions and features of accounts receivable software:
- Invoice Management: It allows businesses to send and manage every invoice. This can include automatic billing and recurring payments for regular customers.
- Payment Tracking: The software tracks payments received against each invoice, helping businesses get a clear picture of any outstanding invoice, partial payments, and paid ones.
- Customer Account Management: AR software often includes tools for managing customer accounts, including contact information, net terms, and historical transaction data.
- Aging Reports: These reports show the duration that an invoice has been outstanding, helping businesses identify overdue payments.
- Payment Reminders and Collections: The software can automate sending payment reminders to customers and escalate collections efforts for overdue accounts.
- Revenue and Cash Flow Forecasting: By analyzing payment patterns and due invoices, AR software can help predict future revenue streams.
- Integration: Many AR systems integrate with enterprise resource management systems, CRM, and banking systems for seamless financial operations.
- Compliance and Reporting: It helps in maintaining compliance with accounting standards and generates various reports for internal and external use.
Examples of Accounts Receivable Software
Here is a list of some of the best accounts receivable software in the market today:
- Growfin: Growfin is an advanced accounts receivable automation software specifically designed for any finance team dealing with high invoice volumes. It stands out as the smartest AR software in the market, enabling these teams to gain significant control and visibility into their collections and cash application processes.
- Tesorio: An AR tool designed for accounts receivable management. It automates tracking of bills and payments, and helps check customer credit and payment collection.
- Gaviti: A dedicated platform for simplifying the invoice-to-cash process in accounts receivable. It includes features for invoice management, payment forecasting, and automated notices for late payment.
- Billtrust: Focuses on managing end-to-end customer payments and offers features like dunning management, customizable invoices, and a billing portal.
- Versapay: A suite of solutions for accounts receivable management, offering payment collection, invoicing, and cash application features.
- Quadient Accounts Receivable: Specializes in the credit-to-cash process, particularly for B2B invoicing. It provides automation and insights into customer payment behaviors.
How an Accounts Receivable Software Works
Good AR software takes care of accounts receivable automation comprehensively. It works by automating and managing collecting money owed to a business from its customers.
The software streamlines the invoicing, tracking, and collecting processes, which are critical for cash flow management.
- Customer Management: AR automation software begins by storing and managing customer data, including contact information, credit terms, and historical transaction data. This information forms the basis for interactions with the customer regarding payments.
- Invoice Creation and Dispatch: When a sale is made, or a service is provided, the accounts receivable automation software generates an invoice based on the terms agreed upon with the customer. This invoice is then sent to the customer, often electronically via email or through an online portal.
- Payment Tracking: Once the invoice is issued, the software tracks the status of each invoice. It records payments received, reconciles them with the respective invoices, and updates the account balance accordingly.
- Aging Reports: The software generates aging reports that categorize receivables based on the time an invoice has been outstanding. This helps businesses identify overdue accounts and focus collection efforts.
- Payment Reminders and Collection: For overdue invoices, the AR software helps with dunning automation. More advanced systems also offer features to manage collections activities.
- Partial Payment: In cases where a partial payment is made, or adjustments are needed, the software accurately records these transactions against the respective invoices.
- Reporting and Analysis: The software provides various financial reports (like accounts receivable aging, cash flow, DSO, and ADP trends, and more) that offer insights into the business's financial health, customer payment behaviors, and cash flow forecasting.
- Accounting Systems Integration: AR software often integrates with the broader accounting system, ensuring that the general ledger is updated with receivable transactions, maintaining consistency and accuracy in financial records.
- Compliance: The software helps in maintaining compliance with accounting standards and ensures that all financial data is securely stored and handled.
- Automation: Many AR systems offer automation for routine tasks and can be customized to fit the specific billing, credit, and collections policies of a business.
By fitting into the AR process, the solution reduces the likelihood of errors, saves time, and helps companies with AR management. Learn more about the benefits of accounts receivable software, here.