Account Receivable Automation: Streamline your AR process

Every day, new technologies, platforms, and processes emerge that can help businesses manage their spend. We are now in a golden era of spend automation, which is becoming even more important for businesses looking to stay ahead.

One of the best ways a business can optimize and maintain a healthy cash flow is by automating the accounts receivable process. This is one of the most impactful enhancements finance teams can implement, and it’s easier than you may think.

In this article, we will explore the essential components of AR automation, the benefits it offers, the features to look for in a solution, and the future trends shaping this technology. 

We'll also discuss how Zip can enable full finance visibility as part of a fully integrated spend orchestration suite.

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What is Account Receivable automation?

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Accounts receivable (AR) automation refers to the use of technology to streamline the receivable process, from invoice generation to payment collection, reducing the reliance on manual processes and minimizing errors. It plays an important role in enhancing efficiency and accuracy in financial operations.

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Brief Breakdown: Account Receivable Process 101

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While modern software can automate and accelerate these processes, ultimately the requirements of the workflow is a mostly standardized process. The Accounts Receivable process involves:

1. Invoice Generation

The first step in the process is invoice generation. This is where it all starts: an invoice is created that outlines the payment details, the amount due, due date, payment terms, and any relevant discounts. 

Manual invoice processing can be labor-intensive, often requiring significant data entry. Automation solves this, but we’ll get to that later.

2. Invoice Sending

Once the invoice is generated, it needs to be sent to the customer. This can be done via mail, email, or through an electronic invoicing system. Note that the method of delivery can impact the speed and efficiency of the payment process. Using electronic invoicing can help in achieving faster payments and reducing delays.

3. Tracking

After the invoice is sent, it’s time to track its status. You can use software to monitor and track whether the invoice has been received, acknowledged, and processed by the customer. Just like you track the packages sent to your house, business tracking will help in identifying potential issues early on, and allows for timely follow-up.

4. Payment Collection

Payment collection is the process of receiving the payment from the customer. Different companies use or accept different payment methods, from credit cards, ACH, online payment portals, and more. Ideally a vendor will allow for multiple payment options, which ultimately improves the customer experience and facilitates faster payments.

5. Reconciliation

Finally, reconciliation is when you match the received payments with the issued invoices, to ensure that all payments are accounted for correctly. This final step is important for maintaining accurate financial records and identifying any discrepancies or past due accounts—and for planning future purchases.

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Top 3 Types of Accounts Receivable

1. Trade Receivables: These are amounts owed by customers for goods or services delivered. For example, a software company billing a client for a subscription service.
2. Notes Receivables: Written promises for amounts to be received. They often come with interest and a fixed maturity date, like a loan given to a client.
3. Other Receivables: These might be any other amounts owed to the business, such as tax refunds, interest receivable, or advances to employees.

None of this is now. These are all standard practices and requirements, and modern technology doesn’t change the actual necessities of the process. 

However, in managing customer payments, accounts payable has long been saddled with inefficiency, forcing teams to deal with manual tasks, manual accounts, and other pain-points that may be associated with managing customer accounts.

This is why it’s worth looking into AI-powered accounts receivable software like Zip dedicated to automating and streamlining these processes.

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Features to look for in an Account Receivable automation solution

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Implementing an Accounts Receivable automation solution can enhance the efficiency of the AR process to a measurable degree. Here are essential features to consider when selecting a receivable automation software:

Integration Capabilities

One of the must-have features in an AR automation solution is the ability to integrate seamlessly with existing accounting software, ERP systems, and CRM platforms. Integration capabilities make sure that data flows smoothly between systems, reducing the need for manual data entry and minimizing the risk of errors. This is particularly important for CFOs and finance teams looking to maintain accurate and up-to-date financial records.

Customizable Workflows

Customizable workflows allow businesses to tailor the AR process to their specific needs. This could mean setting up automated payment reminders, defining approval workflows, and configuring follow-up actions for past due accounts. Customizable workflows enhance the efficiency and effectiveness of the accounts receivable management process.

