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AR Automation benefits for the CFOs office during economic uncertainties

22 November, 2021
4 mins read
Rachelle Fisher, AVP, Digital Transformation
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What you'll learn

  • Whether AR automation is a need or a choice for your business?
  • Understanding the benefits of Accounts Receivable automation.
  • Will automating your A/R replace your employees?
  • Steps to get started with A/R automation
Accounts Receivable Automation: A Need or a Choice?
Top 6 Signs that Indicate a Need for A/R Automation
Top 7 Benefits of Automating Your Accounts Receivable
Change Management: How to Handle the Fear of Getting Replaced by a Machine?
How to Get Started with Accounts Receivable Automation?
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Accounts Receivable Automation: A Need or a Choice?

According to a survey conducted by HighRadius, approximately 30% of the CFOs and Heads of finance revealed that the global pandemic has exposed the need to automate out order to cash processes.

Across the industries, senior finance and A/R leaders are focusing on accounts receivable automation. Should you join the league and initiate a digital transformation for your order to cash process as well? The answer would depend on how efficient your accounts receivable process is. If your receivables process has leaks, for instance, your A/R team operates in silos, and there is no real-time visibility on critical A/R metrics from the senior management’s end, then you should consider automation.

Every business is different, and your organization might also experience unique challenges. Automation could be the best option if there are unique challenges in your business. How would you identify whether your A/R needs automation or not? Here are some top signs that indicate it is the right time for you to automate.

Top 6 Signs that Indicate a Need for A/R Automation

  • Rise in the Number of Past-Due Invoices Beyond 90 Days: Your payments are getting delayed more than expected. An increase in the number of your outstanding invoices beyond 90 days is an alarming sign, as most of your payments could soon turn into bad debts.
  • Delayed Payments Due to Incorrect Invoicing: Are your customers complaining often about mistakes in the invoices? Human errors such as incorrect invoice information or delivery to the wrong person will not only delay your payments but also negatively impact your customer experience.
  • Same-Day Cash Posting is a Myth:  With a huge volume of incoming payments, your cash application teams are unable to match invoices to incoming payments on the same day. This delay in cash posting might be a result of missing remittances, manual intervention, or other exceptions
  • Analysts Unable to Prioritize Invalid Deductions: Your analysts are unable to differentiate and prioritize invalid deductions, and end up spending 1/3rd of their time researching and validating valid deductions – which is essentially a waste of their time. If they would have focused on invalid deductions, they would have been able to recover the cash.
  • Increased Operational Costs: Excessive manual intervention in accounts receivable might lead to increased OPEX. Not only do you have to handle the resource expenses but also paper-based expenses in accounts receivable related to invoicing, credit applications, and customer onboarding.
  • Your Low-Risk Customers are Filing Bankruptcy: This is not a good sign for your business. It might be possible that your credit teams are unable to proactively review the various customer portfolios to identify the fluctuations in credit risk. That’s why they are unable to predict the upcoming red flag.

There could be other red flags in your accounts receivable process, if you have identified such critical issues that are impacting your AR process, add those in our AR assessment form and our AR technology expert will get back to you with answers

Top 7 Benefits of Automating Your Accounts Receivable

1. Lower Bad Debt with Proactive Credit Risk Mitigation

Your credit teams can fast-track reviews based on external bankruptcy alerts, negative payment trends, and credit utilization thresholds. They can leverage the AI-based blocked order predictions to manage upcoming orders. Better visibility on the overall portfolio risk helps them to control and improve bad debt.

2. Cost reduction in A/R:

With end-to-end accounts receivable automation, organizations will be able to save more than 70% of their invoicing costs. The transition from paper to electronic invoices would also guarantee timely invoice delivery, boosting customer satisfaction. Additionally, with an automated cash application, you can eliminate 100% lockbox data capture fees, eventually balancing the operational expenses in A/R.

