What Is Accounts Receivables Automation? Automating Your AR for Better Cash Flow.
Jul 27, 2022
Accounts Receivable management can quickly turn into a tedious task. Indeed, following up on each invoice manually is time-consuming for finance teams. Good AR management also requires following up on a few essential AR metrics.
All in all, managing your AR with manual processes is inefficient - and frankly a little boring, too. Thankfully, dedicated tools exist to help streamline this process. Automation helps you free up your time to focus more on higher value-added tasks.
The best part? You decide how much automation you want in your process, and you can have more personalized exchanges with your client's thanks to it.
In this article, discover and learn:
What is AR automation and what are its advantages?
How does automating accounts receivables improve efficiency?
How to start and get the best AR software?
Plus, a checklist on how to choose the right AR automation software.
Upflow is an AR automation tool that helps you get paid faster. By streamlining your processes, and with automated yet personalized email workflows, it makes your AR more efficient.
What is Accounts Receivable Automation?
Accounts Receivable Automation Definition.
AR automation is simply automating all or a part of your accounts receivable process. Using an automation solution improves the efficiency and accuracy of the whole process (we’ll see all its benefits later on).
Accounts receivable automation is done with a tool, either with software you download or with a SaaS (Software as a Service, that you access online).
Different AR automation tools offer different features with varying levels of automation. Software like Upflow helps you manage your accounts receivable process from A to Z, reducing the time you spend on it.
How Does AR Automation Work?
The beauty of AR automation is that it works the way you want it to work. Depending on your company and your needs, you might choose to use:
Full automation: all your A/R process is automated.
Semi-automation: when only a part of your process is automated.
Concretely, the solution you use will have different tools to help you manage your AR process. For instance on payment reminders, you can decide:
- To automate your email reminders to your clients,
- To schedule reminders for you and your AR team to follow up on your overdue invoices.
- Or even both!
Accounts Receivable automation supports your AR and has many key benefits, automating your most repetitive tasks and ensuring you have all the info you need at your fingertips.
The Benefits of AR Automation.
Get Instant Visibility on Your AR.
The first advantage of using automation for your accounts receivable is that you always know where you stand.
Since all your collection data is gathered in one tool, you can find the information you need, when you need it.
That means being able to know at a glance what your CEI (Collection Effectiveness Index, one of the essential KPIs to track) is for example.
You can also zoom in on every invoice you have to find: its amount, due date, client name and contact, reference number, etc. All of that in a few clicks.
There is no need to fumble through excel spreadsheets or switch between 3 different software anymore - it’s all in there! What’s more, it helps you with financial forecasting.
Increase Your AR Accuracy.
Accounts Receivable automation software will centralize your AR, but also help you calculate your important metrics in real-time.
This means you will always be working with the latest data and that it’s always going to be with the most accurate formula.
That’s especially handy if you want to use the most accurate formula to calculate your DSO, but you don’t want to spend the time doing so.
Because it’s all automated, you also reduce the risk of human error - and when you compute your AR using manual processes, mistakes are bound to happen.
When you automate your accounts receivable, you can rest assured that the numbers you have are the correct ones. You’ve got peace of mind, allowing you to make better business decisions in the long run.
Improve Your Customer Experience.
If you want faster payments, you have to make it easier for your clients to pay you. And that’s exactly what AR software like Upflow helps you achieve.
Your payment reminders are sent at the right time, with the right information. Your emails can be automated to include a direct link for online payment via credit card, or include instructions for customer payment directly to your bank account.
You can also choose to include a reminder to your Terms & Conditions to remind your clients of your payment terms. That’s especially handy with clients who tend to send late payments!
On their end, your clients will be happy to have the information they need for their internal payment processing. Clients rarely pay because they don’t want to.
Sometimes it’s because they’re not happy with your company, or because they cannot pay, but more often than not, it’s simply because they forgot. There can also be some friction in your payment process: that’s why it should be clear and easy for them to pay you!
Regardless of the cause, what’s important is to establish a clear channel of communication. With Upflow for example, your client can raise a dispute on their invoice from their dashboard, so you know there is a problem alerting you to act sooner rather than later.
A great customer experience goes beyond your sales or account manager teams. It’s one that makes it a seamless experience for your clients - and that includes payment collection, too!
Make Your AR Process More Efficient.
Streamline Your Collections Process.
AR software allows you to automate all or a part of your collection process. By supporting your accounts receivable activities, it helps optimize the whole process.
Instead of having to track your invoices on a billing tool (or an excel spreadsheet!) and use a copy-pasted text to send an email reminder to your clients (when you remember), you have everything in one place.
From there, you can also look at your AR metrics, follow your progress, and decide on the next actions to take to improve your AR process - and therefore your company’s liquidity.
Improve Your Cash Application.
Another great benefit of using AR software: it helps with your accounting and financial reporting.
Instead of having to manually match the payment you received with the correct client invoice, you can rely on your AR tool to do it for you. Upflow for instance automatically gets payment information from your billing tool or payment gateway.
Your AR software knows when an invoice has been paid and marks it as such on your dashboard. Imagine all the time you could save! It’s also a more accurate way to do your cash application.
By automating more repetitive tasks - which tend to be lower-value - AR automation allows you to make better use of your receivable team’s efforts.
Improve Your Cash Flow.
Last but not least: AR automation solutions help improve your cash flow! As it helps reduce DSO (for Days Sales Outstanding, or the average number of days it takes you to get paid), your company gains in liquidity.
