AR Automation, Productivity and Cash Flow

automation cashflow productivity

Rule-based, repetitive, high-volume work is what automation handles best, and chasing overdue invoices is all three. Software issues invoices as the accounting system creates them, attaches a copy to every reminder, adds a Pay Now button and escalates on schedule. Midsized businesses using ezyCollect report saving up to eight hours a day on routine duties.

Accounts receivable automation software promises a disciplined workflow plus time-saving tools for peak labour productivity. Essentially, a best practice process powered by an automation engine.

And there’s a good reason why accounts receivable is often targeted by Boards as a key driver of cash flow. After all, it’s revenue just waiting to hit the bank account. The problem is the waiting part. Despite Inquiries, regulations and voluntary codes of practice, business-to-business late payments persist. But when your Board demands faster cash recovery, it’s time to take control.

But how do accounts receivable departments reverse a trend in late payments when they’re not prepped for success?

Growing businesses need efficient processes

Midsized companies are ideal candidates for a technology-enabled solution. Often stuck in small business mode, their staff battle on with a manual debtor management ‘system’ that comprises a mess of spreadsheets, outdated data and limited resources. It all leads to a haphazard collection process resulting in lost time and cash.

Without the right tools for the job, even the most proficient staff can run out of steam for what seems like an endless task of chasing payments. As one ezyCollect user told us recently: “It felt like I was always flying blind.”

It seems that credit controllers can be working very hard, yet the cash remains locked in the land of the lost.

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Accounts receivable duties are ideal for automation

The fact is, workplace productivity improves with automation technology. Accounts receivable tasks are perfectly suited to automation because they fit the following automation criteria:

The task is rule-based.
For example, if an invoice payment is 2 days overdue, then send a reminder.
Actions follow a consistent workflow.
For example, send payment reminders at 2 days overdue, 10 days overdue, then call the debtor, then send a demand letter by Day 30.
Generates a high volume of output.
For example, issuing hundreds of invoices then sending multiple reminders per invoice results in a high volume of communications.
Can be customised from templates.
For example, use the same format for reminder messages and customise them per customer account.

Even better, when you automate the repetitive manual tasks (like sending payment reminder emails), you free up valuable staff time for the high-touch accounts receivable duties that benefit most from human skills of listening, empathy and negotiation. That’s more time for phone calls to debtors, dispute resolution and customer service.

Automation technology speeds up collection times

Your days sales outstanding or DSO is the average number of days it takes for your business to get paid i.e. your average collection time.

Your DSO can drastically improve if you move through the invoice-to-collection process from beginning to end, efficiently:

Issue correct invoices quickly (the beginning)
Communicate promptly and consistently as payments become overdue (the messy middle)
Make it fast and frictionless for debtors to pay you (the end)

Automation offers solutions across the accounts receivable spectrum. You can automate:

the issue of new invoices created in your accounting software
a pre-reminder (‘Hi, your invoice is due for payment soon’)
a series of payment reminders by email and SMS
and even a self-serve checkout for debtors to settle their accounts online

The end-to-end nature of automation can greatly reduce your reliance on someone’s hands-on time, which is notoriously interrupted, particularly during busy seasonal trade. An automation engine will move through the process for you, 24/7, all the while condensing the time between invoicing and collecting. And that’s how cash recovery becomes faster and working capital predictably improves.

Reducing the cost of accounts receivable

While your business may eventually collect payment, it accumulates costs each day that accounts receivable age. You’ve collected the cash, but at what cost?

