What is AR Automation? How to digitalize your accounts receivable process
3 March 2022
Written by: Meredith Moran
What is accounts receivable automation? In this blog post, we’ll explain what this concept is all about and how it helps you streamline your AR collections process. You will also get some helpful tips on what to consider when choosing an AR automation service provider.
What is Accounts Receivable Automation?
Most people will agree that getting paid on time is vital for your operations. Even so, a lot of companies, of all sizes and across industries, face frequent hurdles when invoicing. Slow and tedious distribution and failing to fulfil customer invoicing requirements take time from your accounts receivable team, directly affecting your cash flow. That’s where Accounts Receivable Automation comes in.
AR Automation is, simply put, a way of automating repetitive and time-consuming tasks for your accounts receivable team. It can also help you increase the probability of immediately approved invoices that will be paid more quickly by your customers. It helps you save time and avoid mistakes that are frequently found on invoices – most of which occur either due to human error or not being aware of the invoicing requirements of the customer. Some perks of automation come from switching to and enjoying the benefits of e-invoicing.
Beyond checking articles for accuracy, pricing and company information, there can also be requirements from customers, such as specific means of distribution or purchase references to help them approve the invoice. Any mistakes in this process can lead to delayed payments, credited invoices and other disruptive and burdensome issues.
The benefits of AR Automation solutions
AR Automation helps you streamline your AR collections process, comply with local invoicing legislation, and distribute all your customer invoices electronically – regardless of your customers’ digital capabilities. You set up rules according to each customer’s needs so you can automatically fulfil requirements while maintaining a fully digital workflow.
Benefits at a glance
Faster internal invoice handling
- Faster payments
- Improved cash flow
- Greater security
- Increased accuracy
- Better customer relations
- Reduced distribution costs
Streamline your workflow
By reducing the time spent on each invoice and making the entire workflow more efficient, your AR team can concentrate on handling overdue payments or forecasting cash flow. In other words, by alleviating staff of the most tedious tasks, they can instead focus on ensuring that the company thrives.
Easily comply with legal requirements
An increasing number of countries have mandated e-invoicing, implementing systems such as Italy’s SDI. And since different countries have different requirements, it quickly becomes complex – especially if you have customers in many markets.
In these cases, some AR Automation solutions help you comply with local legislation. It gives you a single touchpoint for all of your global invoicing and lets you get paid across markets.
AR Automation webinar
Increase accuracy and customer service
Increasing the accuracy of your invoices also builds trust with your customers. Companies that regularly fail to send the correct documents look unprofessional and cause extra work. With AR Automation solutions, it doesn’t matter which format your customer prefers or how digitally developed they are. You handle them the same way at your end, even if they still want documents delivered on paper.
This is made possible through print and mail services with automated sorting and routing. Your finance team can focus on other valuable tasks, rather than the tedious process of separating documents by whether they should be sent as emails, paper or electronic invoices. This time-saving feature not only stores individual invoice distribution recipient needs but also makes it easy for recipients to switch from printed or emailed invoices to electronic as their organizations reach greater digital maturity.
“AR Automation should be able to integrate seamlessly with your ERP without adding new interfaces.”
What to consider when choosing a service provider
Now that you know the benefits, the next question might be how you can get started. Switching over to digitalized processes is not necessarily second nature for the average business owner, but many service providers offer consultations to evaluate what your business needs to automate the accounts receivable process. A conversation with a service provider also gives you the chance to closely examine your options because not all providers are the same.
So, what should you look for when selecting an AR solution for your business? Make sure that it ticks all the boxes.
- Pick an open platform
One of the main differences between solutions is how open they are towards other, similar services. Unless you are aware of what solutions your current and future customers are using, you should pick a solution that is compatible with other platforms.
- Make sure it supports the countries where you operate
Are you doing business abroad, or are you expecting to expand towards new markets? Pick a platform that has a presence in as many markets as possible.
- Make sure it supports local legal requirements
A growing number of countries are requiring invoices to be sent electronically and via local hubs or platforms.
Ensure that you can fulfil those requirements.
- Distribution in all formats
Most companies have moved to some form of digital invoicing, but the point of AR Automation is that it shouldn’t matter to you. Ensure that your service can send out invoices regardless of format, even if it is on paper.
- Seamless integration
AR Automation should be able to integrate seamlessly with your ERP without adding new interfaces.
In the future, you might want to digitalise and automate other business processes. Make sure the service provider you chose have support for them as well so that you can use the same business partner for AP Automation, e-procurement and sales order automation.
Are you ready to have this conversation? Feel free to reach out to Pagero for a free consultation!
Summary: How does AR Automation work?
The goal of Accounts Receivable Automation is to simplify invoice issuance and distribution. The solution is made possible by integrating the supplier’s finance systems with a business network, allowing your business to distribute invoices electronically, by email or by post with a click of a button.
As a supplier, you can fully digitalize your processing and distribution even if all your customers do not have the same digital capabilities. You issue and handle all invoices in the same way on your end, through your own finance system. Customer needs, whether it be to receive an e-invoice, a PDF or other image file by email, or a paper invoice by post, are saved and attended to by the service provider.
In addition to distribution, the smart business network and invoicing platform can automatically apply content enrichments and digital signatures to meet the requirements of your customers or local tax authorities.
This text was originally published 12 January 2021 and last updated 3 March 2022.