Taking cash out of the ATM, using online banking websites and apps
to pay bills, and even confirming doctor appointments or filling prescriptions
using automated messages - all of these everyday tasks are now automated
through technology. However, automation is much more complex when it comes to
the business world. While the digital revolution has already disrupted most
departments across an organization, some are slower to take the leap. Accounts
receivable (AR) is one area that has yet to see as much progress towards
automation as other areas, including accounts payable (AP).
With more power in the hands of buyers, even in B2B
transactions, AR is lagging behind in automation and technology. The digital
revolution is here, and AR needs to catch up. For example, buyers are using
technology to introduce flexibility to different parts of the accounting cycle,
in particular with accounts payable teams and across payment channels. They can
now pay via ACH, credit cards and even wire transfers. Virtual credit cards,
also known as one-time use or emailed credit cards, are also becoming more
popular. While new technologies make it easier for the buyer to pay, the rapidly
changing payment landscape adds stress to suppliers and AR departments as they
navigate accepting those payments and mitigating fees.
The challenge facing these financial departments is to overcome
the inefficiencies resulting from traditionally manual invoice-to-cash
processes, and integrate new technology solutions that can deliver on increased
revenue with more streamlined processes.
By utilizing automated invoicing and payment solutions, those
charged with driving financial success can ensure their organizations are
moving away from costly, labor-intensive methods and towards innovations that
reclaim valuable time while simultaneously accelerating cash flow.
One Size Does Fit All
Whether you manage invoice delivery, payments processing or the
entire invoice-to-cash process, you might think that there is no single
solution that will help meet the various financial needs of an organization.
This may have been true a decade ago, but today the digital revolution has
allowed us to invent payment cycle management (PCM). With an electronic
approach, organizations can transform a once disorganized, disparate AR system
into a single, automated, cloud-based solution.
Taking the Leap
Joining the digital revolution and transforming your business with
automation can seem like a daunting task, but it’s not as complicated if you
break it down into three steps. For most AR departments, the three crucial
operational areas are invoice delivery, invoice payments and cash application.
By focusing on these three areas, companies can help increase efficiency across
the chain of billing and payments. Automating these key processes will also
make it easier to handle other AR tasks, such as collections and reporting
Bring on the Cash Flow
Businesses can increase and stabilize their flow of cash through
automation. When sending invoices manually, companies often mail them just once
a week or even once a quarter. They then deposit checks only after they
are manually entered into the system and matched with remit statements.
Automation speeds up the entire process by sending invoices daily. Customers
who choose electronic invoicing options, such as email or using an online
portal, may even receive invoices within 24 hours of making a purchase, without
printing and postal delays.
When you can guarantee fast invoice delivery, customers may be
incentivized to pay invoices faster if they are presented with discounts. Even
offering electronic payment methods, such as credit cards and ACH, puts cash
back into your business faster. A paper check may take up to five days to
clear, while an electronic payment can clear within 24 hours. This adds up to a
significant reduction in days sales outstanding (DSO), an accelerated flow of
cash into your business and happier customers, with minimal effort by your AR
By implementing a single, end-to-end digital strategy, businesses
can maximize operational efficiency and use their resources in more productive
ways. Rather than manually entering data into spreadsheets, keying data and
filing paperwork, AR teams can work on strategic initiatives to move the
organization forward. With less manual labor and more automation, businesses
can experience a reduction of human error and paper in the office, while also
increasing data security. When employees have more time to focus on high-value
initiatives and providing better service, both employees and customers benefit.
Any manager or executive will tell you that when you have better
data, you can make smarter decisions. The beauty of a smart automation solution
is that it provides you with better reporting tools and dashboards that can’t
be replicated through an ERP interface or excel spreadsheets. Another benefit
is that once AR processes are automated, real-time updates provide instant
access to the insights and data needed to make more intelligent business
Businesses have a lot to gain and nothing to lose by embracing the
digital revolution within their AR teams and automating the invoice-to-cash
process. And as AR departments establish their position in the digital
revolution, PCM is the first major step in the right direction.
Ed Jordan is CFO at Billtrust, a payment
cycle management solutions provider that helps businesses automate and
accelerate the invoice-to-cash process. To learn more, visit www.billtrust.com.