Upgrade Your Team with a Digital Accounts Receivable Process

Jun 30, 2023 by Zazil Martinez


Unlocking the potential of a streamlined and efficient accounts receivable process is critical for finance teams burdened by paperwork, manual tasks, and fragmented data sources. If your accounting processes are still in the manual era, this article will help you upgrade your team with a digital approach.

Is your accounts receivable (AR) process slowing you down? Finance teams of all sizes are drowning in paperwork, manual tasks, and disparate data sources. These broken processes hold teams back by limiting capital efficiency and liquidity and decreasing your time, revenue, and efficiency. Due to poor billing and AR processes, businesses can lose up to 25% of revenue from new sales.

Digitizing the AR process can streamline your operations and solve several challenges. Finance teams have doubled their output while reducing overhead costs by 33% using a digital approach. Executives have been laying the ground for a digital AR strategy that leverages digital payments and automation.

This change has not been sudden. The importance of digitizing business processes has grown steadily over the last few years. However, the way it has changed AR processes has been significant.

If your accounting processes are still in the manual era, this article is for you. Continue reading and learn how to upgrade your team with a digital accounts receivable process.


3 Signs You Should Switch to a Digital AR Process

Digitizing your AR process saves money. It can also speed up your collections, reduce late payments, and reduce 70% of the repetitive tasks taking up your team's time and resources. The more you do to streamline your operations, the better it is for your cash flow and bottom line.

Yet, most companies have back-end accounting operations that don't keep up with their growth:

  • 37% of organizations spend between 41 and 160 hours per month handling unpaid invoices
  • 41% have over five people focused on managing receivables
  • Nearly 100% of invoices needed at least one extra touch to get paid

If you identify with any of these challenges, it's time to consider a digital approach.


Friction is Causing Late Payments

Do your customers ever ask you to resend an invoice because they "didn't receive it" or "didn't notice that the bill was due"? Companies often rush to improve AR metrics like DSO without considering their collections activities. A lot of money is lost between an invoice being delivered by mail or a customer realizing that an invoice mistakenly landed in their spam folder.

This can be easily solved with an AR automation solution. It allows to easily tie all data together and track and report it at the account level. This gives teams a general view of collected and pending receivables so an invoice never goes unprocessed, unapproved, or unpaid, removing friction from the payment process to get paid faster.


DSO is Suffering (And Not Improving)

Reducing DSO or past due invoices is a common goal for any AR team. It's in the company's best interest to collect outstanding receivables as quickly as possible, but how to balance the time it takes to chase down delinquent accounts with the rest of the responsibilities?

Automating the collection process allows the elimination of manual efforts to refocus on high-level tasks like forecasting and strengthening relationships with customers.

One benefit of digitizing processes is analytics and reporting. It gives hyper-specific analyses, drilling into individual accounts and assigning risk profiles to routinely late payers.


Manual Tasks Are Taking Up Your Time.

About 86% of organizations submit invoices by paper; some still send them via fax. That means paper handling, envelope stuffing, scanning, and shipping work for one small yet important aspect. A digital AR process can cut processing costs by up to 70% by eliminating the repetitive manual tasks taking up time and money.

Financial teams' labor costs are high, but digital tools can easily reduce them by up to 98%. Considering that a company processing a thousand monthly checks can leave over $500,000 on the table, it's a no-brainer. That's why automation is a game-changer for businesses with tight margins.


How a Digital AR Process Upgrades Your Team

Without an efficient and accurate invoicing process, cash flow can decrease. This can stunt growth, increasing risk and hurting businesses' overall health. If your invoicing process is manual, there are several ways you can benefit from switching to a digital process:

  • Free up your team's time for important initiatives. Now you can forecast, analyze cash flow, improve productivity, optimize working capital, and help your company scale.
  • Make timely and accurate collections effortless. Automated systems help avoid late payment problems by ensuring customers receive invoices and reminders on schedule. You process their payments the same way, regardless of the method, and payers can even choose to opt out of transaction fees using a zero-fee payment rail.
  • Use workflows to improve your customer's payment experience. Automatically notify payers when payments have been processed, send completed transaction details, billing reminders (with an embedded link to many payments), and more.
  • Manage your entire cash life cycle through one central platform. Using a comprehensive payment platform helps you avoid investing in multiple applications. Instead, your dashboard becomes the headquarters for your payment lifecycle. This grants access to key revenue insights and monitors customer lifetime value, average revenue per customer, and active recurring revenue.
  • Turn your accounts receivable process into a profit center. Digital platforms help cut manual tasks and grant control over all aspects of a transaction, including fee management. Using a zero-fee payment rail helps drop transaction costs and apply a convenience fee to transactions, unlocking a new revenue stream for the business.
  • Speed up your financial close with instant reconciliation. Digital AR tools can help you automate your financial close with instant three-way reconciliation. All your payments are automatically verified against ERP records, and reports are instantly integrated with your ERP system to provide the finance team with a consolidated view of all your accounts.
  • Reduce your regulatory risks through enhanced security. Another benefit of managing your receivables digitally is that many tools come with built-in security features to protect your business from fraudulent activity. Aside from being a PCI Level 1-certified payment processor, Paystand's platform also stores electronic records of all payment activity on our enterprise blockchain, giving you a tamper-proof record trail that is secure, notarized, and digitally auditable.


