6 Benefits from Improving Accounts Receivable Management!

Accounts Receivable Management

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Accounts receivable is a function of the accounts department. In large organizations, a separate team handles the accounts receivable vertical.

They are responsible for collecting money from debtors or customers who owe the business money, checking discounts, processing refunds for returns inwards, and extending the credit periods if necessary.

Importance of Accounts Receivable Management

Accounts receivable is a crucial function that helps a business maintain its operational efficiency through effective liquidity and cash management practices. If customers are not given any credit, they may go to one who does.

So unless the products offered by the company are unparalleled in quality, service, and price, discount and credit approval practices to customers are often imperative for smooth operations. Depending on the size of the business, the number of invoices that need to be raised to collect dues will vary. 

Automation can change accounts receivable processes

Automating through managed account receivable will increase the efficiency of the function and reduce payment delays. Although the AR function is critical, an important part of the function involves repetitive tasks that are tedious, time-consuming, prone to human errors, and has repercussions on overall business if not carried out properly.

When AR is automated, all the repetitive tasks are carried out by the software through preprogrammed low-code applications that just need to be adjusted as per the existing workflow. Many benefits of automating will remove discrepancies like lost invoices, under-collection, or compliance issues which are common for businesses that handle numerous invoices. 

An integral part of accounts receivable software is also its intelligence function that can prompt the manager and help them take strategic calls for the next course of corrective actions. The value-addition of managed accounts receivable is invariably high in terms of efficiency, optimization, and enhanced productivity. 

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Positive changes due to automated accounts receivables

When robotic process automation or RPA is implemented, the repetitive tasks of raising invoices, erasing duplicate invoices, adjusting sales returns, and processing refunds are transformed. Here is a list of benefits that can be witnessed after integrating configurable digital tools customized for managed accounts receivable workflow:

1. Integration with process and software

Automated AR software can easily integrate with enterprise software and third-party business applications. As per the process requirement, a clear alignment with payment processing, online gateways, different payment routes, collection diarising as per days sales outstanding or DSO report, recording payments, and sending emails and reminders for payment is a basic requirement

2. Transparent communication

With different employees taking care of different sub-tasks, often integration is amiss in a manual process as the communication can be limited to chats or emails in silos. With automation, productivity tools ensure the record of every communication and change in the status of tasks are notified on a real-time basis. 

3. Better revenue

Without the collections efforts of an accounts receivable function, prospective bad debts can be avoided. With the help of aging reports, DSO is reduced to a healthy measure. Provisions for bad debts also reduce as most dues are collected on time.

Automation helps with timely alerts to track and collect payments within the stipulated time. It reduces human errors of not sending reminder emails and messages to customers who owe to the business. When a system is error-free, time and money are saved as a domino effect positively.

4. Reduces customer churn

A business that is not able to recover dues in time has to keep churning customers. As a result, long-term relationships cannot be established. Nonetheless, with automation, since reminders are sent in time, payments are received from the customers, and a loyal base is established over a period

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5. Enhances cash flows

In business cash flows are impacted by operating, financing, and investing activities. Of the three aspects, the positive cash flows from operating activities are considered by equity analysts and trade pundits as a healthy measure of the strong fundamentals value of a company.

Automation ensures that positive cash flows are generated. If a client is showing red flags as not responding to collections teams calls, then the system is recorded likewise. These initial signs are taken seriously by the business intelligence automation, and corrective measures are taken up to avert mishaps. 

6. Reduces overheads

When accounts receivable is automated, expenses related to third-party collection agencies are reduced without overshooting the DSO period. All the required ratios will be healthy when cash flow statements are positive. 

Conclusion

If businesses need a competitive advantage, workflow automation is the primary solution for Accounts Receivable Management. It is not a question of if but when and when the process transformation will take place.

When even simple tasks are being automated to achieve better results and improve the experience for customers and employees, falling behind is not a pragmatic solution. Adopting intelligent accounts receivable software will improve efficiency while maintaining the quality of the business.

Accounts Receivable Management article and permission to publish here provided by Mariana Wilona. Originally written for Supply Chain Game Changer and published on January 24, 2023.

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