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Scaling for Growth in 2022: Why CFOs Are Turning To AR Automation

9 May, 2022
6 min read
Brett Johnson, AVP, Global Enablement
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What you'll learn

  • More than 80% of mid-market businesses expect to have double-digit growth in 2022
  • Scaling for growth (44%) and slow manual processes and outdated technology (42%) are the biggest challenges in managing accounts receivables
  • Nearly a third of the mid-sized companies plan to automate invoicing, collections, and cash application in 2022
Mid-market businesses expect rapid revenue growth in 2022
From manual processes to AR automation: The journey towards success
Key implications of not keeping up with the latest AR automation technology
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From pandemic panic to scaling the business

In 2020, the chief financial officer’s agenda changed monthly. COVID-19 pandemic forced most businesses to redouble their focus on cash flow and bad debts. Mid-market finance leaders need to reimagine workflows and product lines and ensure business continuity amid a global pandemic. In 2021, once past the immediate effects of COVID-19, CFOs began focusing on implementing new technologies and accounting processes to accommodate the new world of hybrid and remote work. In 2022, CFOs are rebooting their growth agendas, and efficiently scaling the business is top of mind.   

Mid-market businesses expect rapid revenue growth in 2022

In the most recent survey (find details of the survey at the end of the article) of senior finance executives in the United States conducted by Industry Dive and sponsored by HighRadius, we observed a shift toward high revenue growth for many companies. For example, the proportion of companies indicating revenue increases of between 51% and 60% in 2021 was 8.4%, compared with 17.5% in 2022. The percentage of companies expecting revenue to grow by over 60% increased from 5.8% in 2021 to 10.4% in 2022.

Revenue growth projection for 2021 - 2022

Source: The State of CFO’s Office – A Mid-Market Perspective 2022. Download the full report here.

Processing the growing volume of invoices that drive revenue growth will be a challenge for companies that don’t have existing AR team capacity. Adding headcount to meet the increasing AR processing volume isn’t the easiest or the most cost-effective option.

The average cost to recruit and hire one junior accountant in the U.S. is estimated to be $4,129, and it typically takes 42 days to fill the position.

With companies’ invoice-processing capacity potentially far below what may be required in 2022, it’s not surprising that scaling for growth was the most commonly cited challenge in managing accounts receivable (44.4%), followed by slow manual processes and outdated technology.

Here’s a look at the top challenges in managing accounts receivables.

Biggest AR challenges

Source: The State of CFO’s Office – A Mid-Market Perspective 2022. Download the full report here.

It is, therefore, not surprising that our survey results found that one-third of respondents will automate accounts receivable (AR) processes in 2022 and that the vast majority (86%) said an increase in AR efficiency could significantly reduce costs. With the talent shortage pushing wages northward, companies have realized that simply adding more staff isn’t as efficient as improving the productivity of their existing teams.

From manual processes to AR automation: The journey towards success

According to our survey, in December 2021, 42% of companies still relied on spreadsheets to manage AR. Paper-based invoice processing costs between $16 and $22 per invoice, and these necessarily have to be delivered by post or fax.

In 2022: 

  • 33% will automate invoicing
  • 33% will automate cash applications and reconciliations
  • 32% will automate collections

AR automation for competitive advantage

Aside from anticipated cost savings and scalability, companies recognize that processing receivables manually with spreadsheets would put them at a competitive disadvantage compared with companies that automated. 63% of survey respondents said that AR automation was important to keep pace with their competitors and that falling behind the curve would affect their ability to deliver on customer service, limit the potential for AR teams to work remotely, and hurt their ability to attract and retain talent.

Remote and hybrid working has also created a new level of complexity for CFOs. Besides the security systems and work-monitoring issues, CFOs have had to make remote work part of their talent attraction and retention package for accounting teams, says Morris, VP of Finance, at HighRadius. “Everyone’s hurting from attrition and recruiting and retention in this environment is uncertain, so being able to work remotely is table stakes now, and an important recruiting tool in 2022. The key however is making sure the company has made the right technology investment to allow for that. It’s not really optional anymore.”

Adding value through efficiency 

Keeping pace with competitors also means leveraging AR analysts in the most value-creating way. A midsize company typically has anywhere between 1-3 analysts. These fast-growing companies look to optimize their team structure and get away from clerical manual tasks to higher value-added work that can help them elevate their position in the market. 

For example, in collections, analysts spend a lot of time identifying whom to call to recover outstanding receivables. Manually doing it includes going into the system of records, downloading data, creating reports, and applying filters that can identify whom to call. The whole process is so time-consuming that oftentimes, the customer would already have made a payment by the time you make a collection call.

AR automation systems automatically help collectors prioritize who to call first. The embedded AI and machine learning technology will predict which customer is most likely to pay today, and that frees up a significant chunk of time for the AR analyst to focus on higher value-added work.

Key implications of not keeping up with the latest AR automation technology

Losing out customers is the biggest implication of not deploying modern AR automation systems, according to our survey. And it’s not surprising considering that AR solutions offer e-invoicing, e-payments, self-service portals, easy dispute resolution, and other features for customer use.

Implications of lagging in AR automation

Source: The State of CFO’s Office – A Mid-Market Perspective 2022. Download the full report here.

In an environment where customer retention is considered of the highest importance and adding new customers is the key to keep growing, companies are increasingly adopting AR automation solutions. Here’s a look at how the AR automation market is expected to grow in the next half-decade.

Projected growth in the global AR automation market (billions)

2022 2026 % change
USD 1.89 USD 3.86 104.2%

Source:  Mondor Intelligence

So, if you do not want to miss the AR automation bus, talk to us to know more about it, schedule a demo, and book your seat on this journey today.

About the survey

HighRadius and Industry Dive, a leading finance research organization, surveyed 154 finance leaders (CFOs: 44%, VP Finance: 15%, Director of Finance: 29%, and Chief Accounting Officers: 12%) from small and mid-market businesses (with revenue less than $1 billion in the most recent financial year) in the US to understand their priorities, challenges, market outlook, and views on the accounts receivable function and technology at large. This survey was conducted between 10 Dec 2021 and 14-Jan-2022 by CFO Dive. 

For a complete copy of the survey report: “The State of CFO’s Office – A MidMarket Perspective 2022”  download here. To view our webcast on this topic, click here

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