Accounts receivable (AR) process optimization makes solid business sense — after all, uncollected sales mean missed revenue and profit. When it comes to getting paid faster, AR automation software is a game changer. It also makes the AR process more precise and consumer friendly. However, not every software solution is appropriate for every organization, so it is critical to make an informed decision. Following the selection of AR software, the following 14 best practices for accounts receivable automation can assist the company in making the most of the installation. What Is AR Automation? AR automation comes in various forms, all aiming at replacing the manual aspects of the AR process. Some AR software solutions can only automate particular steps in the AR process, such as invoice digitization or payment acknowledgment automation. Other AR solutions automate the entire process, from order entry to cash application, and include extensive management reporting. According to industry studies, more complete AR automation results in more productivity and accuracy, better customer service, faster cash conversion, and more meaningful data for management analysis – all while saving money. 14 Key AR Automation Best Practices Any AR automation project's purpose is to improve the process so that cash comes in faster, clients feel better about doing business with the organization, and more work is done by fewer employees. However, how such objectives are met varies from company to company. Envision the future state - This includes determining the company's unique AR automation goals, as well as how those goals will be monitored. It’s helpful to agree on a set of metrics that will statistically evaluate progress and measure performance, along with a mechanism to record the essential information. Document the current state - One of the first steps in implementing AR automation is gathering the AR team to thoroughly describe the present process, displaying all key workflows as they currently exist and describing any pain points and bottlenecks. This aids in identifying the gaps between the current and desired future states. Furthermore, now would be a good opportunity to go over typical operating norms and procedures, highlighting potential enhancements that will be achievable once AR automation is deployed. Get your accounting department involved - It is vital to assemble the correct team of people to analyze AR automation, and the earlier AR system users are included, the smoother the installation will be. Accounting employees in charge of the AR process have invaluable, comprehensive expertise that must be heeded. Furthermore, because they will be the major users, it is critical to obtain buy-in before deployment. Establish a key stakeholder for migration - This includes determining the company's unique AR automation goals, as well as how those goals will be monitored. It’s helpful to agree on a set of metrics that will statistically evaluate progress and measure performance, along with a mechanism to record the essential information. Ensure new AR tools integrate with existing technology - An end-to-end AR automation solution that connects with other systems, like as order management, general ledger, cash management, and inventory management, can provide even more benefits. Having IT representatives on the team aids in identifying integration opportunities and obstacles. Move to full automation incrementally - It is better for both the AR employees and the company's customers to migrate processes gradually rather than all at once. Large-scale changes can be overwhelming for internal workers and cause customer confusion, all of which can soon become troublesome for a company's cash flow. Paced automation allows employees to learn and grow comfortable with changes before introducing new ones. At the same time, it is critical to maintain the invoice review and payment procedure simple and straightforward for customers. Establish Key Performance Indicators (KPIs) - KPIs are useful tools for tracking performance and can be used to track progress when automating AR. Determine which metrics will be utilized, establish benchmarks for each KPI, and decide how frequently they will be reviewed based on the company's priorities. Communicate with customers and clients about the switch - Because AR automation may alter a company's customer experience, it's best to convey any customer-facing adjustments ahead of time. Switching from paper invoices to digital invoices, redesigning digital invoices to look different, or modifying the contents in each field are some examples. Inform clients that AR automation may result in more payment alternatives and inform them that they will get more (or different) automated messages like payment reminders or payment receipts. Outline and set up your workflows - After documenting current workflows, outline required, and desirable adjustments based on the chosen AR automation system. Labor should be freed up as a result of AR technology taking over monotonous, repetitive jobs. Setting up new workflows thoughtfully may provide an opportunity to redeploy efforts to alternative or new activities, in addition to collecting possible cost savings. Set up dashboards - AR dashboards are automated, graphical presentations of summary data that are used to track a company's client balances and receivable activity. KPIs, summary customer aging reports, top customer balances, and department efficiency measurements are all common components of an AR dashboard. Track those first invoices to catch glitches early - Invoice problems or inaccuracies frequently lead to payment delays and awkward conversations with customers. When implementing an AR automation solution, it is best practice to implement quality control methods to ensure that the initial invoices are sent accurately. Consider using KPIs to track the quantity of rework, such as tracking the number of updated invoices or customer disputes. Encourage early payments - Collecting cash as early as possible improves cash flow and reduces bad debt. Offering early pay discounts is one approach to encourage consumers to pay before the invoice due date, and AR automation helps ensure that those offers are given consistently and on time. Another strategy to expedite payments is to provide consumers with electronic payment choices like ACH and credit cards or embedded links to a payment portal in the invoice, both of which are speedier than traditional paper checks. AR automation can help facilitate and track these early payment processes. Seek client/customer feedback - An automated AR system should strengthen client relationships. Because one company's AR is another's accounts payable, when done correctly, it can also reduce processing time and costs. Check-in with customers to see how their experience is changing to ensure that the working connection is improving. Review AR regularly for inconsistencies - It is a great practice to check AR to ensure that the automated strategy is running properly. This could imply reallocating some AR resources to perform more frequent AR reconciliations, including customer contact data and any unapplied cash. AR dashboards can help with notifications that detect deviations within predetermined tolerances. These 14 best practices can aid in the transition from a manual AR process to an automated AR system and make ensuing AR processes more productive and effective. Choosing the best AR automation solution might help with this as well. NetSuite Accounts Receivable, a component of the company's cloud-based suite of enterprise resource planning (ERP) software for business administration, allows for complete automation of the AR process. NetSuite provides capabilities that reduce the time it takes to turn sales into cash, from invoice production to collections. Furthermore, role-based dashboards enable real-time visibility at all levels. It also connects with other ERP modules, such as order management, inventory management, and financial management, which is important. Want to know more? Check the full article here: https://bit.ly/3E9gcZZ
