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13 Ways that Automating your A/R Department Drives Growth Outcomes

Topics: Finance

13 Ways that Automating your A/R Department Drives Growth Outcomes

How would you describe your company’s overall growth strategy? Is it to increase sales or look for new efficiencies internally? If you’re focused purely on expanding through traditional sales outreach, you might miss out on key internal opportunities right in front of you, like growth from accounts receivable automation.   

Accounts receivable automation transforms payment experiences for employees and customers alike, experiences that are typically plagued with manual processes. This article will dive into how to automate accounts receivable and how it can drive growth. 

Automatization in A/R - Why is it important?

Using accounts receivable automation, particularly with embedded trade credit services, reduces manual processes that can be time and efficiency drainers for A/R departments.   Accounts receivable automation includes every step of the A/R process, from sending invoice reminders, managing collections and remittances, and recording payments. This automation technology can seamlessly integrate with ecommerce and ERP systems.

According to Paystream Advisors, companies that rely on manual processes to manage collections spend 15% of their time prioritizing their activities, 15% of their time gathering information to make collections, and only 20% of their time actually communicating with their customers about payment. In contrast, companies that are using accounts receivable automation software spend only 6% of their time prioritizing their activities, only 6% of their time gathering information for collections calls, and are able to spend 62% of their time communicating with their customers about payment.

AR Automation Stat Infographic

For example, a manufacturer selling goods via its e-commerce site can provide a “buy on net terms” option during checkout. Buyers are able to easily set up a terms account that invoices them at the time of shipping. 

For the manufacturer, invoicing, tracking, collection, remittance, and settlement are fully automated, reducing costs and saving time for the accounts receivable department.

There are many ways this type of automation can drive productivity for not only your A/R department but your business as a whole.

13 Ways A/R Automation Can Accelerate Business Growth & Drive Efficiency

Optimizing the accounts receivables process improves buyer-supplier relations and cash flow management crucial for growth. Increased productivity means that A/R teams can focus on supporting strategic growth with higher-value customers, rather than getting stuck in tasks that can be automated.

Here are 13 ways accounts receivable automation plays a key role in accelerating growth and can benefit your business:

1. Decrease Collection Costs and Bad Debts

About 72% of firms employing digitization in A/R report reduced operational costs, primarily as a result of an improvement in collection efforts. Instead of letting bad debt pile up, efficient collection processes turn more receivables into cash.

2. Identify Hidden Costs in A/R

Accounts receivables management ladened with inefficiencies results in a longer cash conversion cycle. Slower cash payments lead to additional credit management costs that eat up the bottom line. 

Other hidden costs include a poor customer experience resulting from incorrect invoices, delayed posting, and payment logistical nightmares that could discourage repeat business and destroy an organization's reputation. 

3. Automate Reconciliation

Manual A/R processes often include communication with customers about payment terms and invoices, followed by reconciliation. Not only do orders and terms have to be reconciled, but transactions from bank statements may need to be exported to a spreadsheet for matching purposes. Automation creates a self-service model that reconciles and syncs records. As a result, 87% of businesses that embraced automation reported faster processing.

4. Automate Instant Decisioning when your B2B Customers are part of a Trade Credit Program

Accounts receivable automation that includes a B2B trade credit program powers a digital credit application within the B2B checkout portal. Business clients can access automatic verification immediately through Apruve, which has a payment platform integrated with a global credit network to enable rapid underwriting. Since AI can evaluate credit applications, customers receive feedback on their trade credit application in minutes. Instant decisioning can be configured to the seller's preferences. 

5. Easy Payment Acceptance and Credit Assessment

Digitization in A/R powered by smart technology offers net terms at checkout. Credit evaluation happens instantly, and installment options are offered quickly. Easy payment options also encourage faster settlement. 

6. Decrease DSO

With accounts receivable automation, the average Days of Sales Outstanding (the number of days a company takes to collect payment after a sale) is 32 days for a company delivering between 500 and 1,000 invoices per month. Companies with little to no automation report a DSO of 44 days on average. Meanwhile, those with high levels of automation only take 29 days to convert credit sales to cash. 

7. Increase ROI (particularly on the long-tail cohort of smaller customers)

Without automation, you are using 80% of resources to service 20% of clients. By leveraging technology, you can free up resources to sell to more customers to increase the ROI. 

8. Increase AOV and Purchase Frequency

Digitization in A/R allows your business to access more payment options on checkout. Improved customer service and faster credit approval attract repeat customers and encourage clients to increase the average amount of each order. 

9. Lower Delinquency Rates

Using accounts receivable automation speeds up the collection process, resulting in lower delinquency rates. Automated accounts receivables management means virtually effortless collection, rather than having to chase payments manually. 

10. Reduce Fraud Risk

Automation reduces security risk in and out of the organization by allowing buyers to transact within secure channels. Additionally, the human aspect is removed from the equation. 

11. Free Up Capacity and Resources

Since accounts receivable automation performs multiple processes, calculations, checks, and balances, the organization improves capacity, speed, and timing. With your system working nonstop, organizations can do more during the workday. At the same time, companies use fewer resources to perform the same tasks within a shorter period. 

12. Consolidate and Standardize Operations 

Automation allows organizations to increase standardization and implement consistent control across workflows. Improving controls enhance the accuracy and consistency of data without adding headcount. Companies can consolidate existing operation locations and present an incremental opportunity to gain direct cost savings by eliminating the need for outsourcing and offshoring.  

13.  Allow Teams to Reallocate Staff to Higher Value tasks

A/R Automation cuts down repetitive and transactional processes by automating invoice creation and integrating credit evaluation, approval, and account management in one platform to reduce manual data entry. Streamlined processes free up staff for strategic tasks.

AR Automation Feature Image

Best Practices For Transitioning into Accounts Receivable Automation 

If you decide to transition to A/R Automation, there are steps you can take to ensure it goes as smoothly as possible. Reduce potential friction from switching to using accounts receivable automation with these best practices:  

Collaborate With Your Team

A/R automation is a high-level decision that affects the entire organization. Invite departments directly involved with the process starting with the accounting and credit team to assist with mapping workflows. Address bottlenecks and pain points within the process.

Invest in Upskilling

Implementing new tools can strain operations. Reduce the skill gap through training programs. Preparing your team to leverage automation and tackle their new roles within the organization creates efficiencies while reducing resistance to change. 

Create Intuitive Solutions

Put customers first when choosing A/R automation providers. Customers are likely to have a negative onboarding experience when the new system creates more work for them. Focus on reducing the onboarding time for customers and providing a convenient solution accessible even through mobile. 

Transform Your Accounts Receivable Process With Apruve

Accounts receivable automation allows you to build an efficient team that leverages accurate real-time data and creates a positive customer experience. Discover how to transform your trade credit and accounts receivable process, and gain a competitive advantage with Apruve.

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Apruve enables large enterprises to automate long-tail credit and A/R so you can stop spending 80% of your time and resources on 20% of your revenue. We partner with each of our customers to solve their unique credit, payment, and accounts receivable challenges and build the right credit solutions for your markets, customers, and goals. 

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