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Best-of-Breed vs. Integrated Solution: Which Type of AR Software to Choose?

What you’ll learn

  • The AR function is made of multiple sub-functions such as invoicing, collections, and credit risk management.
  • Automating only one or a few sub-functions within AR may not help you realize 100% efficiency gains 
  • Best-of-breed AR solutions and integrated receivables software have distinct advantages and limitations

How big is your accounts receivables department? May not be really big if you compare it to your customer relationship management team or your accounting team. Given the relatively small size of the AR department, do you still need to focus on the type of software to buy? YES! Your AR department is responsible to manage all the cash owed to you by clients. So, will one integrated receivable software solution suffice, or do you need separate apps for invoicing, collections, and cash applications to help your AR team be more efficient? This can be tricky. Balancing your current and future AR needs within your budget requirements is critical. In this article, we offer you tips to choose between an integrated receivables software suite and stand-alone accounts receivable software modules.
At HighRadius, we offer both AR modules and suite solutions to choose from. If you want to talk with our experts to learn about both types of AR solutions, contact us for a solution walkthrough. Click here to talk to our experts

Integrated solution vs. best-of-breed AR software modules

The accounts receivable function consists of various sub-functions such as invoicing, collections, credit risk management, cash application, and deductions management.

An integrated receivables software, also called best-of-class or best-of-suite, is a single solution (or a suite of integrated modules) that caters to all the workflows in your O2C cycle. It helps automate all the different workflows such as credit scoring, customer onboarding, invoice management, collections prioritization, and cash reconciliation.

Pros of integrated solutions Limitations of integrated solutions
Easier implementation;  required to be done only once Niche features may be absent or have limitations
Zero disconnect between teams due to strong data integration and sharing Vendor lock-in risks are higher
Lower costs than implementing multiple separate modules Higher chances of security attacks affecting your entire operations

A best-of-breed or stand-alone accounts receivable software offers modules for each of the different functions. So, you’ll have separate software solutions for invoicing, credit risk management, collections management, deduction management, and cash reconciliation. These solutions could either be from the same vendor or from different vendors. You need to integrate them using connectors or seek the vendors’ help to connect all the different modules.

Pros of best-of-breed software Limitations of best-of-breed software
Handles the core function exceptionally well Higher costs when implementing each module separately
App downtime will not affect all the departments Higher complexity in data and file sharing between teams
Lower vendor lock-in risks Interoperability is difficult

At HighRadius, we offer you separate modules for each sub-function as also a suite consisting of all these modules if you want an integrated, wholesome solution.

How to decide between best-of-breed vs. integrated AR solutions?

How do you choose between an integrated AR solution and best-of-breed AR modules for your business? Here’re some tips to help:

1. Assess your needs to determine functionality requirements

Every business is different. So are your needs. You may already be using an e-invoicing solution that you’re comfortable with. Your challenge might be in applying cash accurately and closing the books. Thus, your need is for a cash application solution. In such a case, you may want to go for a specialized app that helps fill in this gap while at the same time integrating with your existing e-invoicing system.

But if your business hasn’t yet implemented an automation software for the order-to-cash (O2C) process, it is likely that you might want to go with a suite solution that helps automate as many functions as possible and delivers a higher ROI.

Want a template to assess your AR automation needs? Check out our AR Automation Assessment Tool.

2. Do the math of the costs involved

Buying separate modules can look more costly than buying a single suite solution. But where do cost advantages and higher ROI really lie?

Check the costs of the different modules and assess them against your needs. Does replacing your current system with an AR suite offer better cost advantages? Or is your need only for an e-invoicing solution? In that case, you may want to go for the lower-priced module than a higher-priced suite solution.

Pro tip: When assessing the costs and ROI, check for not just your present needs but also your future growth needs and scalability issues.

3. Determine integration complexity

The AR software that you choose should integrate with your existing systems such as ERP, accounting, and CRM. When using a piecemeal approach, like buying standalone solutions for the different functions, you’ll need to go through the integration process multiple times. And doing this with multiple vendors can add to your costs and complexity.

