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Modernized Approaches to Accounts Receivable

September 17, 2021

In part, accounts receivable (AR) can be defined as the balance of money due to a firm for goods or services delivered or used but not yet paid for by the customer. For example, Company A is a manufacturer of automotive parts. Company B owns a car repair shop that purchased $2,500 of auto parts from Company A. Company A now holds $2,500 in accounts receivable from Company B. The hope of Company A is that they’ll be paid according to the payment due terms of the contract. However, many times that doesn’t happen and for various reasons.

Regardless of your business, you expect to be paid for the products or services delivered when payment is due. When this doesn’t happen, your days sales outstanding (DSO) can skyrocket, leaving you at a financial disadvantage. Is there a way to collect the money owed on a timely basis? The answer is a resounding yes!

Although collection methods have changed with the advancement of technology, what hasn’t changed is the need to collect payments due. Creating and maintaining an effective AR management strategy is a critical aspect of running a financially successful business. Where is your company on the AR modernization spectrum?

Is Your AR Modernized?

While many organizations believe that they are on the cutting-edge of AR modernization, a recent survey showed otherwise. Published in Business Wire, the survey highlights gap areas between where AR resources believe their company is on the modernization scale compared to where they really were. To gain perspective on where your company resides on AR modernization initiatives, here are some of the gaps between reality and perception.

  1. More than 60% of companies haven’t made the transition of payments or invoices to digital. Nearly 30% of payments are still cash and paper check.
  2. 60% of respondents view their current AR systems and processes as frustrating. This is a result of lack of integrations between processes, too many manual tasks, insufficient customer self-service capabilities, and inefficient processes/workflows, poor AR team user experiences, outdated and slow technology, human errors, and high operating costs.
  3. Over 50% of companies don’t have real-time integrations with their enterprise resource planning (ERP) systems. In addition, these organizations don’t have automated integration with their customers’ accounts payable procure-to-pay platforms.
  4. More than 40% of AR departments don’t offer self-service capabilities.
  5. Only 25% of executives see their AR departments as a strategic partner in the business.

If you can relate to any of the above bullets, read on to learn how to modernize your AR functions.

How to Optimize Your AR Processes

Taking your company from manual AR efforts into the digital era isn’t a one-and-done initiative. It’s a journey to realize a fully automated and efficient AR environment.

Let’s take another look at the reality versus perception gaps to see the changes needed that will take you one step closer to modernizing your accounts receivable:

  1. Billing and invoicing customers need to be error free and sent in a timely manner. Errors or time delays during this function can have negative downstream affects that can wreak financial damage to your organization. By automating invoice processing, a cloud-based billing solution enables you to support even the most complex account hierarchies and provides the ability to easily consolidate or dynamically separate invoices – increasing first time billing accuracy.
  2. Whether you’re dealing with inefficient workflows, insufficient customer self-service capabilities, or antiquated billing systems, a cloud-based billing platform can make AR functions more efficient and eliminate error-prone manual processes. For example, no two organizations operate identically and the billing system needs to conform to the way you do business and not vice versa. Your billing software needs to give you the power to extend the solution’s user interfaces, data model and workflows to reflect the way you operate. When it comes to self- service, customers want the ability to help themselves and make payments using their preferred method such as debit/credit cards, PayPal, ACH, etc.
  3. Streamlining AR processes requires seamless integration between your billing system and other essential applications. These applications include customer relationship management (CRM), ERP, general ledger, tax solutions, etc. Whether through custom-built connectors or application programming interfaces (APIs), seamless and efficient AR relies on a fully integrated application ecosystem.
  4. As the lifeblood of a company’s cash flow, AR personnel is responsible for receiving payments.  The collections process needs to be a top priority of business leaders. This includes providing the team with the tools they need to be effective. The complex nature of the receivables process makes this task difficult and time consuming when done manually. Cloud-based collection solutions automate the processes to minimize revenue loss, optimize employee productivity, and improve customer experiences.

As the Chinese proverb so precisely says “A Journey of a Thousand Miles Begins with a Single Step,” the same is true of your journey to AR modernization.

Is it Time to Begin Your AR Modernization Journey?

Modernization can remove many AR pitfalls. However, you don’t need to revamp everything at once to optimize and improve your accounts receivable. One way is to examine where you’re encountering the most significant challenges and tackle these first. However, doing this requires a clear understanding of all your metrics. Metrics that many times your general ledger and ERP reports are inadequate to provide.

To get all of the reports you need, take a look at our recent blog – 4 Standard Accounts Receivable Reports Every Business Needs – which will help you reassess your current processes to make the changes needed to profitably grow you company. Unlike other cloud and legacy billing solutions, BillingPlatform provides the unmatched agility needed to eliminate manual billing tasks, automate accounts receivable and collections, and generate the financial reports needed so that you’ll always be in complete financial control.

Contact us today to learn more about how we can help modernize your AR modernization journey.

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