5 Key Steps to Choose the Best Accounts Receivable Automation Software

16 December, 2023
4 min
Gerry Daly, AVP Product Strategy - Treasury

Table of Content

Key Takeaways
Introduction
What is Accounts Receivable Software and Why Do Businesses Need It?
Benefits of Investing in An Accounts Receivable Automation Software
5 Steps to Choose the Best Accounts Receivable Software
Streamlining Your AR Processes with HighRadius
FAQs

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Key Takeaways

  • Maintaining GDPR compliance for your AR function necessitates adhering to key requirements such as lawful data processing, transparency,and accountability,fostering trust amid evolving privacy standards.
  • GDPR compliance in AR demands strict adherence to data minimization, consent management, access controls, encryption, breach response, vendor oversight, and clear data retention policies, ensuring security and trust.
  • HighRadius provides GDPR-compliant automation solutions, streamlining invoice data capture for efficient AR management.
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Introduction

Managing accounts receivables is critical for maintaining a healthy cash flow for any business. Metrics such as invoice aging, days sales outstanding, and bad debt can directly impact cash inflows.

To streamline AR operations and reduce the time and effort it takes to mitigate credit risk, deliver invoices, collect payments, and match records, accounts receivable software is crucial.

However, with numerous options available, choosing the best software can be overwhelming. In this article, we’ll provide you with tips to select the best accounts receivable software for your business.

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What is Accounts Receivable Software and Why Do Businesses Need It?

Accounts receivable software is a crucial tool for businesses looking to streamline their receivables management process. With AR software, businesses can automate many of the time-consuming tasks involved in managing accounts receivable, including invoicing, payment processing, and collections.

But why do businesses need accounts receivable automation software? For starters, it helps ensure accurate and timely invoicing, which is critical for maintaining positive relationships with customers. By automating the invoicing process, businesses can reduce errors and ensure that invoices are delivered to customers in a timely manner.

In addition, software used for accounts receivable can help businesses prioritize collections efforts and identify potential issues early on. With features like aging analysis reports and deduction management, businesses can quickly identify which accounts require attention and take action to resolve any issues.

Investing in an accounts receivable software can also lead to increased efficiency and productivity. By automating many of the manual tasks involved in receivables management, businesses can free up their finance executives and collectors to focus on higher-value tasks like credit and collections strategies.

Overall, accounts receivable software is a powerful tool for businesses looking to improve their receivables management process. With features like automated invoicing, collections prioritization, and deduction management, businesses can streamline their operations and improve their bottom line.

Benefits of Investing in An Accounts Receivable Automation Software

Here’s a quick look at the accounts receivable automation benefits:

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5 Steps to Choose the Best Accounts Receivable Software

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When it comes to choosing the best accounts receivable software for your business, there are several steps you can take to ensure you make the right decision. Here are five steps to help you choose the best accounts receivable software features:

1. Huddle up internally

Start by connecting with your team members who work on accounts receivable workflows to understand their challenges and requirements. This will help you set clear objectives about what you want to achieve with AR automation software. 

Some questions to ask your team include:

  • What are the bottlenecks in your AR process?

    • Is the DSO consistently high?
    • Are more clients turning bankrupt?
    • Is the error rate high in reconciliation?
    • How much time do you spend on invoicing?
    • What is the process you follow to make collection calls?
  • How much are you losing because of these bottlenecks?

    • $$$ in bad debt and unpaid invoices per month
    • Cost of additional FTE needed for completing tasks
    • Delay in closing the books
  • Do we have any resources currently that can help work-around it?

    • Tech tools
    • Expert professionals
    • Outsourcing agencies

It's important to assess how well you've automated the different steps in your AR process to identify gaps and understand which processes need to be automated on priority to improve efficiency.

2. Do your research

Once you assess your needs and the gaps in your system, you need to look for solution vendors that can help plug the gaps. Research various AR solutions and compare their features, pricing, regulatory compliance levels, and integrations. Opting for cloud-based solutions can save you CAPEX costs and improve scalability while on-premise hosted solutions give you better control over your data and processes. 

Key accounts receivable software features:

Feature

Description

Billing and invoicing

Auto-generate invoices and deliver them via emails or directly to customers’ accounting or AP systems.

Payment processing

Process multiple payments including ACH, checks, and wire transfers. Allow customers to schedule payments, pay in installments or partially.

Aging reports

Keep track of aging receivables and categorize them based on the number of days outstanding (< 30 days, etc.).

Worklist prioritization

Automatically rank outstanding accounts based on the amount and days overdue.

Customer self-service portals

Allow customers to identify their amounts due and pay anytime using their preferred channels.

Credit risk scoring

Check credit scores of customers using predefined models and data from multiple sources.

Automated dunning

Automatically send reminder emails to customers about their payment due dates and amounts.

Other good-to-have features include automated cash reconciliation, in-app calling for collectors, and deductions management.

Integrations

When selecting an AR solution, ensure it can integrate with your ERP, accounting, or CRM software. Look for plug-and-play integrators to speed up implementation and avoid extra costs. Out-of-the-box integrators can help you navigate the process without much IT support. HighRadius offers customized integration support to meet any specific requirements that you may have. HighRadius’ solutions are built-for all popular ERP systems including NetSuite, Sage Intacct, Microsoft Dynamics, SAP, and Oracle.

