Custom Image

How to Use RPA in Accounts Receivable Management to Scale Your Business Faster

6 July, 2022
5 mins read
Kiran Rana, General Manager, Mid-Market
Linkedin profile

What you'll learn

  • RPA solutions help automate repetitive, rule-based workflows efficiently
  • RPA technology is cost-effective, easy to implement, and provides quick returns
  • Invoicing, cash application, and reporting are some accounts receivable workflows that RPA helps automate
CONTENT
What is RPA and how does it work?
The use cases of RPA in accounts receivable management
What are the benefits of using RPA technology in AR?
What is the cost of implementing RPA technology for AR?
Should you use RPA technology to streamline your AR processes?
Next Steps: Choose AR Automation Solution with RPA technology
Print Bookmark

Automation is a buzzword today and your business, irrespective of its scale or industry, can not afford to stay on the sidelines. Every accounts receivable (AR) function within your business, including collections, credit, and cash reconciliation, need to be streamlined and made more efficient with automation tools. One such tool that is effective, easy to implement, and has great capabilities is robotic process automation (RPA).

Accounts receivable teams should invest in RPA to automate repetitive, rule-based tasks such as invoicing and cash reconciliation. RPA tools along with advanced technologies such as artificial intelligence (AI) and machine learning (ML) help businesses complete complex workflows with little to no human intervention.

In this article, we look closely at RPA technology, its benefits, and costs. We will also look at a few popular use cases of RPA in accounts receivable management.

What is RPA and how does it work?

Robotic process automation is a software technology that helps execute rule-based business processes automatically. RPA tools mimic the actions that a human user takes to complete a task. The tool is then able to complete the steps in the workflow without any manual intervention.

RPA software solutions are used to execute high-volume repeatable tasks such as cash reconciliation and optical character recognition (OCR). Unlike traditional automation tools such as scripting and macros, RPA solutions can interact with multiple types of apps and perform more complicated steps.

The use cases of RPA in accounts receivable management

The accounts receivable function involves many processes and tasks that need meticulous attention since they are often repetitive and high in volume. This makes it an attractive function for automation. RPA tools can help automate such AR functions and make finance teams more efficient.

In this section, we look at some common use cases of RPA in accounts receivables.

Cash application

Your business will likely receive payments in multiple formats, including checks, e-payments, and cash. Often the customer would pay online and send you the remittance details via email. You’ll then need to match the payments with the right invoice, enter the data in your systems (ERP or accounting software), apply cash, and close the invoice.

How is it done manually? Your analyst will need to go through the checks, enter the check numbers against the right invoice in the system, check the status of the check, and close the invoice. In other instances, the analyst would need to go through emails in the inbox, collect the remittance details, and enter them into the ERP system. Matching records manually like this is error-prone and takes a lot of time.

How does RPA help? Optical Character Recognition (OCR) tools use RPA technology to read the checks and extract relevant information such as check number, amount, etc. The tool then automatically populates the extracted details to the relevant system such as ERP or accounting software. OCR technology can also be used to extract text data from remittance documents in PDF or image formats. RPA tools help make cash application faster and more accurate.

Invoicing

According to a survey we did, sending invoices immediately is a measure that many CFOs plan to take to improve cash flow.

Sending invoices helps improve cash cash, say 37% of CFOs

Source: State of CFO’s Office Report 2022

Automating some or all parts of the invoicing process is crucial to be able to send invoices on time and boost cash flow.

How is it done manually? Your billing team collects all purchase orders, copies the data from there to your invoice template, and sends them via post or email to the respective customers. The sheer number of steps makes it highly prone to errors. Your team might end up entering the wrong figure in the invoice or send the wrong invoice to the customer. Such mistakes will lead to a poor customer experience and will also require you to have a large billing team.

How does RPA help? RPA programs automatically capture details from the purchase orders and prepare the invoice. The program ensures that the invoices are complete and all calculations accurate.

Accounts receivable reporting

Accounts receivable management is a critical function that has a direct impact on cash flow and working capital management. Business leaders need to track AR metrics such as days sales outstanding (DSO), days deduction outstanding (DDO), collection effectiveness index (CEI), etc. regularly to ensure that the company has the necessary capital and cash for everyday operations and future investments. AR teams use several reports to keep track of all these key metrics.

How is it done manually? Manual reporting involves your analyst collating data from multiple spreadsheets and paper records. They then put the data in separate spreadsheets to share with the respective stakeholders. It is time-consuming and doesn’t offer a real-time picture of your cash position.

How does RPA help? Accounts receivable software with reporting and dashboard features use RPA technology to build standard reports to track DSO, bad debts, etc. These tools automatically pull data from multiple sources to prepare the AR reports and allow you to set permissions on who can view and share them.

Deductions management

Sometimes, customers do not make the full payment citing quality issues, late delivery, or other reasons. To ensure that you collect the full payment without hurting customer relationships, it is crucial to track and identify deductions. You may also want to write off small value deductions that are often the result of rounding off the invoice amount to focus on higher value deductions and understand the issue(s) involved.

How is it done manually?  Analysts go through individual customer accounts, invoices, and bank statements to identify deductions, claims, and disputes. Then, they check the records and open communication channels with the customer to identify the reasons behind the deductions or disputes.

