Maximizing efficiency: Top strategies for effective AR automation

Corcentric

In today’s business landscape, companies are constantly on the lookout for ways to enhance operational efficiency, and one area where significant improvements can be made is in accounts receivable (AR) management.

As technology continues to advance, accounts receivable automation has emerged as a game-changer in helping organizations streamline invoicing and payment collection. More than just a trend, AR automation represents a shift in how companies approach financial operations, providing measurable benefits such as improved cash flow, fewer manual errors, and better customer relationships.

However, while AR automation presents clear advantages, not all companies experience the same level of success. For some, managing the complexity of automation software in-house can bring a different set of challenges along with benefits.

That’s why many organizations are taking the next step — or even leapfrogging AR automation — by adopting Managed AR services as an even more powerful solution. Managed services, in conjunction with automation, create a comprehensive approach to AR management that not only alleviates the pain points businesses encounter, but provides even more robust results.

In this article, we’ll explore the top strategies for successful AR automation, highlight the key processes that can be automated, and discuss why Managed AR might be an even better choice for maximizing efficiency.

The essentials of AR automation

At its core, accounts receivable automation encompasses the use of technology to simplify processes that were traditionally done manually — such as generating invoices, sending payment reminders, and reconciling payments. These activities, often repetitive and error-prone when handled by hand, are ripe for automation.

Automation tools harness machine learning algorithms, cloud computing, and advanced data analytics to make AR processes more accurate, adaptable, and scalable. This not only reduces the amount of time spent by finance teams on repetitive tasks but also offers deeper insights into the company’s cash flow and financial standing in real time.

The primary benefits of AR automation include:

Improved cash flow: Automated payment reminders and faster processing mean that payments are collected more efficiently, which has a direct positive impact on cash flow. When payments are received on time, businesses can maintain healthier working capital.
Reduced manual errors: By digitizing invoicing and payment collection processes, the likelihood of human errors—whether in data entry or document handling—is significantly reduced. This improves the accuracy of financial reporting and helps prevent costly mistakes.
Enhanced customer relationships: Automation allows for more consistent communication with customers. Features like self-service portals and automated reminders ensure that clients stay informed about their payment obligations. When payment disputes or delays are handled smoothly, it reinforces trust and strengthens long-term relationships.
Integration with accounting systems: Automation software can easily integrate with existing accounting systems and Enterprise Resource Planning (ERP) tools, creating a seamless flow of information. This means real-time updates on receivables and quicker reconciliations.

Key processes to automate in AR

Not every AR function is suited for automation, but certain processes lend themselves particularly well to it. The key is identifying the areas where automation can have the most impact on efficiency and accuracy. Below are some critical AR processes that are ripe for automation:

Payment reminders and follow-ups: One of the simplest yet most time-consuming tasks in AR management is keeping up with payment reminders. Automation ensures that emails are drafted and sent automatically when payments are due or overdue. This maintains consistency in communication and reduces the need for manual follow-ups.

Invoice reconciliation: Automating the reconciliation of invoices and payments can save finance teams significant time. By automatically matching incoming payments with outstanding invoices, automation reduces the risk of errors and speeds up the process of closing the books.

Real-time data analysis: Automation tools can analyze payment data in real time, giving businesses immediate insights into payment trends and customer behaviors. This information is crucial for adjusting strategies and managing risk. For instance, if the system detects a pattern of late payments from a particular client, the business can proactively address the issue.

Cash application: One of the most labor-intensive tasks in AR is cash application—matching payments to the corresponding invoices. Automation systems can handle this with a high degree of accuracy, significantly reducing the amount of unallocated cash on the books. Studies show that automated cash application can reduce unallocated cash by up to 99%.

Leveraging data insights for strategic decision-making

Another major advantage of AR automation is the ability to access real-time data and analytics. By offering live dashboards and detailed reports, automation tools give businesses the visibility they need to make informed decisions. Whether it’s monitoring Days Sales Outstanding (DSO) or tracking overdue invoices, these insights enable proactive financial management.

Enhanced decision-making: With up-to-the-minute information at their fingertips, finance teams can make faster, more informed decisions about collections and credit policies. This improves overall financial agility, especially when responding to changing market conditions.
Reducing financial risk: Accurate, real-time data allows businesses to better manage credit risk and predict cash flow needs. Automation tools can flag potential issues early, such as a client’s repeated late payments, allowing businesses to take preventative action.
Optimizing operational efficiency: The combination of automation and real-time insights allows CFOs and finance leaders to focus on strategic activities rather than getting bogged down in day-to-day operations. This enables them to play a more active role in shaping company strategy.

Overcoming common challenges in AR automation

While the benefits of AR automation are undeniable, some companies may struggle with implementation. The most common challenges include high upfront costs, a steep learning curve, and integration issues with legacy systems.

Managed AR services offer a solution to these challenges. By outsourcing AR functions to experts, companies can sidestep the difficulties associated with automation implementation and ensure that they’re getting the most out of their automation tools.

Why Managed AR might be the better option

For businesses that want to enjoy the benefits of AR automation without the challenges of implementing and managing it in-house, Managed AR services offer a more comprehensive approach. Managed services combine cutting-edge technology with expert support, making the automation process smoother and more effective.

Here are some reasons why Managed AR services might be a better option than DIY automation:

Access to expertise: Managed service providers bring specialized knowledge to the table, ensuring that automation tools are set up correctly and operate efficiently. They also stay up to date on the latest trends and technologies, meaning that businesses can benefit from ongoing improvements.
Cost savings: While automation software itself can be expensive, Managed AR services offer a self-funding solution. They typically reduce the cost of internal labor, minimize errors, and improve cash flow enough to offset their own fees.
Focus on core business: By outsourcing AR management, businesses free up valuable time and resources that can be redirected toward core activities that drive growth. The finance team can focus on higher-value tasks like credit management and financial planning rather than chasing down payments.
Guaranteed results: Managed services providers are often able to guarantee a certain level of performance, whether it’s faster collections or a reduction in DSO. This assurance provides peace of mind to businesses that might otherwise struggle with the uncertainty of automation outcomes.

Any company considering AR automation (and every company should be) but is hesitant about the challenges it may present, Managed AR services may be the ideal solution.

Conclusion: Embrace AR automation for financial success

Accounts receivable automation is no longer a luxury — it’s a necessity for businesses looking to stay competitive in today’s fast-paced environment. By automating key processes and leveraging data-driven insights, companies can not only improve their financial efficiency but also create a better experience for their customers. However, for those who want to maximize the potential of AR automation, Managed AR services offer the perfect blend of technology and expertise.

To learn more about how to optimize your AR processes, download our Ultimate Guide to AR Management.