Bad cash flow management can be very damaging for a business. So much so that it’s not unusual for a business to collapse due to outstanding debtors and not enough money coming into the business at the right time.
Accounts receivable (AR) is a big part of keeping company finances on track through the various processes involved from generating and sending out invoices to maintaining records of payments and general accounting functions.
It can be a time-consuming financial job made more difficult by debtors with late payments, short payments, out-of-date discount claims, contract disputes and of course, unrecoverable debt. All of these challenges add to the workload of the finance team, who already have a lot on their plate.
Further still, having large amounts of unallocated cash and open items reduces the visibility that the finance team has and makes the month-end a challenge.
Although a complex and time-consuming process, it’s vital to the business that accounts receivable processes are done correctly and accurately to please all parties involved including the company collecting the money and the company or entity paying the money.
In an attempt to reduce complexities in AR processes, we considered whether accounts receivable processes could be digitised and even automated.
Will it automate?
Yes! And not only can AR processes be automated, they can be made more efficient!
Let’s start with three key reasons that you might choose to automate accounts receivable processes:
- To regain visibility of finances
- To reduce days sales outstanding (DSO)
- To improve the organisation’s cash flow
They’re good reasons to consider automation and all have great benefits for the business as a whole.
How does it work?
Automating AR processes doesn’t just rely on digitisation of documents but can actually be done for the delivery of both paper and electronic invoices to customers, so those that have not gone paperless will still be able to work with the new system, while those demanding e-invoices will be satisfied.
When order forms or purchase orders come into the finance team, the automated process captures the documents, validates the information and delivers it to the organisation's back-end systems.
As payments come into the organisation, they are automatically captured, identified and data is extracted from remittances, checks and other relevant documents. All the data and information is then validated, balancing remittance totals against check amounts and reconciling payments with open invoices.
Once all of this is done, accounting systems are automatically updated.
What are the benefits?
As well as the key reasons mentioned above, some of the other benefits of automating accounts receivable processes include:
- Centralised information with easy access and audit trails.
- Reduced operating costs
- Reduced data entry errors
- Manage disputes and collections more efficiently with instant access to information in a central location
- A reduction in the time taken to settle invoices by customers and improved compliance