How does RPA help? RPA bots help to auto-aggregate claims, bills of lading, proofs of delivery, and other documents from emails and customer service portals. It then automatically captures line item data from these documents and auto-links claims to their respective deductions and invoice numbers. RPA also auto-matches deductions with promotions and credit points, making the whole deductions management process faster and much easier.

RPA and AI based deductions management in HighRadius AR solution

Auto-extraction of data from invoice and delivery documents using RPA in HighRadius(Source)

What are the benefits of using RPA technology in AR?

In this section, we look at some of the key benefits of using RPA for automating AR processes.

  1. Saves time: It is estimated that RPA helps finance departments save up to 25,000 man-hours by reducing errors. RPA solutions speed up AR management by making data transfer from invoices and receipts 3x-4x faster.
  2. Improves productivity: RPA bots improve the productivity and efficiency of your team. It helps you to increase your team’s capacity by 35% – 50% without adding employee count and boost the speed of workflow completion by 30% – 50%. RPA solutions are also able to complete tasks immediately, irrespective of the time or the day, thus improving productivity and customer experience.
  3. Reduces errors: RPA are rule-based automation tools and they help complete repetitive tasks without errors. Studies show that RPA boosts financial data accuracy by 95%.
  4. Quick implementation: Unlike the long implementation timelines for technologies such as ERP and AI, RPA tools can be implemented quite fast. Simple workflows can be automated with RPA solutions in 2 weeks while complex processes may take 2-3 months.
  5. Saves costs: According to a study, companies can save between $5 trillion – $7 trillion by 2025 by using RPA. Automating processes with RPA helps save costs by reducing errors and increasing productivity.

RPA in financial services to grow at 30.9% CAGR between 2021-2030

(Source)

What is the cost of implementing RPA technology for AR?

Finance leaders are often worried about the cost of investments and the returns they yield. Our recent survey revealed that cost optimization is the biggest priority for CFOs in 2022.

RPA tools can support finance leaders in their cost optimization initiatives. Since these solutions are priced much lower than other technologies, the savings they help generate are manifold.

The cost of RPA solutions can be divided into three categories – development costs, maintenance costs, and infrastructure costs. Many RPA solution providers offer platforms wherein you can develop your own RPA bots with minimal coding efforts. This helps further reduce the costs of RPA solutions.

Below we look at the cost of implementing RPA technology for various workflows.

  • The cost of implementing an RPA bot that performs data entry tasks is $5,000. Annual savings that can be garnered from it goes up to $50,000 (Source)
  • An RPA bot that converts pages from PDF to CSV costs ~$25 per month + maintenance charges, subject to the number of conversions (Source)
  • Custom RPA solutions cost between $5,000 – $30,000, depending on the vendor pricing, bot configuration requirements, the complexity of the software agents, and maintenance efforts (Source
  • According to a Deloitte study, small and medium businesses tend to pay $4000 – $15,000 for an RPA bot that performs a single task. For enterprises, the costs may go up to $20 million, as they would need RPA solutions that have up to 500 bots (Source)
  • RPA solution providers offer unattended automation (automated workflows that do not require human intervention) solutions for $1300 – $1900 (Source)

Should you use RPA technology to streamline your AR processes?

If you are still confused about whether to invest in RPA solutions for AR automation:

Two-third of the CFOs believe RPA will transform AR management in 2-3 years

Source: State of CFO’s Office Report 2022

RPA solutions are cost-effective and help you streamline your AR functions by automating repetitive, mundane tasks. It enables you to reduce time spent on manual workflows such as cash reconciliation and focus on strategic initiatives such as building customer relationships, risk management, and cash forecasting.

Most RPA solutions are priced at a few thousand dollars, making them easily affordable. They also deliver ROI between 30% – 200% in their first year of implementation. Power users of RPA technologies are even able to achieve 4x ROI.

RPA tools are thus attractive for both small and mid-size businesses as well as enterprise organizations. These are a must-have in your AR automation tech stack and can become the first step toward using more advanced automation mechanisms such as artificial intelligence (AI), the internet of things (IoT), and predictive analytics.

Get a free copy of our eBook—Modern CFO’s Guide to FinTech Use Cases— covering all the latest technologies – AI, ML, Cloud, RPA, Blockchain, and more.

Next Steps: Choose AR Automation Solution with RPA technology

Today, you needn’t develop your own RPA bots for automating AR processes. Many AR automation solutions come built-in with RPA technology to help you manage invoicing, deductions, cash application, and other workflows.

HighRadius is a leader in the invoice-to-cash automation space (Gartner Magic Quadrant 2022) and offers solutions with RPA and AI technology to streamline invoicing, collections, credit risk, and deductions management. Schedule a demo with us to quickly learn about our AR solutions and how they can boost your cash flow.

Most Popular Resources

All Topics
Accounts Receivable
FINANCE
Midmarket
Talk TO Our Experts

Streamline your order-to-cash operations with HighRadius!

Automate invoicing, collections, deduction, and credit risk management with our AI-powered AR suite and experience enhanced cash flow and lower DSO & bad debt

Talk to our experts

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.

Lightning-fast Remote Deployment | Minimal IT Dependency Prepackaged Modules with Industry-Specific Best Practices.

Automate Your Order-to-Cash Today!

Thank you for signing up! Stay tuned :)