14 Superior Strategies for Automating Your Accounts Receivable Processes

Streamlining a company’s accounts receivable (AR) operations is an astute business strategy. After all, unpaid sales translate into forsaken revenue and profits. The introduction of AR automation software can significantly accelerate the payment process, enhance accuracy, and offer a more customer-centric approach. However, it’s crucial to remember that not all software solutions will be an ideal fit for every business, so careful selection is key. Upon choosing the right AR software, adhering to these 14 refined strategies for automating accounts receivable processes can aid in maximizing the potential of your implementation.

What Does AR Automation Entail?

AR automation encompasses a diverse range of approaches, each intended to supplant the manual components within the accounts receivable process. Certain AR software tools specialize in automating specific steps like digitizing invoices or streamlining payment acknowledgements. On the other hand, some solutions offer comprehensive automation, handling the entire spectrum from order entry to cash application, all while providing detailed management reports. Industry studies indicate that a more holistic approach to AR automation leads to substantial improvements in efficiency, precision, and customer service, alongside swifter cash conversions and richer data for managerial evaluation — all of these benefits while concurrently offering cost savings.

Crucial Insights

  • AR automation significantly curtails the duration needed to transform credit sales into cash collections from customers.
  • The efficiency and cost-saving potential of automated AR solutions can greatly vary.
  • Reflect on these 14 refined strategies for accounts receivable automation to fully capitalize on the selected solution’s benefits.

Crucial Insights

  • AR automation significantly curtails the duration needed to transform credit sales into cash collections from customers.
  • The efficiency and cost-saving potential of automated AR solutions can greatly vary.
  • Reflect on these 14 refined strategies for accounts receivable automation to fully capitalize on the selected solution’s benefits.

Crucial Insights

  • AR automation significantly curtails the duration needed to transform credit sales into cash collections from customers.
  • The efficiency and cost-saving potential of automated AR solutions can greatly vary.
  • Reflect on these 14 refined strategies for accounts receivable automation to fully capitalize on the selected solution’s benefits.

Fourteen Essential Strategies for Successful AR Automation

The aim of any AR automation initiative is to improve the process to accelerate cash inflows, enhance customer satisfaction, and achieve higher productivity with fewer resources. However, the path to these goals varies across organizations, necessitating the involvement of the right personnel in transitioning to AR automation or expanding an existing system. Here are 14 optimal strategies to guide companies in implementing AR automation:

  1. Define Your Future Vision. This involves recognizing specific goals for AR automation and, crucially, determining how to measure them. It is beneficial to establish quantitative metrics to track progress and performance while devising a method to gather the necessary data. This vision will help prioritize the most crucial features, keeping the team focused and not diverted by less significant additions.
  2. Understand the Present State. A preliminary step towards AR automation is to thoroughly document the existing process with the AR team, mapping out current workflows and identifying bottlenecks. This will highlight the gaps between the present and envisioned future states. It is also an excellent time to review standard operating procedures, emphasizing potential enhancements that AR automation could enable.
  3. Engage Your Accounting Department. Forming a competent team to assess AR automation is vital, and the earlier AR system users are incorporated, the smoother the transition will likely be. The accounting personnel currently overseeing the AR process possess invaluable insights that should be considered. Furthermore, securing their support before implementation is key, as they will be the primary users.
  4. Appoint a Key Stakeholder for Transition. Garnering high-level executive support for an AR automation project is a best practice, particularly as the changes will likely be noticeable to customers. For the same reason, consider including cross-functional team members, like sales or customer service personnel. Beyond executive sponsorship, each project requires an internal champion from the accounting department to ensure project success.
  5. Integrate New AR Tools with Existing Technology. An end-to-end AR automation solution that aligns with other systems such as order management, general ledger, cash management, and inventory management can deliver more benefits. Including IT representatives in the team can help identify integration opportunities and potential obstacles.
  6. Transition Gradually to Full Automation. Phased migration of processes is preferable for the AR staff and customers. Sudden, comprehensive changes can overwhelm the internal team and confuse customers, jeopardizing cash flow. Gradual automation allows staff to adapt to changes step-by-step and keeps the invoice review and payment process simple for customers. Some companies find success with a modular or pilot customer approach.
  7. Establish Key Performance Indicators (KPIs). KPIs are instrumental in tracking performance and serve as markers to gauge progress in automating AR. Decide on the metrics to be used, set benchmarks for each KPI, and decide how frequently they will be reviewed based on the company’s priorities.
  8. Inform Customers and Clients about the Transition. Given that AR automation might alter the customer experience, it’s best to communicate forthcoming customer-facing changes in advance. Alert customers that AR automation may provide additional payment options and notify them about altered automated communication for payment reminders or receipts.
  9. Design and Implement Your Workflows. After documenting current-state workflows, devote time to outline necessary changes based on the chosen AR automation solution. Thoughtful workflow setup can potentially redeploy efforts to different or new tasks, thereby not just capturing cost savings but also enhancing productivity.
  10. Set up Dashboards. AR dashboards provide automated, graphical displays of summary information used to monitor customer balances and receivable activity. They should be incorporated into the AR automation plan from the outset, customized to offer continuous, role-based information pertinent to individual job responsibilities.
  11. Monitor Initial Invoices to Identify Early Glitches. Quality control measures should be in place to ensure that the first invoices go out correctly when implementing an AR automation solution. Keep an eye on early invoice cycles to catch and address potential issues promptly, as errors can lead to payment delays and tricky conversations with customers.
  12. Incentivize Early Payments. Prompt cash collection improves the company’s cash flow and reduces the risk of bad debts. One way to achieve this is by offering early payment discounts and ensuring these offers are presented consistently and timely using AR automation. Other methods include offering electronic payment options such as ACH and credit cards, embedding payment portal links in the invoice, and leveraging AR automation to facilitate these transactions and monitor adoption.
  13. Solicit Customer Feedback. An automated AR system should bolster customer relationships and may even reduce their processing time and costs, as one company’s AR is another’s accounts payable. To ensure that the working relationship is improving, it’s beneficial to periodically check in with customers regarding their changing experience. For example, automated emails should provide customers with a fast and easy way to ask questions, but the effectiveness of this can only be confirmed by seeking feedback.
  14. Regularly Review AR for Discrepancies. It’s advisable to regularly review AR to ensure the automation plan is functioning as intended. This may involve reallocating some AR resources to conduct more frequent AR reconciliations, including customer contact data and any unapplied cash. AR dashboards can assist with alerts that identify irregularities within preset tolerances.