Pricing

This is one of the key deciding factors in your software purchase journey. AR software solutions may be priced on a per-user basis or the number of invoices sent. Check if your company policies allow you to subscribe to the vendors’ pricing model. Study if they fall within your budget limits and can help you achieve target ROIs within the specified timelines.

3. Score and shortlist vendors

Along with evaluating the software solutions, also check the vendors' credibility, clientele, and service levels. You wouldn't want to be stuck with an unresponsive vendor post software implementation. 

Some key parameters to evaluate the vendor on include:

  1. Application uptime: This metric helps you gauge whether your application will be available 24×7. It will also give an idea about which party will be responsible if the service gets disrupted by planned downtime or unplanned outages. The common industry standard is to support 99.9% uptime.
  1. Response levels: This metric promises how much time it will take your AR SaaS vendor to recover from a cybersecurity incident from the time it has been detected. Other business continuity and disaster recovery metrics such as recovery time objective (RTO) and recovery point objective (RPO) help you know how much time it will take for you to get your data in case of an incident and how much of the data you’ll be able to recover, respectively. The shorter the RTO, RPO, and incident response time, the better is the vendor’s service.
  1. Security measures: Since financial and client info is one of the most confidential data, it is pertinent that your AR solution adheres to the highest security standards. This also helps from a regulatory standpoint. If you are using SaaS AR software, check for the multi-tenant security measures, location of data centers, data retention, data encryption, and access privileges.
  1. Grievance TAT: Check the customer service turn-around-time (TAT) of the vendor. Does the vendor promise to reply or initiate action on your grievance within four hours? How long does the vendor say they take to resolve issues – less than 48 hours or more? To provide your customers excellent customer service, your AR application and payment portal must be available at all times without any hiccups.

Ensure that the metrics discussed above are covered in the service level agreement that you sign with the AR software vendor. Add any other conditions or service that is crucial to meet your business goals. Track whether the AR software vendor upholds all the promises mentioned in the SLA.

4. Take demos of the software

Once you’ve shortlisted a few vendors, the next steps would be to touch base with them via email, chatbot, or social media to understand their offerings better and start a conversation. Take demos of the solutions to get a feel of their interface and features. Chat with the solution experts to understand the limitations of the product and any additional costs due to customization or other requirements.

Questions to ask during a demo session:

  • Can you show me how to use this <feature name> function?
  • Is there an alternative way of doing this <task>?
  • I have this <problem>, how can the solution help me?
  • What features are available on the mobile app?
  • Do you service other clients within my industry?
  • Can you provide customer testimonials?

5. Get stakeholder buy-in

Share your solution comparison and vendor analysis with all stakeholders involved such as the CFO, finance director, AR manager, and other executives. Include the stakeholders in the demo calls and other high-level discussions. Based on your interactions with the vendors and the scores you've allotted to their solutions and service, shortlist 1-2 vendors to proceed with.

By following these five steps, you can choose the best accounts receivable collection tools for your business. And if you're looking for an AR software solution that can help streamline your AR processes, HighRadius can help. In the next section, we'll discuss how HighRadius can help streamline your AR processes.

Streamlining Your AR Processes with HighRadius

If you're looking to streamline your accounts receivable processes, HighRadius'Autonomous Receivables suite of solutions can help. This suite of solutions automates all aspects of your accounts receivables process, including EIPP Cloud, Collections Cloud, Credit Cloud, Deductions Cloud, and Cash Application Software.

With HighRadius, you can automate your entire ar process, from invoice delivery and tracking to collections worklist prioritization, payment predictions, and cash projections. Powered by AI and RPA-based tools, HighRadius' solutions can help you reduce manual efforts and errors, improve efficiency, and increase cash flow.

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More than 700 of the world’s leading companies have transformed their order to cash, receivables, and treasury processes with HighRadius. Our customers include PepsiCo, Anheuser-Busch InBev, Sanofi, Kellogg Company, Sysmex, and many more.

HighRadius offers cloud-based Autonomous Software for the Office of the CFO, which brings modern digital transformation capabilities like artificial intelligence, robotic process automation, natural language processing, and connected workspaces as out-of-the-box features for the finance & accounting domain.

So if you're ready to streamline your AR processes and improve your cash flow, schedule a demo with HighRadius today to understand how our solutions work and how we can help your business.

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FAQs

1. What are the 5 KPIs for accounts receivable?

Five KPIs for accounts receivable are: 1) Days Sales Outstanding (DSO), 2) Accounts Receivable Turnover Ratio, 3) Collection Effectiveness Index (CEI), 4) Percentage of Receivables Over 90 Days, & 5) Bad Debt to Sales Ratio. These metrics assess efficiency and effectiveness in managing receivables.

2. How do you automate accounts receivable?

To automate accounts receivable, implement software that manages invoicing, payment tracking, and communication with customers. This includes automatic invoice generation, electronic payment processing, reminders for due payments, and real-time reporting for better cash flow management.

3. What is AP Automation vs AR automation?

AP automation involves streamlining the process of managing outgoing payments to vendors, including invoice processing and payment execution. AR automation focuses on optimizing incoming payments by automating invoicing, payment tracking, and customer communication.

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