If you’re looking for detailed information about accounts receivable (AR) automation, you’ve come to the right place.
In this article, I’ll share AR automation benefits, tools to help you automate manual processes, and how to make accounts receivable automation work.
Let’s go!
Table of Contents
- What Is Accounts Receivable (AR) Automation?
- 5 Benefits of Accounts Receivable Automation
- Tools for Automating Accounts Receivable
- How to Automate Accounts Receivable Processes
What Is Accounts Receivable (AR) Automation?
Automating accounts receivable is the process of…
- Sending invoices
- Following up on customer payments
- Ensuring you collect payments owed to you
…via accounting software tools (hence “automation”).
These tools automate manual accounts receivable processes to save time, reduce costs, and prevent errors.
Some AR automation software can do more, like reconciling transactions with your accounting ledger tool along with a variety of other things.
Before automation, businesses had limited options for credit management, like hiring an in-house collections team or outsourcing the service.
However, both approaches were often cumbersome, time-consuming, and difficult to manage.
Implementing an AR automation solution streamlines this process, reduces manual intervention, and improves cash flow efficiency.
5 Benefits of Accounts Receivable Automation
Modern accounting technologies make accounts receivable management more efficient than it had ever been.
Here are five benefits of AR automation.
1. Faster Payments
In an advisory accounting firm, you help your clients take control of their cash flow and get their precious cash in the bank faster.
Business owners are often slow to follow up on outstanding receivables, leading to unpaid invoices piling up.
The key benefit of automation is the use of automated reminders in the accounts receivable process. When your client sends an invoice, an automated email sequence is triggered, reminding customers when payments are past due.
This speeds up the payment cycle and reduces the mental load of tracking who owes what.
2. Accounts Receivable Automation Saves Time
Cutting down on working hours is one of the main benefits of using AI in accounting processes like accounts receivable.
More specifically, AR automation can improve work-life balance by saving significant time in critical business processes like sending emails or making collections calls.
Once the technology is set up, connected to your systems, and your communication cadence (how often you’ll follow up on unpaid accounts) is defined, you’re good to go.
3. Better, Stickier Customer Relationships
Helping your clients collect their cash faster strengthens your relationship with them.
Remember: clients don’t care how you do your job.
As I shared on LinkedIn, it matters little to them whether you take one hour or 100 to perform the work.
What matters is that you bring them results.
In other words, if you can cut down dozens of hours per year by integrating accounting and automation, you should definitely go for it.
4. An Additional Recurring Service Offering
Offering an automated receivables service makes it simple to invoice customers and manage cash flow. Since it’s an ongoing need, it’s also a great way to boost your monthly recurring revenue.
If you do offer this service, it’s a good idea to build out your service terms and include them in your accounting engagement letter.
5. Improved Accounts Receivable Fraud Prevention
Manual data entry opens the door to mistakes — and even fraud.
Even unintentional errors can lead to major discrepancies, lost revenue, or worse, legal headaches.
When you automate accounts receivable, you’re significantly reducing the risk of human error. In turn, this reinforces the security of your accounting systems.
For example, with an automated system in place, the invoicing process and payment tracking become streamlined and secure.
Sensitive payment details are processed consistently, and a clear audit trail is created. This makes unauthorized changes or suspicious activities easier to detect and prevent.
Tools for Automating Accounts Receivable
You don’t need an accounts receivable team, but you do need the right accounting tools.
I’ve listed 12 of the best apps below:
InvoiceSherpa
This is one of my preferred tools for managing accounts receivable processes and I go into great detail on how to use it in this article. It can help manage late payments and also accept credit card payments.
Chaser
Chaser is a very-well integrated and reviewed “end-to-end” AR automation platform. It helps businesses manage bad debt more effectively.
Plooto
Plooto offers automated accounts payable (in addition to accounts receivable). The company also serves a ton of clients and provide several resources for accounting firms who want to offer payable/receivable services.
Collbox
Collbox is a basic (but not in a bad way) AR automation tool that focuses on debt collection for past due invoices on customer accounts.
Bill.com
Bill.com is a popular platform with accounts payable features as well as expense management tools in addition to AR automation.
CreditorWatch Collect (formerly Debtor Daddy)
Collect allows users to create a very intricate invoice workflow, including SMS reminders (in addition to email) and custom reporting to see where your AR process stands.
Biller Genie
Biller Genie is an accounts receivable automation software that offers invoice collection and reconciliation. It also provides a fully functional customer portal, enabling clients to view invoices and make secure payments 24/7.
Routable
Routable offers comprehensive accounts payable and receivable functionalities, complemented by an active development roadmap aimed at continuous app enhancement. Its two-way synchronization with accounting software allows real-time updates.
Satago
Satago manages accounts receivable collection and reporting while providing users with insights into customers’ credit profiles, which helps reduce the risk of bad debt and improve days sales outstanding. It has automated payment reminders that can significantly improve cash flow efficiency.
Rotessa
Rotessa offers a unique approach to accounts receivable by enabling businesses to set up automatic payment processing with their customers.
This system allows for scheduling one-time or recurring payments. I have personally used it across 2 businesses.
Esker
Esker combines AI-powered processes with intuitive collaboration tools. It focuses on unifying the invoice-to-cash cycle, enhancing efficiency, and reducing manual intervention.
Esker also supports global organizations with multi-language and multi-site functionalities.
Invoiced
Invoiced is a comprehensive platform that automates billing, collections, payments, and reporting.
It’s particularly beneficial for small teams that want to reduce manual accounting tasks and improve cash flow. Users appreciate its straightforward interface and efficient payment processing capabilities.
How to Automate Accounts Receivable Processes
Step 1: Pick Your Tool
The first thing you’ll want to do is pick the AR automation tool that you’ll be using.
You can choose from the list above, but I strongly recommend you extensively test your top picks before committing to any accounts receivable software.
Step 2: Connect to Your Cloud Accounting Software
You’ll then want to integrate your cloud accounting software to your AR automation tool so that overdue invoices and customers are synced across.
Here’s what it looks like in InvoiceSherpa:
Step 3: Set Up the Automated Payment Reminder Cadence
The big thing we’re trying to automate is collection of payments. This happens through automated reminders sent to debtors.
So you’ll need to configure the part of the app that controls the templates for reminders and determine just how often you want payment reminders to be sent out.
Step 4: Connect Payment Gateways
Different apps have different ways to make the customer payment process easier.
For instance, InvoiceSherpa offers you several possibilities to collect payment:
Whereas in Rotessa, you’ll collect payment via bank account.
Whatever it is, you’ll want to make sure that there’s a way for payments to get collected through the app with your efforts in Step 3 above.
Step 5: Clean the Books Before Automations Run
The way these apps work is that they send automated reminders based on outstanding invoices.
If your books haven’t been updated in a while, payment reminders might be sent out on payments that have been received, but not reconciled.
So make sure the books are up to date before the payment reminders go out.
Step 6: Assess Collection Efforts
Once the automations have run, you need to assess just how successful your collection efforts were.
Depending on the result, you might consider tweaking reminder templates and their messages to see if your collection efforts improve in future periods.
Ready to Automate Your AR Processes?
That’s a wrap!
Hopefully, this guide showed you ways to improve your business’s financial performance with AR automation.
What processes do you automate the most? What are your favorite AR automation tools?
Share them in the comments below!
very informative, keep up the good work