By following these refined strategies for AR automation, businesses can optimize their accounts receivable process, improve efficiency, and enhance customer satisfaction.

This graphic presentation of NetSuite's Accounts Receivable dashboard provides crucial insights into your organization's performance, highlighting key performance indicators and offering a clear view of your incoming cash flow.

Streamlining Accounts Receivable with NetSuite’s Automation

Implementing these 14 best practices can facilitate the transition from a manual AR process to an automated system, resulting in more effective and efficient AR operations. Selecting the appropriate AR automation solution is just as critical. NetSuite Accounts Receivable, an integral part of the company’s cloud-based enterprise resource planning (ERP) software suite, delivers comprehensive automation of the entire AR process.

From invoice creation to collections, NetSuite offers features that expedite the transformation of sales into cash. Furthermore, automated, role-specific dashboards provide real-time transparency throughout the process. Crucially, NetSuite seamlessly integrates with other ERP modules such as order management, inventory management, and financial management.

In many cases, automating accounts receivable proves to be a transformative strategy, significantly improving invoice generation and collection from credit sales. When you couple these improvements with enhanced efficiency and analytic capabilities, the appeal of AR automation for many businesses becomes clear. The aforementioned 14 best practices serve as a robust roadmap for businesses seeking to optimize their results when transitioning away from manual processes.

FAQs on Best Practices for AR Automation

  1. How is Accounts Receivable Automated? Accounts Receivable (AR) automation software integrates customer contact information with digital invoices for efficient online delivery. It allows for the generation of automated payment reminders and receipts and enables multiple online payment options along with automated cash-application features. AR automation provides comprehensive monitoring and measurement tools, including customizable dashboards, to effectively manage the entire AR process.
  2. What strategies can enhance Accounts Receivable Management? The primary objective of accounts receivable management is to shorten the sales-to-cash cycle, ensuring faster cash collection for businesses. Numerous stages constitute the AR process, and improvements at any stage can accelerate cash inflow. Strategies include swift delivery of invoices to customers, automated payment reminders at regular intervals, provision of diverse and speedy payment options, and the use of machine matching to reconcile and apply cash payments to open receivables. Additionally, role-specific AR dashboards displaying key metrics and KPIs can aid management in monitoring trends and activities.
  3. How can you streamline the Accounts Receivable process? The most effective way to streamline the AR process is through automated AR software, which supplants laborious and repetitive manual tasks with automated procedures, enhancing accuracy and reducing processing costs. Consider implementing measures such as invoice digitization, online invoice delivery, automated reminders, internet-based payment options, and automated cash-application matching to further streamline your AR operations.
14 Superior Strategies for Automating Your Accounts Receivable Processes
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14 Superior Strategies for Automating Your Accounts Receivable Processes
Explore effective strategies for implementing accounts receivable (AR) automation, its benefits, and how it streamlines business financial processes for improved efficiency and profitability.
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ABJ Cloud Solutions
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