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How to Boost your ERP’s Agility with Accounts Receivable Automation

What you’ll learn


  • Understand the roadblocks faced by mid-sized businesses in ERP systems.
  • Learn how automation improves AR efficiency with boosted cash flow and reduced days sales outstandings (DSO).

Introduction:

Quote on ERP

Enterprise resource planning(ERP) systems help small and mid-sized businesses(SMBs) in financial management, account receivables, project management, inventory tracking, and more. With increased functional complexities and a high volume of unstructured data, companies are struggling to handle data to make strategic business decisions. Often, when a business grows rapidly, native ERP systems are not enough to handle the rising functional requirements. Businesses need to look for scalable and best-in-class niche solutions such as AR automation software to tackle these concerns.

With ERP automation, companies can create efficient workflows, minimize complexity, and boost productivity and revenue. SaaS-based and API-enabled solutions have low maintenance costs and high scalability potential. These technologies also offer visualization, data analytics, and reporting tools for better analysis.

Studies show that accounts receivable (AR) automation has helped SMBs process payments faster (87%), improve team efficiency (79%), and deliver superior customer experiences (75%). In this blog, we discuss the major challenges in ERP systems and how automation helps resolve them.

What Type of Roadblocks Does your ERP Face

  • Non-intuitive accounting functions:

Finance teams often feel overwhelmed when the ERP system requires too much navigation and the interface isn’t user-friendly. Employees will need to be trained frequently to help them cope with non-intuitive systems. Further, the cost of implementing and maintaining such an ERP is also high. The overhead cost, time-consumed, and the manpower invested will ultimately affect your bottom line.

  • Scalability concerns:

With the growing volume of customers and transactions, customization is necessary to accommodate higher functional complexities and requirements. Also, the flexibility of this setup depends on the capabilities of your ERP vendor.

Due to this, it makes it more difficult to upgrade in the future. Customizations may require qualified IT support and high operational expenditures.

Inflexible ERP Challenge

Sources: Highradius
  • Limited capabilities for reporting and analytics:

Since companies receive a massive amount of complex and unstructured data, their traditional systems are often not capable enough to track multiple metrics such as days sales outstanding(DSO), total open AR, cash projection, days deduction outstanding, etc.

This results in a lack of clear visibility into your business’ performance. Without proper insights and reports, it becomes difficult for finance executives to make strategic decisions.

  • Loopholes in AR module:

ERP systems provide a number of features but there are some loopholes and concerns as mentioned below:

  • The absence of account prioritization in collections efforts can lead to losing track of high-risk customers.
  • Traditional accounting systems have a manual dunning process which includes customizing each correspondence, attaching the associated invoices, and then sending them to the customers via emails, faxes, and posts. It consumes time and increases the chances of human-error.
  • For the cash application process, the AR team manually aggregates payments and remittance details, then matches the particular payments with invoice numbers, and also handles short payments which is a very complex and time intrusive process.
  • For credit management, the customer onboarding process is slow and paper-based. Also, it requires manual intervention for aggregating data from credit agencies and creating credit scores.

All these factors can lead to poor customer experience, minimize the cash flow, and reduce working capital, leaving your AR team not able to collect past-dues on time.

Redefining ERP Systems with Automation

Now that we know about the challenges that current ERP systems pose, let’s take a look at how we can resolve them. Automation ensures that business processes such as account receivables, finance management, and reporting run smoothly without any human intervention. This helps achieve fewer failures and correct data analysis. It also improves accuracy, flexibility, control on operational cost, and cash flow.

Here are some other ways automation improves ERP’s performance.

  • Boost productivity:

Your legacy ERP system contains the details of your organization as well as of your customers. Automation tools help to auto-generate invoices, deliver them quickly, and prioritizes customer accounts based on risk factors.

Best-in-class AR solutions support automated dunning, auto-captures documents, and helps manage deductions. For the cash reconciliation process, it helps in automated remittance aggregation and is capable of auto-matching invoices to payments with straight-through cash posting.

Advanced solutions reduce manual effort and help to focus on strategic tasks, thereby improving productivity.

  • Optimized data processing and fewer spreadsheets to track:

ERP is the central repository of all business and customer data. As the business grows with rapid speed, there is a sudden increase in data and legacy systems might not be able to effectively analyze and utilize the available data.

An automated solution acting as a single source of truth allows you to manage and maintain data in a structured manner so that different departments do not face any issues while accessing and collaborating with the data. It eliminates redundant operations and suggests effective methods for maximum efficiency.

  • Advanced analytics and report:

Automated ERP systems can work on complex and unstructured forms of data. It supports data analytics to get real-time and accurate information. These intelligent systems can extract data and generate reports in the desired format. Examples of key reports to track include:

  • Days deduction outstanding report:

    It illustrates how well or how poorly your company is managing deductions.

  • Total open AR report:

    It helps you track the growth or decay in the total open AR for different customer segments.

  • Day sales outstanding report:

    It provides an overview of the average number of days taken to convert credit sales into cash.

These reports help to analyze the organization’s current situation and refine the decision-making process.

  • Cutting down on operational expenditure:

Your business’s financial health can get significantly affected by overhead expenses. Owners of mid-sized businesses need to have a clear view of operational costs. Your team needs to ensure that your current operational model is on the right track to reduce OpEx and stay on top of the competition.

An automated AR solution can auto-deliver invoices through web portals and emails, thus saving both time and money spent per invoice. These advanced technologies also support Remote Deposit Capture which allows customers to scan and send checks directly to the bank. Many intelligent automated AR solutions provide built-in integration with numerous credit agencies at no additional subscription fees, helping your business save on credit integration costs.

Want to know more about how to reduce OpEx in small and mid-size businesses? Check this ebook “12 Strategies For CFOs To Reduce OPEX in Mid-sized Businesses.

Steps to Prepare Your Business for Automated ERP System

The advantages of an automated ERP system are many and this is the right time to invest in it. But before you make a decision on that, here’re some points to keep in mind.

  • Have an internal discussion with your teammates to identify the pros and cons of your existing ERP system.
  • Have a discussion with your finance team to evaluate costs and ROI.
  • Track how advanced solutions help to scale with your current ERP system to enhance AR functions.

Conclusion:

Studies show that by 2026, the market size of automation software is expected to grow up to $309.6 billion. Close to 68% SMBs are planning to adopt automation in the near future. Upgrading your existing ERP system can help you to manage your cash flows better, even with limited resources. Integrating ERP systems with automation software can help enhance the existing capabilities of the ERP and also provide additional features. While there are many solutions present in the industry, choosing the right vendor is crucial for implementing the automation solution correctly.

Want to know more about how to select the right vendor? Check out this blog on”10 Questions to Ask Your Accounts Receivables Vendors”

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The HighRadius RadiusOne AR Suite is a complete accounts receivable’s solution designed for mid-sized businesses to put their order-to-cash on auto-pilot with AI-powered solutions. It leverages automation to fast-track key accounts receivable functions including eInvoicing & Collections, Cash Reconciliation, and Credit Risk Management powered by RadiusOne AR Apps to improve productivity, maximize working capital, and enable faster cash conversion. Affordable, quick to deploy, and functionality-rich: it is pre-loaded with industry-specific best-practices and ready-to-plug with popular ERPs such as NetSuite and Sage Intacct. The HighRadius RadiusOne AR Suite is designed to automate labor-intensive processes while streamlining credit and collections activities for faster AR processing, better cash flow and improved profitability.

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