Transformative benefits of automating accounts receivable processes

The B2B payment landscape has undergone several significant shifts in recent years, with a clear trend toward digital payments and automation. 

Many B2B transactions that once relied on paper checks or manual processing are moving toward electronic methods such as ACH transfers, virtual cards and electronic funds transfers. This shift is driven by the desire for efficiency, cost reduction and faster transaction processing times. 

Additionally, as younger decision makers and business leaders fill the B2B space, B2C-like payment options are more in demand by customers — and we are seeing related automated accounts receivables enhance productivity and agility within traditionally run finance teams.

While companies are beginning to understand the need to move their customers toward digital payment options, many are slow in adopting an automated approach, even though automation solutions are proven to be efficient, cost effective and offer faster and more efficient processes.

Behind the adoption process

While adopting automated processes can be highly beneficial, integrating automated payment systems with existing accounting or ERP systems can be complex and require significant technical expertise. Compatibility issues with legacy systems can further complicate integration. Often overworked and stretched thin (not unlike accounting teams), IT teams may feel that adopting any new technology is unmanageable. 

Working between multiple systems, IT teams are frequently called into action when things inevitably go wrong. They are asked for quick fixes and workaround solutions to help the systems work together. On top of this, they are expected to help create custom reports to ensure each accounting department is working with the data they need. However, with the right solution, once IT has handled the installation, the software is easy to maintain and essentially runs itself. Custom reports can be made with the touch of a button, and most platforms offer a user-friendly, no-code interface, which means adjustments can be made without any technical expertise.

Calculating ROI

Implementing an automated payment option for customers to use typically incurs costs related to software, hardware, integration and training. These upfront costs can be a barrier for some organizations, especially smaller businesses. This is probably the most common reason for avoiding automation. There might be a prevailing opinion among management that the cost of any new technology will exceed the benefit. Studies have found the truth is just the opposite.

According to Atradius, a B2B collection service,  businesses in the Americas lose 51.9% of the value of their receivables that are not paid within the first 90 days. Numbers like this highlight an essential reality. Late payments don’t just slow down your cash flow; they cost businesses money. The longer an invoice goes unpaid, the more value it loses and the less likelihood of collecting the full amount. Dun & Bradstreet has found that after 90 days, the likelihood of the invoice being paid is 69.6%. If that same invoice reaches 12 months past due, that likelihood drops to 22.8%. Given the established connection between manual accounts receivable practices and late payments, the “business as usual” approach may cost a business money.

By contrast, adopting an AR automation approach can put money back into the bottom line. A study conducted by Forrester found that implementing AR automation generated a 400% return on investment over the course of three years. Breaking that down, Forrester discovered that the automated AR solution studied led to the following improvements:

• Improved AR workflow automation and team efficiency by 25% — this benefit totaled $424,000 over three years.
• Collected 25% more through reduced write-offs. AR automation makes collections consistent. This benefit totaled $234,000 in present value revenue over three years.
• Reduced legacy costs by $52,000 over three years. Organizations were able to retire costly payment processors, ERP modules and management resources.

Automating the processes customers use to pay an organization makes it possible to capture data insights about payees instantly without the need for time-consuming manual data analysis. Additionally, the ability to streamline invoice approval helps identify areas where digital payments are experiencing delays, enabling smoother transactions.
Keeping the personal touch 

Another common reason businesses might avoid automation is the desire to keep the human touch in customer interactions, which is understandable. PricewaterhouseCoopers has found that 59% of consumers feel that businesses have lost the human element of customer experience.

While it might seem counterintuitive, automating the AR process has the potential to inject more of the human element into customer interactions. Manual receivables often require staff to spend hours on tasks such as invoice creation, invoice delivery, data entry, compiling detailed reports and more. That leaves little to no time for an AR team to work strategically or engage in the relational side of the business.

By automating back-office tasks, members of the accounts receivable team are freed up to focus on working directly with high-risk and high-value accounts. They have the time to provide white glove service when necessary and work with potential problem accounts to ensure payments are made in a timely manner while respecting the challenges a customer may be facing.

Bottom-line benefits

Automating accounts receivable processes offers several key benefits, including reducing manual efforts, streamlining workflows and accelerating the invoicing and payment collection process. Errors are minimized while payments are accelerated with the ability to send invoices promptly and offer convenient online payment options. Companies that lag in making payments more streamlined have the potential of risking customer dissatisfaction and falling behind competitors. Automating processes offer efficiency gains that save time and resources for businesses and their customers, delivering what every business seeks to achieve — enhanced customer satisfaction and loyalty.