Here are some costs associated with an inefficient accounts receivable system:

Human labour on routine tasks. Not only are you paying for staff time, you could be wasting their time and talents on tasks that don’t fully utilise their skills. Midsized businesses that use ezyCollect, for example, report a saving of up to 8 hours per day on routine accounts receivable duties.
Fees on short terms loans or invoice financing options. Accessing money from lenders is an option when cash flow is tight but it’s never without a cost.
Errors and omissions. When tasks are reliant on a hands-on approach, they are susceptible to inaccuracies, variations in people’s productivity throughout the day, and divergence from agreed standards. Any requirement to re-do steps in the collections process prolongs your collection time.
Delinquent debts. As invoices age, they become increasingly difficult to collect. Once an invoice is more than 12 months old, illion suggests there is a 90 percent chance you will need to write-it off as a bad debt. That’s the value of the sale wiped from your books, plus the expense incurred trying to collect the debt.

Automation helps to overcome debtor excuses

Dealing with debtor excuses is par for the course; just ask any credit controller. Here are three common reasons for late payments and how automation can overcome them:

#1 I never received your invoice

The automation solution: Set a rule to issue invoices. For example, ezyCollect can automatically issue new invoices to your debtors once they are created in your accounting system. Then automatically attach invoice copies to every automated reminder so your debtor always has a copy of the invoice.

# 2 I forgot to pay – you should have reminded me

The automation solution: Set up a communication workflow that automates a series of payment reminders that reach debtors via email and SMS. Customise reminder templates so your debtor understands it’s you communicating with them, not a third party they have no relationship with. Include a phone call as part of escalating actions in your automation workflow.

#3 I’m out of the office / Your office is closed

The automation solution: Add a ‘Pay Now’ prompt to your invoices and reminders so debtors can click and pay online, from any device, anywhere. Payments come in 24/7, regardless of who’s in the office. Depending on your software, payments can even be auto-reconciled for you.

Your accounts receivable before and after automation

So how does the accounts receivable process change with an automation system working in the background?

This table describes a few changes you can expect:

Current	With ezyCollect’s automation
Staff look at a number of sources to report on the current status of ageing receivables.	Aged receivables are mapped for you, showing a distribution of ageing invoices. Dashboard analytics provide real-time data of key metrics such as value of invoices due and overdue.
Late payments persist due to poor visibility of ageing invoices.	Dashboard reporting puts a spotlight on largest overdue debtors, longest overdue debtors and debtors entering the danger zone of defaulting. Filters let you drill down into debtor sets and find ageing debtors immediately.
AR staff print off an aged receivables report which quickly becomes outdated.	Each debtor’s account history is maintained in real-time in one central hub and includes all reminder communications and debtor notes.
AR staff communicates with debtors only after an invoice becomes overdue.	Automate a friendly reminder that payment is due soon, prompting debtors to pay early or on time.
Call all debtors from a long list of overdue debtors regardless of previous communications.	Each morning the system emails you a list of debtors who have reached the stage of needing a reminder phone call.
Manually type reminder emails to large-value debtors; there’s no time to send reminders to everyone.	Use merge fields to customise reminder templates with debtor information. Then allocate all or some debtors to an automated workflow that methodically delivers email and SMS reminders on schedule.
Chasing lapses after a few reminder attempts.	Chasing escalates with one-click action to send a demand letter or outsource to a debt collector.
AR person remains at desk to process credit card payments over the phone.	Debtors complete credit card payments via clickable Pay Now buttons on invoices and reminders, at any time, day or night.
Payments are received but not acknowledged.	Thank you email is automatically generated when a debtor pays and reinforces positive payment behaviour.
Hire more staff or outsource to a bookkeeper to handle a growing list of debtors.	Automation is highly scalable and can handle your growing list of debtors.

Key points:

Productivity and cash flow improve with accounts receivable automation software.
Achieve cost savings as human productivity improves and human errors decline.
Buyer relationships strengthen as your customer service and customer payables experience improves.
No industry is immune from technological transformation. But the ones that get ahead of the curve will reap the benefits of competitive advantage.

Next stepTo see how ezyCollect’s automated workflow can improve your accounts receivable process and cash flow, request a demo todayBook your demo today

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Written by

Kristina Estoesta

Has written more about getting paid on time than most people have thought about it. If you have read something here about accounts receivable, odds are it was hers.