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What are the Benefits of Accounts Receivable Automation?

Looking to improve your accounts receivable processes? Explore the benefits of accounts receivable automation and software products for better collections.

Dimitri Raziev
Dimitri
Founder, Kolleno
datepicker icon February 6, 2024

Summary

Accounts Receivable Software allows automating the accounts receivable management which leads to the improvement in cash flow, better relationships with clients and saving time.

AR Software is a cloud-based software-as-a-service product which connects to the most popular business tools via secure API and automates manual repetitive tasks. 

The finance department still lags behind in adopting digital tools that other business functions have embraced. The automation of account receivables and account payables solutions is revolutionizing the financial team’s daily activities.

AR Software produces reports, real-time analytics, and data that assist CFOs in forecasting and shaping strategic decisions.

What Does Accounts Receivable Software Do?

Benefits of using accounts receivable software include enhancing collections processes and improving cash flows. Automation software helps businesses overcome time-consuming manual AR challenges.

Before discussing the best AR automation software, let’s outline the accounts receivable process.

When a company makes a B2B sale, sending the invoice to the customer promptly significantly affects the cash flow. The longer you wait to prepare an invoice, the longer it will be to collect payment. 

After reaching the customer’s inbox or office, processing the invoice, including approvals and payment, takes some time. The invoices have payment terms, such as when is the deadline for the payment. The usual payment deadline is 30 days. However, if the payment wasn’t received by the stated date, the invoice becomes overdue. The majority of businesses regardless of their size encounter late payments. In some countries, the proportion of businesses with late paying customers can go up to as high as 50%, so this is completely normal. 

The financial department and credit controllers must collect payments promptly to maintain liquidity and cover expenses, avoiding offering free credit to customers. The Accounts Receivable asset section of the balance sheet records the uncollected cash from sales.

Accounts Receivable Management is a process of communicating with customers regarding the uncollected payment is . Proactive AR Management requires a lot of time and effort, however, it directly affects the cash position of the company. The AR Software can solve struggles associated with this time-consuming but vital task. Below we discuss the main benefits of using the Accounts Receivable Software for your business.  

5 Benefits of Account Receivable Automation

1. Improving Cash Flow

The most important benefit of using the accounts receivable automation software is the improvement in your business’s cash flow. When sales revenue is not collected but remains in your Accounts Receivable, you cannot rely on it in case of urgent needs or for paying salaries.

The research shows that the firms waiting 45 days to follow up have 26% of overdue payments. On the other hand, sending the reminder 5 days after it becomes overdue reduces overdue receivables to only 8%, which is considerably lower than the average overdue balance for surveyed firms.

Sending timely reminders, through appropriate channels and tone, is crucial for successful AR management. However, it might be hard for the employees to estimate that time. AR software relies on machine learning algorithms to accurately estimate your client’s payment history, performing the task effectively. As a result, we collect payments more quickly and improve the cash flow.

On average, Kolleno software clients reduced overdue balances by 40% after using AR Software for at least three months. 

2. Save Your Time

AR automation platforms save time, just like other automation tools. An impressive study by Quickbooks has calculated that small businesses in the UK have wasted 56.4 million hours chasing invoices! Where do these many hours come from? Accounts receivable management involves many steps and tasks. First, the invoice has to be sent out. Then the follow-up email prior to the payment deadline is welcome. Thirdly, the first follow-up to the delaying customer is sent out, and so on. These tasks already require some planning and execution. Errors in original invoices, including mistakes in annual ones, can range from copying the wrong Excel cell to sending to the wrong customer.

With Accounts Receivable Software these errors are eliminated. Additionally, your AR automation platform accurately tracks and lists follow-up and future actions in the ‘Actions Center.

3. Better Forecasting and Analytics

The Accounts Receivables software is analysing the AR data in real-time, providing an access to the analytics for better forecasting and decision-making. The data shows the ageing balances, customer collection, sales versus collection, days late, and many more. These data insights that are updated continuously are vital for the modern office of the CFO. According to the Gartner survey, 54% of CFOs are not getting the reports they need to better do their job.  

The Accenture report “ CFO Now: Breakthrough speed for breakout value” has identified that 72% of surveyed CFOs have said that they are now “catalysts of digital strategies.” Using modern digital tools for enhancing accounts receivable management is an example of how CFOs are embracing digital transformation. 

4. Less Friction to Pay Invoices

To speed up the AR payment process it is intuitive to show the customer the most efficient and frictionless path to the payment process. The AR software is preparing the invoices right away when the sale has been successful including the payment link which leads to the payment portal. Moreover, the payment link is included in every notification and follow-up message that the customer receives, be it an email, or a text message. This simplifies payment for B2B customers, as their payment delays are often due to busy schedules and multitasking rather than financial difficulties. Make it for your customers as easy to pay as possible, and your cash flow will see a positive impact. 

5. Better Customer Relationship

The Accounts Receivable technologies are doing a great job at improving the relationship with your clients. When the business is missing the payment deadline on its invoice, it is likely that they have forgotten about the deadline. Businesses have large numbers of invoices and sometimes they are lost during the approval process or were not a priority in their daily operations.

Sending a reminder to b2b customers in a timely manner using the appropriate tone of voice will strengthen the customer relationship. The AR automation software predicts optimal timing and messaging for repayment, enhancing customer relationships. Moreover, the professionally made invoice with easy-to-follow payment links is also creating a great impression with your clients. Last, but not least, the Accounts Receivable automation software leaves no space for errors, misspellings, or wrong reference numbers. 

