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Top 5 Benefits of Automating Accounts Receivable Process

Top 5 Benefits of Automating Accounts Receivable Process

A brief overview of Accounts Receivable automation software

If only the world was a perfect place, customers would pay before the due date and you would reap the benefits of having all your cash received on time. This would fill the cash gap for working capital needs that eliminates the requirement to borrow funds from outside at a higher interest rate. But we don’t live in a perfect world. If you are stuck in the vicious circle of multiple follow-ups with your customers, you probably have a flawed collections process.

But if we dig a little deeper and explore, you would know that there are tools that can help you automate your manual collections process and make it more efficient. AR automation software can help you streamline your accounts receivable process, which helps bring down or eliminate bad debts.

Why automate your AR Process?

The manual collection process can become extremely challenging as your business grows. If you aim to streamline your receivables process, you must consider a digital transformation that saves time and money spent in the process. Despite having strict collections policies in place, many companies still find it difficult to collect before the due date. Manual AR process cannot withstand in a fast-growing company because:

  1. As a business grows, AR managers would only consider the option of expanding their collections team to cater to more collections work. This adds to the cost. While in reality this could be handled more efficiently by an automated process.
  2. Reconciling and gathering data to present to the board is challenging with manual AR as it requires going through endless rows and columns across spreadsheets.
  3. Manual collection follow-ups by itself is a challenging task. Tracking would become difficult as the company scales. Imagine sending and tracking hundreds of emails! Even if you have a team of fifty, it would still be a daunting task. One wrong email to a wrong customer would end up in bad customer service.
  4. A failed outstanding from a customer is equal to not bringing in any deals. As a company grows it would want to fit in the market for more customers. In this process, they would miss out on concentrating on collecting their outstanding payments. This can leave a lot of money in the open vulnerable to becoming bad debts.
  5. The manual collections process is time-consuming which makes it a lengthy process until you can realize the money you need to get back from your customers through collections.

Some other challenges include:

  1. Going back and forth between accounts as the team is unaware of which accounts to prioritize. This requires spending time every week at the beginning attempting to create a worklist for collectors.
  2. Manually following up with customers with multiple emails for multiple outstanding amounts after checking up on the master sheet.
  3. Maintaining and managing disputes and escalations separately as two separate sheets from other sheets
  4. Not having a common communication channel between sales and CSMs for better collaboration. The conversations usually happen via emails or chat tools.

By automating your AR process, you are cutting down on hours of manual time spent on doing repetitive tasks like changing invoice status or sending out follow-up emails. Here are the top 5 reasons you should automate your AR process today.

Benefits of Automating Accounts Receivable Process

benefits of automating your collections process

Bring down costs with automation

If you have a cluttered desk, then blame all the paperwork that comes with the manual collections process (and your spreadsheets to a great extent!). When companies are competing to stand ahead in the market, paperwork often stands as a hindrance. Running back and forth between getting invoices processed and sending out invoices can slow down the receivables process.

By automating, you are cutting down costs spent on doing repetitive tasks which comes back to the company in terms of improved productivity. Your team can focus on more strategic tasks by spending more time on them than sending out reminder emails.

Better Cash Flow and Cash Forecasting

Forecasting in AR means calculating the funds that a company will be receiving from its clients within a set period of time. According to Paystream Advisors, businesses that use manual AR processing spend 15% of their time prioritizing and another 15% of their time assembling data.

Time saved in these can be used for studying cash flow forecasting to make future business decisions, especially with the built-in prediction and forecasting abilities of AR automation software. CFOs often lack real-time visibility into critical receivables accounts which makes it difficult for them to efficiently forecast. An automation tool will help you understand the individual status of invoices which makes it easier to speculate the cash inflow. With effective forecasting, you will be able to find the cash gaps and take preventive measures before it occurs.

Standardize your process

When the data is accessible commonly for both the sales and collections teams, working becomes easier and free from confusion. When employees find the AR process streamlined, they get to spend more time in future business planning. Worrying about an inefficient AR process that makes collections slow only adds up to the stress that in turn results in inadequate productivity. When employees don’t move beyond the AR aging understanding, they don’t know where their cash is stuck.

With automation, you can bring a well-defined process that is easier to understand for the teams. Automated collections also make it easier to prioritize accounts based on various collection goals that eliminate the manual grunt work.

Standardization brings better assessment of long tail accounts. It also improves collaboration, which is what is majorly missing in the manual collections process.

Reduced Human Error

Manual AR gives a lot of room for human error. While to err is human, a tool can always prevent this from happening. Data reconciliation is very important to arrive at the correct numbers for decision-making. A few million here and there can change the entire forecasting results. This could lead to wrong decision-making. An AR manager has to build out reports by reconciling AR data from an endless list of excel sheets. This can increase the chances of an error creeping in.

Likewise, collection agents can often end up making grammatical as well as factual errors, like an incorrect invoice amount, in their emails, which can dent the customer experience. To avoid all of these, it is always a good idea to automate. This would make sending out dunning emails, collecting reports, and presenting final statements a piece of cake. For instance, the Collections Strategy in Growfin makes the collections process not just easier but efficient too, with personalized follow-up capability that you can operate at scale instead of a standard bunch of dunning emails.

More accurate and timely data

Lack of visibility into real-time data can make the collections process flawed. An automated tool lets you segregate your customers based on their past payment behaviors, which in turn helps in accurate targeting.

Streamlining across various ERP processes and bringing in a one-stop solution can expedite collaboration between teams, and ultimately improve the AR process efficiency. To understand better, here’s how your AR process would look like with a tool like Growfin.

A traditional ERP tool requires gathering information from various sources which slow down the process of collecting data for presentation. A lot of time is often consumed in preparing reports to present to the board. Automation makes this not just quicker but more accurate.

It matters to have an AR process that actually works

Your employees are important. Making them work on monotonous processes that can be automated is going to do little to motivate them to perform efficiently. Taking this burden off their shoulders will allow them to think outside the box and come up with better solutions for issues that are actually important. For instance, Growfin’s AR automation tool helps:

  1. Build/create efficient collections strategies for better collections
  2. Easily identify long-tail customers and prioritize accordingly
  3. Send out dunning emails easily with personalized messaging
  4. Keep track of disputes and views them at an invoice level for a better understanding of the tool
  5. Dive deep into your collections metrics and make forecasting easier

If you want to bring about a change for the greater good, you can talk to our specialists right away. We would be glad to demonstrate how Growfin can make your life easier and save you some big bucks!

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