If your company bills on credit, accounts receivable are an integral part of your accounting. From ensuring an expedient Days Sales Outstanding (DSO) to preventing late payments and disputes, having accurate accounting systems for AR is essential. Unfortunately, manual processes can complicate efficient accounts receivable implementations due to complex workflows and the manual errors that can plague the collections processes. AR teams can struggle without extra resources, and this added pressure can lead to accuracy problems and delay.
Luckily, that is where accounts receivable software comes in with features such as enhanced visibility, automated real-time reminders, and credit management. AR software has many positives that will help your accounts receivable system run smoother for both you and your vendors. Before we hop into the benefits of accounts receivable automation, let's talk about how accounts receivable affects your accounting and cash process from invoicing to cash application.
What are accounts receivable?
Accounts receivable is money that is owed to your business by your suppliers for goods and services. In the accounts receivable workflow, you send the customer their bill through either mailing invoices physically or through email. The client will then pay it by the payment terms you established for the purchases. ERP systems or AR automation solutions often have portals or alternative, more accessible methods for customers to pay e-invoices.
There are different types of accounts receivable that get broken down by various metrics. These subcategories include trade receivables, notes receivables, vendor receivables, interest receivables, and employee receivables. What categories you use under the accounts receivable umbrella will depend on your company's architecture. You can learn more about accounts receivable and its sub-types here.
Why you should automate accounts receivable
AR automation software helps your team in a handful of ways. From faster invoice approval to interactive dashboards that give accurate and helpful analytics, these programs can help save you time and money.
Predictable cash flow
In a traditional accounting system, your invoices and reminders have to be sent manually to customers. These messages are automated through automated accounts receivable, meaning customers are always reminded on time. This function also means your team can spend more time monitoring your cash flow rather than just badgering your customers.
AR automation software also often includes a more accessible platform for payments, whether they are via credit card or ACH payment. Through this simplification of the payment process and timely reminders, you not only create a more predictable cash flow process but also improve your working capital and save time for your AR manager and team.
Improved AR metrics
With immediately processed invoices and payments, automatic reminders, and dashboards that improve late payment visibility, you can easily enhance your AR metrics through automation. AR automation Empowers your team with the tools to see those customers that are close to the deadline and also frees up their time to pursue these problems before they snowball.
Save time and labor hours
Manually entering every single invoice can bog down your accounting team immensely. By cutting out even just manual entry alone, you can empower your team to spend time focusing on what matters most. Most accounting automation software also automates reminder messages, analytics, and payment processes, saving even more time for your team. This time saving means a more effective and productive team that doesn't have to worry about overtime when the end of an accounting period is looming.
Less bad debt
When you collect your debts slowly, it can eventually snowball into your company having to take on loans and bad debt. As is seen in both small and large companies alike, this can turn into a quick downward financial spiral. Automation can help your team stay on top of collections, keeping your company's cash flow consistent.
Accounts receivables workflows are ripe for automation
We keep talking about how automation will open up your accounting team's time due to eliminating and simplifying processes. So, which workflows, in particular, are great opportunities for automation? Beyond the few we have mentioned, such as manual entry processes, there are a few prime opportunities to save your team time.
Payment notices and collection emails
To keep your collections process running smoothly, you need to give timely payment notices to customers. It is common practice to send a proactive message a handful of days before the invoice is due as a reminder, then on the actual day the invoice is expected with a repeat copy of the invoice. Sometimes, unfortunately, you will get people who still do not pay after these initial reminders. If that is the case, it is crucial to continue to send notices. On 7-days, 15-days, 30-days, and every 15 days past that, it is essential to continue sending reminders. These should have a more aggressive tone as time goes on.
With this workflow, you can see how this can turn into a ton of messages for your team. You can automate these messages through accounts receivable automation, which can send personalized messages for all of these milestones. Often these messages are easily customizable, as are the timelines.
Credit hold notice
Once you see a customer is consistently paying late, it is time to send them a credit hold notice. This notice implies that they are a bad risk and have to address any credit issues before they can continue doing business with you. Similar to how payment notices can be automated when a system sees late payment statuses, some automation platforms allow you to automate credit hold notices after a certain threshold of late payments.
Accounts receivable automation best practices
When looking at accounts receivable automation processes, it can quickly get overwhelming. Should you do with a SaaS subscription-based company, or are you looking for a custom quote? What kind of integration should you look for, and will you be processing single invoices or dozens simultaneously? Before jumping into the deep end, there are some best practices you can follow to help get the most out of your product.
Get your accounting team involved
No one knows your team's workflow better than your accounting team itself. By getting the team involved in the process of picking out an AR automation software, you will be sure to address any specific issues they run into in their daily tasks. Asking them where pain points are in their workflow and the current processes and products you use will help you identify what features you want in your automation software.
Don't automate everything at once
When you pick your automation software, it is essential to integrate the new functionality slowly. If you jump immediately into automating everything, onboarding and training become more complex for your team with so many parts of their workflow changing. By gradually implementing the new workflows, you give your team time to adapt to the new processes more naturally.
Integrate your accounting tools
As you start looking at a program that integrates both your accounting team's workflow needs and any additional features you may want, you also want to see how it integrates with your current accounting tools. While you may be replacing some of these tools with the automation platform itself, some you will most likely be keeping. These programs left should integrate with the platform you choose for a seamless tech stack that helps your team become even more efficient.
Start automating accounts receivable with Routable
Now that you know what you are looking for in AR automation software, consider Routable. Routable's platform automates both your AR and AP processes to help you have a fully integrated accounting automation system. This automation platform automatically routes your invoices, processes collections, and updates your records. Through more robust internal controls, real-time invoice statuses, less manual entry, and bonuses such as early payment discounts, this automation platform can help your team elevate their processes.
Simplify the AR process
Routable helps simplify your AR process by making every step easier for your accounting team and clients. By routing your invoices automatically to the correct customer contacts, you cut out any confusion and speed up invoicing. Routable will also send reminders to customers to ensure that you get more payments on time.
Automated invoicing & APIs
By connecting your current accounting software, Routable makes automated invoicing easy and streamlined. You can also leverage the software's advanced API for bulk invoicing, making automated invoicing easy, whether dealing with a couple of documents or hundreds. This functionality simplifies your AR workflow dramatically while improving your scalability into the future.
Faster payment collections
Through easy online payment acceptance, Routable makes collecting payments from customers simple. Clients can pay in whatever way they prefer, and once they do, you get real-time payment notifications so that you can stay constantly up-to-date. This quick collection process will help improve your accounting metrics and help get your money to you on time.
Are you interested in trying Routable? Request a demo to see how we can simplify your accounts receivable process.