Today’s CFO understands the crucial role of technology plays within their business. They rely on ERP software to capture financial transactions and business intelligence software to make sense of the data. They implement CRM software for sales and they may even automate accounts payable. But few CFOs have automated accounts receivable beyond simply sending invoices to customers electronically.
The reason for this may be that most ERP software systems offer limited A/R collection automation features, leaving the credit and collections department with disconnected processes using a mix of manual and disparate systems relying on data in spreadsheets and printed aging reports.
According to credit insurance provider Atradius, most businesses get paid in 61 days on average 28 day credit terms. That’s more than twice the agreed upon credit terms limiting access to working capital. But there is something you can do about it. Accounts receivable automation has advanced rapidly in recent years and there is a now new breed of applications available to drive truly amazing results for businesses across a wide spectrum of industries.
Case in point is Systems Maintenance Services, a provider of IT asset management and support services. The company serves larger businesses globally including about 80% of companies on the Standard & Poor’s 500. Systems Maintenance Services implemented accounts receivable automation software in 2012. In just the first year they were able to get paid 27 days faster collecting more money than they invoiced that year as they were able to collect on past due balances from prior years. Further, the company was able to reallocate 50% of one credit manager’s time to other activities despite experiencing exponential growth at the time.
The benefits of accounts receivable automation software are very tangible. According to analyst firm Paystream Advisors, companies that implement accounts receivable automation software are able to reduce past due receivables by 25%.
MSPARK, a national provider of direct mail and digital marketing services implemented Anytime Collect accounts receivable automation software in 2013 to manage a growing customer base and increasing volume of invoices.
“It was very difficult to manage accounts receivable because we could not sort an aged trial balance by amount,” said MSPARK Director of Credit and Collections Kristy Criswell. “That means collectors could have up to 200 pages of information to sort through and our highest dollar accounts were buried somewhere inside those 200 pages.”
Within just a few months of using Anytime Collect MSPARK decreased DSO by 26% and reduced past due invoices by a whopping 88% achieving significant reductions in accounts receivable labor and staffing costs.
So how did they do it? Both companies committed to investing in technology to automate their processes to resolve their business issues and both companies took a measured approach to ensure that they achieved their goals.
AR management automation software combines customer and financial information from your enterprise business applications with CRM-like features to manage customer phone and email communications. More advanced systems include electronic invoice presentment and payment (EIPP) with integrated credit card and automated clearing house (ACH) capabilities, dispute management, and automated email for reminders and communications based on user-defined templates and mail merge reports.
“Accounts receivable is one of the largest assets for most businesses,” said e2b teknologies CEO Bill Henslee. “Applications like our Anytime Collect software make companies more efficient by harnessing technology to automate manual processes providing them with centralized information so they can better serve their customers and shorten the order to cash cycle time.”
Labor efficiency is also dramatically improved with accounts receivable automation software. Paystream Advisors reports that companies that implement accounts receivable technology are able to spend 300% more time soliciting customers for payment and building relationships than their counterparts who utilize manual systems because they spend less time prioritizing activities, gathering information for calls, and they spend about a third of the time resolving disputes because the information they need is available at their fingertips.
Paystream Advisors estimates that accounts receivable automation results in 15 to 25% reduction in bad debt write-offs. Consider a company that writes off $400,000 a year in bad debt. A 20% reduction results in an $80,000 annual savings which goes directly back to the bottom line. Also consider that business operating in industries with very thin margins would have to dramatically increase sales to make up for that amount of lost profit.
Accounts receivable automation software provides many additional benefits such as faster dispute resolution, improved cash forecasting, reduced finance costs for short term loans, reduced credit risk, and freedom to take control over their process reducing fees with third party collection agencies, invoice factoring companies, and legal services.
In addition, accounts receivable automation helps companies maximize unused credit lines while improving their borrowing position with their financial institution. Further, leveraging technology provides significant cost savings by reducing postage, material, and labor for manual invoice and statement delivery.
According to Paystream Advisors, businesses implementing A/R collection automation software typically realize a measurable return on investment in as little as 2 months. While the software isn’t for every company it is certainly a valuable technology for any business selling on credit terms that struggles to manage their accounts receivable portfolio effectively.
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