Technology is evolving every year. Times have certainly changed. In the smart world, technology is making all sorts of processes efficient. Phones and utilities have become smart, rockets are becoming reusable, and self-driving cars are a reality. With this changing and fast-paced world, Account Receivables (AR) processes have also changed. The aim of this article is to help you assess which category your organization falls in and enlighten you with what is new in the world of AR and make you think if it’s time for a change!
All transactions are becoming digital – automatic billing, automatic payments, automatic clearing of cash. Artificial intelligence/machine learning has got deep into the account receivables world to improve the processes. The manual intervention required in these tasks has come down and advancement in technology is reducing it further with every passing day.
In this revolution era, there are a lot of organizations who are either (1)using the outsourcing model for AR along with other lift and shift processes, with everything handled manually or (2)using a shared service center model with a centralized team internally handling all AR processes manually. Typically these companies outsource some processes like collections to third parties. While the costs can definitely be controlled substantially by doing either of (1) or (2), the process improvement is still very limited. I would call these companies handling A/R process manually as LAGGARDS. These companies rely heavily on the Shared Service Centers/Outsourcing partners to provide them the best in class results with limited control on the processes.
The next category is of the companies who had done either (1) or (2) to centralize the operations but are also using technology in certain processes like automated billing, use of templates to correspond, use of macros, etc. to solve the problems for the time being. Their solutions/technology is not scalable and requires a lot of maintenance and costs. I would call these companies REACTORS.
The next category is INNOVATORS. These companies are futuristic. They involve technology in automating almost all the processes. Most of them don’t need an outsourcing partner to handle partial processes. Even if they do, they have control over everything using centralized technology. People always think that being innovators means the company has big pockets spending heavily using CAPEX and OPEX to transform the technology in use. The world has changed and so have the costs associated with the technology.
Let’s look at what’s next in the AR world, which can transform all LAGGARDS and REACTORS into INNOVATORS irrespective of their current processes/outsourcing partners. The concept is of Integrated Receivables – a smart suite of receivable automation tools interacting with each other and your customers.
Let me walk you through an example of how it works – As of today, your credit team, collections team, billing team, cash application/allocation team, all work in Silos. It takes a lot of emails exchange, phone calls to interact with each other. But, the worst part is the interaction with the customer – one team is not aware of other team’s interactions leading to confusion, delays and at times ugly relations with customers. In turn, this leads to costs. Costs of having a dedicated customer success team, the costs of having a process improvement team and so on. So basically, in the end, you may achieve partial automation and improvements in individual processes but what you may lack is the holistic solution to your AR problems.
How about a solution that can handle scenarios like below automatically. Suppose a customer of yours has high credit utilization and its next order might get blocked due to the same. The system will automatically detect this issue and initiate a correspondence workflow. It will create the content of the email/fax and notify the customer about the issue. The email will detail the situation and also provide a link to make payment for the overdue invoices to avoid them being put on credit hold. The customer can click on the link to make electronic payments through a self-service portal. The remittances would be captured automatically and sent to your ERP to clear Open Invoices that in turn would free-up credit to have the customer place the next order all in an automated manner.
Yes, the above example and many other complex scenarios that you face on an ongoing basis can be solved/improved with Integrated Receivables technology. It is a combination of AR automation apps and a collaborative network of buyers and suppliers to improve the AR ecosystem. It’s an ERP agnostic platform that can be up and running in 3-4 months and provides a payback period of less than 6 months. Please try this sample ROI Calculator to check your payback period.
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