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Accounts receivables (AR) are a critical component of every business. The AR team is responsible for sending out invoices, billing customers, processing payments, and following up on payments due. Your business’s cash flow and, consequently, productivity and growth hinges on the efficiency of the accounts receivable activities.
Many CFOs strategically deploy AR automation to streamline invoicing, payment processing, acceptance, and collections management. It is imperative for any business that the above activities work in harmony to ensure a healthy cash flow. AR automation is seen as the solution to realize this objective.
This blog looks at how AR automation can improve different areas in your business by streamlining the efficiency of how you collect payments.
Despite the growing demand for AR automation, many businesses rely on manual AR processes. A 2017 Small Business Trends study showed that about 84% of companies use manual processes such as Excel and spreadsheets. A 2021 report reveals that manual AR processes are still prevalent across industries.
Manual processes slow down collection processes significantly. Companies across industries experience longer collection cycles when they rely on manual AR processes. The PYMNTS research shows that, on average, firms that use manual methods take 25.3 days to follow up on payments. Firms that have not automated their AR processes have 18 percent longer collection terms than businesses that have adopted AR automation.
Delayed payments are typically the top cause of poor cash flow for small to midsize businesses. An earlier survey in Australia suggests that 90 percent of small businesses face cash flow issues and go broke due to delayed payments. The 2020 MYOB Business Monitor found that 38 percent of Australian SMEs (small to medium-sized enterprises) feel financially stressed due to late payments, and 42 percent are concerned about cash flow.
In addition to poor cash flow, businesses incur increased administrative costs linked to debt collection that involves:
A survey of eleven countries, including the United States, by a consulting firm, Plum, found that manually following up on payments is highly time-consuming. On average, 15 workdays are lost each year in chasing after late payments.
According to Plum’s researchers, 7.5 percent of invoices are written off ultimately as bad debt. A 3-day delay in invoice due can take away $115,000 from the working capital with a $10 million yearly turnover ($10 million divided by 261 working days). With cash locked up in delayed payments, the potential working capital is frozen – putting financial brakes on innovation investment and scaling up production.
A recent industry survey found that one of the significant barriers to following up on late payments is the lack of dedicated resources. Businesses also report a lack of personnel and staff time as common barriers to payment collection. A significant proportion of companies find it difficult to broach the payment issue with their clients as they fear doing so could harm their future relationships.
With digital processes for invoicing, AR automation effectively handles labor-intensive AR processes such as deductions while accurately capturing and prioritizing collections efforts. Integration with an online payment platform also streamlines the process, with a payment write-back that syncs to your ERP while providing a seamless experience to your customers.
AR automation brings convenience for both you and your clients, making it an essential tool in today’s fast-paced and evolving business landscape.
According to research, businesses that use AR technologies experience a 23 percent improvement in payment collections compared to firms that use manual methods.
The numbers don’t lie. AR automation brings many benefits that impact overall business health – minimizing your exposure to risk from manual processes.
The past decade has seen a marked proliferation of e-commerce. This is leading business-to-business (B2B) payment merchants to strengthen their digital payments infrastructure. Over the past couple of years, the world has struggled to get to grips with the COVID-19 pandemic, as a consequence, a lot has changed even for business-to-consumer (B2C) companies, who are now bracing for the transition to digital payments.
According to a study conducted by McKinsey & Co., 66 per cent of participants say that digital sales options for customers have become more important during the pandemic, compared to traditional sales options. Also, it revealed that the trend of omnichannel sales methods supersedes that of traditional methods after the pandemic.
So, it becomes imperative for B2B companies to address these changes in customer expectations triggered by the pandemic and the collective transition to digital payments, characterized by automation. B2B buyers now look for variety, ease, and convenience while transacting—something that B2B payment automation can provide. With the improvement in payment options for B2B buyers come the benefits of increased customer satisfaction and transaction conversions, ultimately leading to business success.
Here’s how B2B merchants can keep pace with the changing payment landscape:
Now, B2B merchants should look for ways to recreate the B2C payment experience for their customers. B2B buyers look for ease while transacting, and companies that offer multiple payment options can provide them with instant gratification. Contactless B2C digital payments can also be done in the B2B landscape in real-time by adding features like wire transfer, credit card, and digital wallets.
B2B companies can stay abreast of the changing payment landscape by digitizing their accounts receivables. This can be achieved using automated onboarding, which can save them time and money by eliminating time-consuming credit decisions, emails forms, PDF invoices, and manual bank reconciliations. B2B payment automation can provide buyers with consolidated periodic invoices and give companies more control over their cash flow.
B2B customers show a preference to transact more when they hold a credit line and have forged a financial relationship with the company. For getting a leg up over competitors, B2B companies can offer their customers the ability to get instant credit while making a purchase. Such a strategy can help companies retain their customers and win their loyalty.
B2B business identity theft and fraud have become increasingly common as the customer acquisition process occurs online. As such, security is something B2B companies should pay attention to. They need to leverage advanced fraud detection software and processes to protect themselves and their customers. A well-developed security solution can definitely fraud-proof the payment infrastructure and build risk-aversion abilities.
B2B payment landscape is becoming increasingly digitized, and companies will have to adapt to these changes. In order to keep up, B2B companies need to review and evaluate their existing payment system to use technology to streamline areas where it’s necessary. Creating and adopting an omnichannel payment strategy can greatly help B2B companies get an edge over their competitors.
At ezyCollect, we understand the importance of modernizing your payments in order to keep up with the rapidly changing digital world. We provide Accounts Receivables Automation software that helps businesses automate and digitize their payments. Our solution is designed to help businesses get paid faster and easier, so they can focus on what they do best.