6 Best Practices For Accounts Receivable Automation
This post was originally written on the Chargebee blog
An organization’s cash flow is its lifeblood. And at its heart lies collecting dues on time. Improper accounts receivable management — either through manual processes or ineffective automation — can only complicate the process due to human errors, inaccuracies, and delays, leading to severely clogged collections.
In the era of the shifting financial landscape, the move to incorporate automation for accounts receivable must be well thought out.
Let’s further explore the necessity of automation before we cover the best practices you can follow.
Why You Should Automate Accounts Receivable
Accounts receivable denotes the money owed to your company for your products or services. Since your order-to-cash cycle relies heavily on your AR, it’s necessary to ensure essential functions such as efficient invoicing, optimal days sales outstanding (DSO), and quick dispute resolution, are on autopilot. Apart from carrying out these critical functions, here are the core reasons why accounts receivable automation is beneficial:
1. Save time and human effort
The core function of automation is to build a logic around your accounts receivable process, including which customer to charge, how to charge, when to charge, and what to charge for.
For instance, say a customer has an annual contract. The first quarter goes by smoothly, but the customer wants adjustments (such as add-ons, upgrade/downgrade, and the like) in the second quarter. So, you adjust the subscription pricing manually. Now, imagine hundreds or thousands of customers instead of one — it would be impossible for any company to pull this off manually.
2. Ensure Predictable Cash Flow and Lower Bad Debt
Another core advantage of automating accounts receivable is having a predictable cash flow for your company. Without automation, your prediction could be completely off from what you’re actually collecting. You can automate payment notifications, reminders, and emails to ensure collection on time. Automation will help you stay on top of your collections process, ensure consistent cash flow, and lower bad debts.
3. Gain visibility and make informed decisions with powerful AR insights
Most automation solutions provide interactive analytical dashboards. They give accurate and helpful information on the right KPIs, like DSO, aging reports, cash flow reports, and collection effectiveness index (CEI), and enable you to make strategic financial decisions.
Now that we’ve covered the main reasons why you should automate your accounts receivables, let’s take a look at the best practices that companies can — and should — follow.
Accounts Receivable Automation Best Practices
Here are the 6 golden tips to streamline your AR automation:
1. Ensure seamless integration of tech stack
If and when you make the decision to adopt an accounts receivable software, the first question you should be asking yourself is “will this tool integrate seamlessly into my already existing tech stack?”. If the answer to this question is no, it might end up being more time-consuming and expensive than you expected, and the shift to another tool becomes a headache rather than a problem-solver.
Hence, ensure that the integration aspect checks out. For instance, Chargebee offers integrated Billing and Receivables software, allowing you to
– Cut down mundane work by automatically syncing invoices, payments, credit notes & more
– Get real-time visibility into expected revenue and a single source of truth for AR data
– Gain actionable insights into recovering failed payments and prioritizing collection efforts
– Automate payment reminders with smart engagement rules to ensure a seamless customer experience
And, a lot more!
Pro Tip: Automate gradually
While jumping in and automating everything may seem tempting, keep in mind that onboarding a new tool will put significant training stress on the AR teams. The key is to gradually implement the new functionality and give AR teams the time to adapt naturally.
2. Incentivize advance payments
Establish payment conditions that include incentives for customers to pay early (or penalties for persistent late payers). Choose a software that allows you to offer early or upfront payment discounts.
We at Chargebee Receivables understand that collecting receivables is a two-way process. With an easy-to-access customer portal, we ensure that your customers have visibility into what they owe and why, the option of redressal if they have a problem, and a “Pay Early” option if they don’t want to wait.
For complete article, please visit Chargebee blog.
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