Transformational benefits of accounts receivable automation

The B2B payments landscape has undergone some significant changes in recent years, with a clear trend towards digital payments and automation.

Many B2B transactions that once relied on paper checks or manual processing are moving to electronic methods such as ACH transfers, virtual cards, and electronic funds transfers. This change is being driven by a desire for efficiency, cost reduction, and faster transaction processing.

Additionally, as younger decision makers and business leaders fill the B2B space, B2C-like payment options are seeing greater customer demand—and we’re seeing the associated automated receivables drive productivity and agility within traditionally managed finance teams.

While businesses are beginning to realise the need to encourage customers to use digital payment options, many are reluctant to adopt an automated approach, even though automation solutions have proven to be effective, cost-effective and offer faster and more efficient processes.

Behind the adoption process

While implementing automated processes can be very beneficial, integrating automated payment systems with existing accounting or ERP systems can be complicated and require significant technical expertise. Compatibility issues with legacy systems can further complicate integration. Often overworked and stretched (like accounting teams), IT teams can feel that implementing any new technology is impossible to master.

Working across multiple systems, IT teams are often called upon to step in when things inevitably go wrong. They are asked to provide quick fixes and workarounds to help systems work together. They are also expected to help create custom reports to ensure each accounting department is working with the data they need. However, with the right solution, once IT has taken care of the installation, the software is easy to maintain and essentially runs itself. Custom reports can be created with the click of a button, and most platforms offer a user-friendly, no-code interface, meaning you can make changes without any technical knowledge.

Calculating Return on Investment (ROI)

Implementing an automated payment option that customers can use typically involves costs related to software, hardware, integration, and training. These upfront costs can be a barrier for some organizations, especially smaller businesses. This is probably the most common reason for avoiding automation. There may be a perception among executives that the cost of any new technology will outweigh the benefits. Research has shown that the exact opposite is true.

According to Atradius, a B2B debt collection company, businesses in America are losing 51.9% value of accounts receivable that are not paid within the first 90 days. Numbers like this underscore an important reality. Late payments don’t just slow down cash flow; they cost businesses money. The longer an invoice sits unpaid, the more value it loses and the less likely it is to recover the full amount. Dun & Bradstreet found that after 90 days, the likelihood of an invoice being paid is 69.6%If the same invoice is 12 months overdue, the probability drops to 22.8%Given the established link between manual accounts receivable practices and late payments, a “business as usual” approach could be costing your business money.

In contrast, adopting an AR automation approach can return money to the bottom line. A Forrester study found that implementing AR automation generated a 400% ROI over three years. In analyzing this, Forrester found that the AR automation solution studied led to the following improvements:

• Improved AR workflow automation and team productivity by 25%—a total benefit of $424,000 over three years.
• Collected 25% more through reduced write-offs. Accounts receivable automation makes collections consistent. This benefit totaled $234,000 in present value revenue over three years.
• Reduced legacy costs by $52,000 over three years. Organizations were able to retire expensive payment processors, ERP modules, and management resources.

Automating the processes that customers use to pay your organization enables instant capture of payee data without the need for time-consuming manual data analysis. Additionally, the ability to streamline invoice approvals helps identify areas where digital payments are lagging, enabling smoother transactions.
Maintaining a personal touch

Another common reason companies may shy away from automation is the desire to retain a human touch in customer interactions, which is understandable. PricewaterhouseCoopers found that 59% consumers believe that companies have lost the human element of customer service.

While it may seem counterintuitive, AR process automation has the potential to bring a more human element to customer interactions. Manual accounts receivable often requires employees to spend hours on tasks like creating invoices, delivering invoices, entering data, compiling detailed reports, and more. That leaves the AR team with little time for strategic work or engaging in the relational side of the business.

By automating back-office tasks, accounts receivable team members can focus on working directly with high-risk, high-value accounts. They have time to provide white-glove services when needed and work with potential problem accounts to ensure timely payments while respecting the challenges a client may face.

Final benefits

Accounts receivable process automation offers several key benefits, including reducing manual effort, streamlining workflows, and speeding up the billing and payment collection process. Errors are minimized and payments are expedited by the ability to send invoices quickly and offer convenient online payment options. Businesses that lag behind in streamlining payments risk customer dissatisfaction and falling behind the competition. Process automation offers efficiency gains that save time and resources for businesses and their customers, delivering what every business wants to achieve—increased customer satisfaction and loyalty.