3. Improved Productivity Due to Automation of Clerical Tasks

A/R automation enables your A/R analysts to focus on more strategic work rather than dedicating time towards manual, tedious tasks such as cash application, claims aggregation, manual credit report aggregation, and scoring.

4. Lower DSO with Automated Collections

Your collectors can leverage the AI capabilities such as payment date prediction, and dynamic customer segmentation to proactively identify the critical customers along with recommended collections strategies. Integration with self-service portals and multiple payment options enables the customers to pay faster, leading to an improved DSO.

5. 360-Degree Visibility into Critical A/R Metrics

Softwares like Highradius AR automation software, not only have an interactive user interface but also provide access to real-time data across the order to cash process. The senior A/R leaders can review the A/R process health metrics and even dig deeper to analyze the analyst’s productivity metrics to suggest course corrections. With all your AR data in one place, you can analyze any aspect of your accounts receivable process just in seconds. You can generate real-time reports and visualize them using bar graphs, pie charts, and several other formats just with a few clicks.

6. No More Silos in Accounts Receivable Process

Accounts Receivable Software ensures end-to-end automation across order to cash. This means every team across O2C will be interconnected with a seamless flow of data. For instance, your collections analysts receive real-time updates when an invalid deduction is identified or an order is blocked so that they can prioritize the collection of such low-hanging fruits.

7. Improved Customer Experience with E-Payment Adoption

Organizations are able to scale up their customer experience by offering various forms of digital collaborations to end customers. These include self-service portals, online payments, integration into their A/P portals.

Change Management: How to Handle the Fear of Getting Replaced by a Machine?

An accounts receivable automation venture is often misinterpreted as a ‘headcount reduction’ initiative. However, this isn’t true! A digital transformation doesn’t replace your employees but enables them to ensure they add strategic value to the office of the CFO.

Many organizations stick to their legacy, on-premise systems because they aren’t comfortable with handling the employee reaction post-transformation. That’s why change management is an important aspect that CFOs and senior A/R leaders need to focus on.

Change management would involve explaining to your employees that the focus of automation is to improve the Accounts receivable process and not to replace human employees. A/R automation would eliminate the clerical tasks so that your team can focus more on high-value tasks.

How to Get Started with Accounts Receivable Automation?

Every AR automation initiative would involve the following steps:

  • Identify the Need for Automation:
    Setting goals for your A/R automation is the primary step. You will need to figure out whether you need to automate a particular process like invoicing, cash application, collections, etc., or automate the end-to-end Account Receivable process. If any particular department is lacking behind, you can try automating that single department. But, if the performance of your whole A/R department is slowing down, automating completely would be a better idea.
  • Evaluate and Select a Vendor for Automation:
    The next step is to evaluate the best vendors in the market for accounts receivable automation. Based on your business requirements, you can review various receivables solutions and understand whether the vendor is capable enough to deliver your expected results. Reviewing a vendor’s past results also becomes crucial during the vendor selection process. You should always choose the #1 Accounts Receivable Software in the market to ensure the best possible ROI.
  • Build a Clear As-Is and to-Be State of Automation:
    As you are aware of the nitty gritties of your Account Receivables process, and also have clarity on what problems you want to solve through automation, it is recommended that you define the current state of your AR and the future state post-automation to the vendor. The more clarity you provide, the easier it becomes for the vendor to lay down the transformation plan.
  • Continuously Track the Progress of the Transformation:
    It is important to define checkpoints in your A/R automation project. This way, you will be able to understand whether the transformation is moving in the right direction or not. In case of any conflicts with the expected results, you should immediately inform your A/R automation vendor to discuss possible course corrections.

The need to accelerate digital initiatives for finance operations is now more than ever. While you may have little control over the economy, you can certainly react and take the necessary steps to ensure the revenue impact on your business is low. By infusing autonomous finance in your AR process, you can drive productivity, ensure better alignment within the AR department, and leverage actionable insights for better decision-making. Click here to know how HighRadius can help you to bolster up your AR to not only weather economic volatility, but also ensure sustained success.

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HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.

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