Even when opting for a suite solution, you must ensure that the solution integrates well with your existing systems. The availability of plug-and-play integrators can reduce your implementation time and costs. Loop in your IT team to check for system compatibility and other integration issues. Get their opinion on implementing different modules versus an integrated suite.

Choosing a vendor that offers both suite solutions as well as best-of-breed options can help reduce your integration complexity. It will also ensure that the different AR functions are supported by autonomous solutions that connect with each other and support data sharing.

RadiusOne offers custom integration support for all ERP and accounting systems. Plug-and-play integrators are available for popular ERPs like Microsoft Dynamics, NetSuite, and Sage Intacct.

4. Faster implementation

Do you want to go in a phased manner, implementing solutions at specific intervals of time or do you want to automate all the different tasks at one go? The timelines of AR automation will be influenced by your pressing AR challenges, budgets, and compatibility of existing IT systems. It will also be influenced by your vendors’ capabilities to complete the installation and integrations.

Experts’ opinion on integrated AR software vs. AR modules

We asked Glen George, Senior Director, Product (Collections) at HighRadius whether clients should look at a solution that is a combination of Collections Cloud solution along with other products like Credit Cloud, Cash Application, and EIPP.

And here’s what he said:

“What I see generally with clients is that they would ask for efficiencies and productivity improvements in O2C and when we offered them an end-to-end solution, they would ask us to focus on the Collections product.

Collections team accounts for 40-50% of AR FTE count

What they don’t realize is that if you only focus on collections, the turnaround would happen and then the rest of the teams would not have the tools or capacity to manage the improvements that they have to make in their respective processes. 

Since the processes are so symbiotic the whole automation project then becomes a white elephant and a drag on all resources in question.

Example: Suppose, you implement a collections tool and are able to find efficiencies in the process and reduce headcount there.

However, due to the effective follow-ups and stringent terms, more and more customers get credit blocked. This will require more customers to be reviewed for credit terms and hence you will need to increase manpower in credit management to manage this influx, thus nullifying the gains you made with collections automation.

A strong suite of AR products help create long term efficiencies

Kurt Srivastava, Director, Solution Engineering at HighRadius also agrees that all the AR processes are interconnected, and any inefficiency in one workflow inadvertently delays others. Hence automating a single function doesn’t help solve your AR woes in the long run.

All O2C processes are interconnected. So, for example, if you have heavy deductions, clearly we are having a lot of sales revenue in terms of having a lot of transactions. This means you would have a large volume of cash applications as well. Also in scope, it won’t be any standalone problem that you will have to solve. It is just that a priority that you have set.

It can be summed up that even if you don’t implement all the modules at once, you’ll still need to consider automating the rest of the process at some point. So, choosing solution(s) that would help you scale while at the same time integrate seamlessly and deliver higher ROI is critical.

Customer  story

A global leader in power and sensing technology signed up for HighRadius’ Cash App solution in 2018. They were able to automate almost 85% of their line items and reduce their FTs as well.

A few years later, they realized that they were facing challenges with their collections problem. Their collections team had 6-8 members. They were using Excel to track accounts and were sending reminders letters using Outlook. To realize efficiency gains, they needed to automate their collections process. And they signed up for our Collections Cloud solution within three months.

A year later, they started experiencing bottlenecks in onboarding customers quickly. They went through the features offered by our Credit solution and subscribed to that as well, thus building an integrated AR system via a piecemeal approach.

Here’re some other resources that can help you make the right decision around AR automation:

How to Choose Accounts Receivable Automation Software

Accounts Receivable Software Evaluation Template

Get the Best Out of ERP and Accounts Receivable Automation

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The HighRadius RadiusOne AR Suite is a complete accounts receivable solution designed for mid-sized businesses and SMBs to automate eInvoicing, Collections, Cash Reconciliation, and Credit Risk Management to enable faster cash conversion and maximize working capital.

It is quick to deploy and ready to integrate with ERPs like Oracle NetSuite, Sage Intacct, MS Dynamics, and scales to meet the needs of your order-to-cash process.

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