Automating Accounts Receivable with Xero

Dimitri Raziev17 May 20225 mins

Xero is quickly becoming one of the favoured accounting software globally. Its popularity among SMEs is explained by its accessibility and functionality. Moreover, the accounting SaaS can be powered up with third-party developer apps. Apps offer unlimited solutions for almost any business need. Kolleno is thrilled that our AR management integration is now available on the Xero app store and as an official connected app. In this article, you will learn how to automate the accounts receivable management with help of Kolleno if you are a Xero user. 

Xero- the Great Accounting Tool for SMEs

Xero was founded in 2006 in New Zealand with a mission to help small business owners with their accounting needs. It operates a subscription software-as-a-service model and today has more than 3 million users globally. Xero accounting software clients can view it on multiple devices, be it a PC, or a mobile phone. According to Xero, small business owners are very sensitive to cash flow and balance sheet changes. Therefore Xero aimed to create software that is easily accessible “on the go” and will help SMEs flourish. 

While Xero is an accessible and powerful cloud-based software, it allows third-party developers to create applications. They either enhance some features of Xero, create apps for specific industry needs, or satisfy special business requirements. Kolleno has developed a Xero-compatible app. It securely connects to the accounting software via open API and allows to completely automate the accounts receivable management.

What is Accounts Receivable Management?

If your business makes a sale, the customer receives an invoice to pay by a certain date. Usually, the payment terms are 30 days. The business records the cash it did not yet receive as an accounts receivable and treats it as an asset on the balance sheet. 

When there are many b2b invoices, accounts receivable can become quite large. It may be dangerous for the business, as they might run out of cash to pay their own suppliers or wages. Accounts receivable management, therefore, is the process of getting cash from clients. This involves sending the invoice, following up on the payment, sending reminders to clients that might miss the payment, and also chasing after clients who are the debtors. 

Costs of Manual Accounts Receivable Management

Cash Flow Struggles

Manual Accounts Receivable management can result in a shortage of internal liquidity and can lead to problems with cash flow. When the cash is not coming in on time it can lead to difficulties in meeting your business financial obligations. 

This is especially dangerous for SMEs as it may lead to bankruptcy. According to CBinsights running out of cash is the number one reason why start-ups fail, with 38% stating it as a reason. Of course, there are lenders, who can help quickly to fill the cash shortages to meet urgent obligations. However, during the economic downturn, which we are about to experience the lending rates to small businesses go down. According to a research of Small Business Index by FSB, the applications and approval rates for small business financing collapsed to 9% and 46% respectively, since started its records. So in times of uncertain economic climate relying on your own cash is key. 

Increase in Stress

Manual Accounts Receivable management is a cause of an increased number of late payments and besides it causing stress and uncertainty about future growth and investment, it also is a cause of stress. Around 25% of small business owners say that late payments are also causing stress in their personal life. On the other hand, if the business owners are afraid of failing, the employees are not very comfortable chasing the late payments with their clients. Some people find it hard to find the right wording or time to contact their clients regarding the missed deadline on the invoice. 

Why Integrate Kolleno with Xero

You can integrate Kolleno with Xero with a click of a button in under 2-minutes. Kolleno will organise all your invoices on one dashboard. It will not only remind you and suggest actions but also be capable of automating the actions away from you. The best thing is that the Kolleno platform is a great addition for any business industry or size. Let’s look at the features in greater detail. 

Action Center

The action sector is an overview of the to-do list for better collections. For example, if the invoice is near the deadline in the action centre you might see suggestions to contact the client and remind them of the approaching deadline. If the invoice is overdue, you will get advice to send the first, or second reminder, etc. Using machine learning technology, Kolleno’s algorithms are analysing in real-time the payment behaviour and invoices when connected to your Xero account and suggest actions for better credit control.

Set Strategies

Besides being on top of what is happening with your invoices and their status you can set the collections strategies. You set the actions based on the payment behaviour of your client. For example, if the invoice deadline is passed, you can set a rule to send the reminder 1, in one week send the reminder 2 etc. If the payment is received, you can set a rule “stop the strategy”, and send the “thank you note”. Kolleno is not only suggesting actions for better collections, but also suggesting the tone-of-voice, or even the email templates. 

Payments Portal

When you do accounts receivable management with Kolleno, your clients have an access to the payments portal. Here they can choose among several popular payment methods. Insert payment link to the payment portal in any communication you send to your client, and it reduces the chance of errors and leads to higher payment success. Moreover, once the payment is received, the payment reconciliations are automatically done with your Xero accounts and the invoice is marked as paid automatically. 

Omnichannel Communications

Reach out to your clients via email, text, or call depending on the status of their invoice. You can set the strategy to contact your b2b clients with various communication channels. Attaching the invoice and leading to the payments portal is easy and intuitive, but also leads to a higher chance of recovering the payment earlier. 

Modern Digital Tools for your Finance Team

Your business deserves to use modern financial tools to increase efficiency. Xero is a great tool for small and medium-sized businesses. However, if you are dealing with a large amount of monthly b2b invoices, it is useful to complement your Xero software with dedicated accounts receivable management tools. 

Kolleno clients not only save their time (16 hours per week on average) but also recover payments 5 times faster. On the non-tangible results- you can reduce the stress of employees greatly. They can focus on more creative tasks, than chasing payments. Also, you can strengthen the clients’ relationships by using modern and timely reminders. Eliminate errors and miscommunications with help of technology. 

Download your Kolleno app for Xero here.