3 Expert Keys to Digital AR

As robust as a digital AR process can be, success depends on integrating this into day-to-day accounting operations. Taking the proper steps can set you up for a smoother transition and a more effective implementation.

These three keys contribute to the best possible outcomes for your team:


Digitize As Many of Your AR Records As Possible

Let's say your current process is entirely manual and paper-based. Each month, an AR clerk reviews each customer record and prints a paper invoice based on products or services purchased. They pop each one into an envelope and put it in the mail. They check the mail for invoice payments daily and manually record them in a spreadsheet. They handle inbound phone inquiries on invoice errors and make outbound calls to delinquent payers.

Imagine your company sticking to this manual process and having to hire one person for every invoice the company sends. You can see how that kind of headcount strategy stays the same. And there's room for error with all those manual steps.

Digitizing AR takes a big chunk of work off the staff's plate, reduces paper processing costs, decreases the margin for error, and speeds up payments. Consider the digitized process:

  • Customer records and purchase orders are stored in an online platform accessible anywhere.
  • Invoices are generated online in a format that can be emailed directly to the customer.
  • Customers can pay using a variety of online payment processors (no more mailing checks).
  • Invoice errors and delinquent payers can be managed quickly online (without phone follow-ups).

As a business grows, incremental time savings, reduced processing costs, more fluid cash flow, and decreased possibilities for error contribute significantly to the company's financial health. This can mean the difference between a new funding infusion or business expansion - or none at all.


Automate the Processes Around Your Digital AR Records

Don't get me wrong: digitizing all the inputs associated with AR is your best first step - but there are other steps. Here are a few examples of what it would be like to digitize without automation:

  • Customers receive invoices via email in PDF attachments. To make an online payment, they must find a payment processor you accept - disconnected from your invoicing process.
  • Customers make online payments, but they're not connected to your receivables data. For every payment a customer makes, an AR clerk has to check the payment provider and reconcile it in the system.
  • AR clerks have online data about delinquent invoices but must send individual emails to customers.

Automation is the next step on the journey to digital transformation. It ties all the disparate online inputs together, removing yet another layer of manual work.

In the case of Paystand customer Elenteny Imports, invoices are auto-generated and sent to customers with a link to pay now using a variety of online payment processors. Customer payments are tied directly to invoices, and incoming payments are immediately reconciled. Human intervention is the exception, not the rule.


Use Data From Your Automated AR Process to Drive Growth

After digitizing AR records and automating processes, it might seem like finance leaders can let AR run on auto-pilot. While this is partially true, the drastic reduction of manual, low-value AR work also represents a huge opportunity: the ability to drive positive change throughout the business using actionable receivables data.

Reviewing available AR data in online reports can help answer the following questions:

  • What percentage of receivables are late each month?
  • Are there any similarities between late payers?
  • What strategies could we experiment with to reduce late payments?
  • What about speeding up payments in general?
  • What could we do to eliminate more friction points in the payment process?

The answers to these questions can help the business become even more financially healthy - an attractive attribute for investors, board members, and potential employees. And finance leaders can take the data they already have and circulate it to other stakeholders. What impact would it have on sales, marketing, customer service, or business development if the AR team could unlock new revenue sources, improve cash flow, and reduce DSO?

Working cross-functionally to support different departments can improve outcomes company-wide. Just ask Paystand customer Choozle: their digital transformation led to a 50% drop in receivables over 90 days and a one-third reduction in DSO. And they cut their closing time in half - a big win for board members who want financial documents fast.


Ready for Digital AR?

The wide-ranging benefits of having a digital Accounts Receivable process are clear. However, it's more complex than flipping a switch - otherwise, we'd all have done it already. Research, goal-setting, planning, and execution must occur to transition successfully.

To start mapping out your current processes and developing your digital AR strategy, check out our Free guide: The Controller's Guide to B2B Payment Optimization. Using this guide, you'll better understand what's working (or not working) and what you'd like to change.