How to choose the best accounts receivable automation software?

With an understanding of the importance of the benefits provided by accounts receivable automation and the challenges it can address, let’s explore the key factors to consider when selecting the best accounts receivable automation software:

Integration with Existing Systems

When choosing AR automation software, ensure it integrates seamlessly with your existing financial systems, including accounting software, customer relationship management (CRM) systems, and enterprise resource planning (ERP) solutions. This integration streamlines data transfer and ensures consistency in financial reporting. Make sure that the accounts receivable software of your choice is compatible and can be easily implemented with the most popular ERPs, accounting software, and if you are a legal firm, there are AR solutions that integrate with the case management softwares like Clio.

User-Friendly Interface

A user-friendly interface is crucial to ensure that your finance team can easily adapt to the software. The software should be intuitive, reducing the learning curve and enabling quick implementation. There are many ar collections software products, however, it can often be hard the one with a pleasant user interface.

Customization Options

Look for software that allows you to customize AR metrics dashboards, reports, and other features to meet your specific business needs. The ability to tailor the software to your requirements is vital for successful implementation.

Automation Capabilities

The core of AR automation software is its ability to automate repetitive tasks. Ensure that the software can automate invoice generation, payment reminders, and the AR cash application process effectively. This will not only save time but also reduce errors.

Scalability

Consider your organization’s growth plans when choosing AR automation software. The software should be scalable to accommodate your evolving needs and increasing transaction volumes without significant disruptions.

Data Security

As financial data is sensitive, the software should prioritize data security. Verify that the software complies with industry standards and regulations to protect customer and financial information. To ensure data security and compliance with current regulations, consider asking your vendor if they possess an ISO certification.

Analytics and Reporting

An advanced AR software should provide you with sophisticated analytics and reporting tools that enable you to track key metrics and make data-driven decisions. Access to AR metrics dashboards and detailed reports will empower your finance team to improve collections processes continuously. Some products come with pre-built AR reports that allow you to download them or set up automatic weekly delivery to your inbox.

Customer Support and Training

Excellent customer support and training are vital, as they ensure that your team can maximize the software’s capabilities. Ensure that the software provider offers training resources and responsive customer support to assist you when issues arise.

How to make the most of your Accounts receivable automation solution?

To further enhance the effectiveness of your AR automation software, make sure you follow Accounts Receivable Collections Best Practices outlined below.

Establish Clear Payment Terms: Ensure that payment terms are transparent, and invoices clearly outline payment due dates and methods.

Implement a Collections Policy: Develop a collections policy that outlines your procedures for following up on overdue accounts and dealing with disputes.

Automate Payment Reminders: Use automation to send payment reminders and follow-up emails to customers with outstanding balances.

Regularly Review AR Metrics: Continuously monitor AR metrics and aging reports to identify trends and address issues promptly.

Segment Customers: Segment your customers based on payment behavior and apply different collection strategies to high-risk accounts.

Streamline Dispute Resolution: Automate the process of handling customer disputes and discrepancies to resolve them efficiently.

Choosing the best accounts receivable automation software is a critical decision for businesses seeking to optimize their AR collections process. The right software can improve efficiency, reduce errors, enhance cash flow, and provide valuable insights through AR metrics dashboards and reporting. By considering integration, user-friendliness, customization, automation capabilities, scalability, data security, and customer support, you can make an informed decision that aligns with your organization’s specific needs. Additionally, implementing AR collections best practices will help you leverage the full potential of your chosen software and further strengthen your financial operations. AR automation is a valuable tool in the modern business landscape, and selecting the right software is a strategic investment in your organization’s financial health.

Try AR Software for Better Collections Processes

The AR Software connects to the most popular business tools and accounting software via a secure API. It suggests the best algorithms for better collection and pulls data such as customer names, invoice numbers and bank details from the records, leaving no space for errors. Moreover, the software is preparing reports and real-time analytics creating more transparency and insights for better decision-making. Contact Kolleno today to find out how you can empower your financial team with digital tools.

Watch the video below to see the success story of Settlement agreement, and understand in more detail how accounts receivable automation solutions, such as Kolleno, made their jobs simpler and more enjoyable.

AR Software FAQs:

What is AR Automation Software?

AR Software is a cloud-based software extension that connects to the accounting records and allows to automation of the Accounts Receivable management. The AR software lists the actions that are listed in the order of priority for better cash collection. 

What is Account Receivable with example?

Accounts Receivable is the record on the balance sheet of all cash that is not collected from sales. When the b2b sale is successful, the client pays only after receiving an invoice. The invoice usually has 30-day payment terms. Until the payment is not collected it is an asset – an Accounts Receivable. 

What are the benefits and importance of accounts receivable management?

The benefits and importance of cash receivable management are directly linked to the financial health of the business and its cash flow. If takes a long time to collect cash from sales, then the business is having a lot of customers who are using a “free” credit. By having large overdue payments a business is risking not meeting its own obligations to pay or even pay salaries. 

What’s the most important feature you want to see in your accounts receivable software?

One of the most important features of the AR Automation software is its ability to predict the best collections strategies that result in faster collections. The AR software has to analyse the past payment behaviour of the clients, the dates, the number of reminders and many more to suggest the course of action. The nice to have, is also an accounts payable automation solution in the same product. However, there are yet not so many platforms that do both ap and ar automation.

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.