It also prevents your unpaid invoices from turning into bad debt. That means holding the cash shortages at bay and being able to manage your cash flow better.
Since you get paid faster, you can use your working capital for your payables - paying your own providers. You can also make strategic long-term investments or financing activities. That all contributes to planning for your growth.
Now you know the why to automating your AR, let’s have a look at how to do it.
How to Automate Your Receivables Process?
Instead of jumping head first into choosing an AR software (which we’ll cover later), let’s take a moment to review how to automate your process in the first place.
To make the most out of your AR software, follow these steps:
1. Map your AR Collections Process.
Each company has its own collection process: small businesses that have 5 clients don’t use the same workflows as an enterprise that mainly does self-service.
What’s more, your processes evolve over the years: your business has probably grown since you started it! From time to time, it’s important to map out and review your exact receivables processes - just like you’d do with your pricing.
So before deciding which AR software you’d like to use, take a moment to write down your step-by-step collections process from start to finish.
2. Outline your Needs.
Once you know where you stand now, you can look into how you’d like your process to improve for the future.
Mapping out your process surely highlighted tasks that always get left out, or that are very time-consuming. These are likely the ones you're going to want to automate!
Knowing your pain points will help define your needs - and help you choose what matters to you in AR software.
3. Involve Other People.
While it’s tempting to keep your deciding committee small to make fast decisions (we’re all for that), it’s also important to ask other people to join in on your AR process.
Your accounting and sales department should get a sit at the table when you review your AR processes. That’s the case if your accounting and sales department:
Accounting needs access to your AR numbers and the ones who can help you in your AR efforts.
Sales representatives have a closer relationship with your clients so they’ll be able to contact them easily and check that their onboarding is going well.
Your Sales and Accounting departments - as well as the Finance one of course - will bring surprising insights into your collection process. They also have specific needs for their processes, which automation will help satisfy.
Working as a team and not in silos will help ensure that everyone has the tools they need to streamline their collection efforts.
Once you know:
What your AR collection looks like,
What you want to automate,
What your needs are across several teams,
You’re ready to choose your AR software!
How to Choose the Right AR Automation Software?
Besides price - which is an obvious yet important component - there are a few criteria to look for in your AR software:
Seamless Integration with your Existing Stack.
At Upflow, we like to work in open ecosystems. It means that we make sure our tool integrates with the many tools you might already have in your finance stack: your billing tool, accounting tool, and even your CRM.
Being able to synchronize with your existing tools is important for two reasons:
It means your data is synchronized across your ecosystem. Information that flows well makes for more efficient processes and more accurate data.
It leaves room for growth. Two years from now, your business processes will be very different - and so will your needs. Using software that integrates with others means you’ll be able to add blocks without having to change your whole tech environment.
There are plenty of options when it comes to AR software.
Some can automate all your processes, but with minimal flexibility for customization. So if you want to personalize your email reminders, or apply a discount rate on invoices paid early, it won’t be possible.
On the other hand, some will offer almost 100% personalization - which can sometimes be a little overwhelming.
You have to find a software that strikes the right balance for you, being mindful that it meets most of your present needs but also your future ones.
Potential for Collaboration.
AR software is here to make your AR process easier. That also means ensuring all the relevant stakeholders are in the loop.
For instance, If you’re closely working with your account management team to collect your invoices, you’ll want to grant them access to your tool. On Upflow, you can invite an unlimited number of members to use our tool.
Some software restrict the number of users that have access, but we believe in fostering collaboration to make your collections management more efficient across the whole company.
Scope of your Dashboard Metrics.
Monitoring your AR metrics is like monitoring the health of your company. Your KPIs need to offer relevant and actionable insights.
Depending on the software you choose, the AR metrics displayed will vary. Some will only feature a few essential KPIs, whereas others will give you a wider range.
You should also pay attention to the scope of the KPIs, i.e. if you can zoom in and out on your metrics. For example, Upflow allows you to directly click on an invoice to access your account from your billing cohort.
The user experience of your AR software is important. Ensuring that your metrics dashboard gives you clear and actionable insights is a must.
Need help tracking your key AR metrics? Have a look at our free spreadsheet!
AR automation with Upflow.
By now you know that Upflow is an AR software that helps you with your accounts receivable automation.
Using Upflow means automating the most repetitive tasks of your AR process. It frees up your time, so you can focus on growing your business.
Some of our features include:
Personalizable email workflows;
Internal follow-up reminders;
Comprehensive AR dashboard ;
Powerful API and integration with many tools like ERPs;
We’ve designed Upflow to help you better manage your AR, which in turn increases your cash flow and long-term growth.
Accounts Receivable automation means automating the most repetitive tasks of your collection process.
You can choose to automate all or part of your AR process using software or a SaaS like Upflow.
Using an AR automation software has several benefits: it gives increased visibility of your accounts receivable, helps you make better decisions, and delivers a better customer experience.
All these benefits contribute to faster cash collection and improves your cash flow.
Before choosing your AR software, take a moment to map out your current AR process, pinpoint your needs, and involve the relevant users in your company.
When it comes to selecting your AR software, make sure it can integrate seamlessly into your existing financial and accounting system. We also recommend you pay attention to the specific features offered, as well as the AR KPIs displayed on the metrics dashboards.
Upflow has many built-in features to streamline your AR process. Our solution not only integrates with multiple other tools but offers the ability to foster good internal and external communication with your clients.