Real-Time Analytics

Real-time spend analytics provide insights into key metrics and KPIs like Days Sales Outstanding (DSO), cash application rates, and the status of outstanding invoices. 

Zip includes highly advanced spend metrics through dashboards that display real-time data to help finance and procurement teams make informed decisions, optimize cash flow, and identify trends or issues in the AR process.

Multi-Currency Support

For businesses operating globally, multi-currency support is an important feature. It allows companies to handle transactions in different currencies, ensuring accurate invoicing and payment processing across international borders. 

User-Friendly Interfaces

Zip figured this one out early on—by creating a user-friendly user interface, finance teams can easily take advantage of all the workflow enhancement and automations the platform offers.

Intuitive design and ease of use can lead to higher adoption rates and improved efficiency in managing accounts receivable—and other financial needs at a company.

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Top benefits of Account Receivable automation

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There are several benefits to automating the Accounts Receivable process, many of which will become essential parts of the AR workflow as soon as they're implemented.

Reduced Errors

Automation significantly reduces the risk of human error in data entry and processing by keeping data transfer 1:1—this means no more human errors in the chain. Automation can therefore increase accuracy in financial records and reduce the chances of bad debt.

Increased Efficiency

By automating repetitive and time-consuming tasks, AR automation allows finance teams to focus on the strategic activities that really move the needle. Real-time visibility into outstanding invoices accelerates the collection process.

Improved Cash Flow Management

Automation ensures timely invoice generation and payment collection, thereby reducing Days Sales Outstanding (DSO) and improving liquidity. This enhanced cash process management is the key to maintaining a healthy cash flow.

Enhanced Data Accuracy

AR automation improves the accuracy of financial data, ensuring that records are always up-to-date and reliable. When data is accurate, your teams can more effectively manage credit and forecasting.

AI-Driven Insights

In leveraging AI and machine learning, AR automation software like Zip can analyze payment patterns, predict late payments, and provide actionable insights to optimize payment cycles and improve collections management.

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How to implement Account Receivable automation

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Implementing AR automation involves several steps and considerations:

1. Assessment and Planning: Evaluate current processes and identify areas for improvement. Define clear goals and timelines.
2. Choosing the Right Solution: Select an AR platform that aligns with your business needs.
3. Integration with Existing Systems: Ensure the chosen solution integrates with your ERP and accounting systems to streamline data flow.
4. Customization and Onboarding: Tailor the solution to meet your specific requirements and train your AR team for smooth onboarding.
5. Security and Compliance: Implement robust security protocols and ensure compliance with relevant standards to safeguard financial data.

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Future trends in Account Receivable automation

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The future of AR automation is promising, with several emerging trends set to shape the industry:

• Advancements in AI: Enhanced AI capabilities will provide deeper insights into payment behaviors and predictive analytics for better decision-making.
• Blockchain Integration: Blockchain technology is still being developed by hardened teams of security researchers, and can offer secure, transparent, and immutable transaction records.
• Predictive Analytics: Advanced analytics will enable more accurate forecasting and improved cash flow management, helping businesses stay ahead of financial challenges.

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Embrace Automation with Zip

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Spend automation is a powerful tool for streamlining the invoicing and payment collection process, reducing errors, and improving cash flow. 

Zip offers a comprehensive spend management and AP automation solution as part of it's industry leading intake and spend orchestration platform, designed to meet the needs of modern businesses. Here are some key features that help streamline finance operations:

1. Intake-to-Pay Process Automation: Streamlines the entire process from invoice generation to payment collection.
2. Intelligent Approval Workflows: Customizable workflows ensure timely and accurate invoice approvals.
3. AI-Driven Insights: Real-time analytics optimize payment processes and cash flow management.
4. Cross-System Integration: Seamless integration with existing ERP and accounting systems for data consistency.
5. Enhanced User Experience: A user-friendly interface that improves efficiency and adoption across finance teams.

To experience the benefits of AI-enabled spend management, request a demo from Zip today and transform your purchasing process into a streamlined, efficient, and error-free system.

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