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5 Reasons CFO Must Make a Strategic Decision to Automate AR

The tasks of a modern CFO are now ranging far beyond the classical financial department’s duties. The additional duties now include risk management, involvement in investor relations, procurement, and even IT. Given the rising importance of the CFO as a strategic thinker and leader, it is crucial to use the digital resources that help to automate repetitive and standardised tasks.

Dimitri Raziev
Dimitri
Founder, Kolleno
datepicker icon August 14, 2023

The reason why CFO is becoming a more strategic role is due to the turbulence the enterprises are operating in now. Be it economic, or political external shocks. The CFO now has to balance the economic stewardship with strategic decisions that will drive the enterprise value. 

According to the McKinsey report, the CFOs spent most of their time on strategic leadership (46%)  and organisational transformation (45%) in the past 12 months. 

If the CFO is still hesitating if AR Automation is the right strategic move, there are five reasons indicating that the time has come.

1. The Cash Flow is Under Pressure

According to the study by Pay.UK and the Chartered Institute of Credit Management (CICM), UK businesses were owed £17.5 billion collectively in 2020. The average overdue amount was around £20,000. More than half (59%) of surveyed businesses stated that they feel threatened if the overdue amount exceeded £50,000.

If your company is experiencing late payments there is a high probability that the business eventually will face the problem of paying its own bills. This in turn will lead to penalties by suppliers and worsening relationships. According to the 2020 data, 8 in 10 SMEs have an overdue payment to other SMEs. However, small businesses are not the only ones who delay paying their suppliers. Large corporations are guilty too. For example, the multinational pharma company GlaxoSmithKline delayed payment to 95% to their suppliers for more than 60 days.

So, as we have seen the delayed payments by your customers can arise from small businesses as well as from large. The key to mitigating these risks and avoiding putting a strain on your business’s cash flow is to be proactive with your accounts receivable from the very beginning. Make sure to send the invoice as soon as the firm confirms the order. Also, state the payments terms and make sure to follow up closer to the deadline. Making these simple tasks will speed up your collections. Automating these tasks will not only make the collections swift but also seamless.

2. Employees of the CFO Office are overloaded

The next intuitive sign telling CFO that it is time to switch to automatic AR is that your staff spends too much time chasing the late payments feels demotivated and would like to switch to more productive tasks. As discussed above, sending payment reminders is an essential part of the credit collection procedure. However, your staff may find it stressful or are afraid to spoil the relationship with their clients by constantly sending frequent reminders.

Furthermore, the employees may spend time on phone calls answering customers’ questions about the payment options or plans. These tasks can easily be solved by Automating AR functions. Kolleno AR software will take the pressure off your staff by creating automatic fully-branded invoices and sending them over to the clients during the most efficient time to maximize collections as estimated by our AI algorithms. Moreover, customers will receive several easy payment options and even plans.

Embracing technology and giving your staff more time to focus on the more rewarding and creative tasks will pay off in the future. After all, “being bored” is the number one reason for looking for a new job, according to a survey of 5,000 professionals. Another survey by Smartsheet has identified that 78% of respondents believe their work would be more interesting if there was some automation of work processes.

3. Re-doing the invoices

The manual preparation of the invoices is not only laborious but also can be very costly. The errors can lead not only to direct loss of money but also impact the cash conversion cycle. Incorrect invoices require repeating the invoice sending cycle all over again. This will require extra time from your employees and sometimes postal costs. According to the research, more than 60% of late invoices are due to errors.

One of the benefits of AR Automation is a reduction in errors. 66% of companies that have embraced the AR Automation solutions stated that the reduction of errors was one of the major benefits for their company. Kolleno AR Software is capable of seamlessly integrating with the accounting software you are already using and pulling the required customer information to prepare the invoice completely automatically and error-free. This will not only free up the time of your employees but also will facilitate customer retention.

4. Difficulty to accommodate the remote working arrangement

The global pandemic has forced the workforce all around the globe to work from home. Despite the fact that more companies are welcoming employees back to work, the WFH is here to stay for long. It is not only an emergency solution during a health crisis, but also a convenient way to give your employees more flexibility.

The new working arrangement requires CFO to speed up the adoption of new digital tools. Embracing the Automation of the Accounts Receivable is one of the easiest tasks, as it doesn’t need to change the infrastructure. However, it facilitates a more collaborative and efficient remote working arrangement. The AR software prepares the invoices automatically, sends them out in a digital format, and requires fewer approvals. The customers receive the invoices timely and error-free, to one of the preferred communication channels for faster payment.  

5. The CFO office is lacking reports

You understand that some of your customers are paying their invoices too late, but you can’t precisely say how long the invoices are overdue, what is the percentage of late payments, and are there any patterns?

One of the most powerful assets in the modern age is data. If you are not using the data produced in your own company it is a waste. With AR Automation solutions your payments and collections statistics will be easily available to you at any time. The AR dashboard will display and analyze vital metrics like the Cash Conversion Cycle, Order-to-Cash, and Aging Reports. With this information, you can see the monthly dynamics and the problem areas. Continuously analyzing the payment behaviour helps mitigate the risks of late payment and to know your customers better. The best part is- with AR Software will prepare all these analytics automatically, and it doesn’t require any extra work.

AR Software

If you want to know more about how Kolleno can help your cash flow, and improve collections, we are happy to tell you more. Kolleno is an AI-powered, cloud-based cash collection solution that is complementary to the business tools you are already using. The seamless integration will power your collections and will enhance the efficiency of your operations. At the end of the day, this strategic decision will enable CFOs to shape their company’s future. 

Dimitri Raziev
Dimitri
Founder, Kolleno
Are you looking to centralize your payments, collections and reconciliation in one place? Book a demo to learn how Kolleno helps businesses to free up resources and focus on core priorities.