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Welcome to another thrilling journey through the captivating world of accounting. Now, don't hit that back button just yet! We promise, this isn't going to be a snooze-fest filled with endless numbers and jargon. Instead, we're about to dive headfirst into a topic that's as exciting as it is transformative. It's the kind of thing that could catapult your business into the future, freeing you from the chains of tedious, time-consuming tasks. So, hang on to your calculators, folks! We're about to explore the riveting realm of accounts receivable automation.
Yes, you heard it right. Automation. It's not just for sci-fi movies and manufacturing lines anymore. It's knocking on the doors of your business, ready to streamline your operations and boost your productivity. So, are you ready to embrace this game-changer? Let's get started!
Table of Contents
What Is Accounts Receivable?
Before we navigate the exciting world of automation, let's revisit the basics. Accounts receivable (AR) refers to outstanding invoices, or the money owed by customers for goods or services rendered. It's like a friendly IOU from your clients, promising to send payment your way. AR is a crucial asset to your business, directly linked to your cash flow and operational efficiency.
Without a robust AR process, you may find yourself in a precarious situation, chasing down payments, struggling with cash flow, or worse, facing the dreaded word no business owner ever wants to hear: bankruptcy.
Now that we understand the importance of AR, let's inject a dose of innovation into our financial operations.
What Is Accounts Receivable Automation?
In our modern world, there's an app for just about everything. Need to count sheep to fall asleep? There's an app for that. Want to learn how to juggle? There's an app for that too. So it stands to reason that there would be a way to automate the often tedious process of managing accounts receivable.
Accounts receivable automation is the use of cloud-based software to streamline and automate AR processes, from generating invoices to tracking payments and reconciling incoming funds. It's like having a tireless, super-efficient financial assistant who never takes a coffee break or forgets to follow up on a late payment.
Why Automate Accounts Receivable?
Now, you may be wondering: Why should I automate my AR process? Isn't the old adage, "If it ain't broke, don't fix it?" While this may be true for some things, like your grandmother's secret cookie recipe or your tried-and-true morning routine, when it comes to business operations, sticking with outdated methods can hold back your growth and productivity.
Automation is the digital knight in shining armor, ready to rescue you from the dragons of inefficiency and late payments. It's the first step to transforming your business into a well-oiled, productivity machine. The question is not so much why you should automate accounts receivable, but rather, why haven't you done it already?
How Does AR Automation Work?
Imagine the following scenario...
A customer purchases a service from your company. The moment that transaction is complete, your automated AR system springs into action. It generates an invoice, sends it to the customer, and schedules a series of follow-ups to ensure payment is made.
Once payment comes in, the AR system matches it to the correct invoice, updates your financial records, and even sends a thank you note to the customer for their prompt payment. And the best part? All of this happens without you lifting a finger. That's the power of AR automation
AR Automation Key Benefits
Automating your AR processes can offer a slew of benefits. Let's highlight the most notable ones...
Improved Cash Flow
The faster you can process invoices and collect payments, the better your cash flow will be. Cash flow is the lifeblood of your business, and AR automation can help you get paid up to 3 times faster by speeding up invoice delivery, providing online payment options, and sending automatic reminders for due payments. It's like giving your business a monetary adrenaline shot.
Nothing is worse than having to chase down late payments. It's kind of like trying to herd cats, and we all know how well that usually goes. AR automation takes the responsibility off your shoulders by sending automated reminders to customers about upcoming and overdue payments. This can significantly reduce the time spent chasing payments and increase the percentage of invoices paid on time.
Enhanced Customer Relationships
Errors in invoicing can strain customer relationships faster than a poorly timed joke at a dinner party. AR automation reduces human error, ensuring that bills are accurate and on time. This can lead to increased trust and customer satisfaction. Remember, happy customers are more likely to be repeat customers.
Business Growth Opportunities
Time is a precious resource, especially when it comes to running a business. The time you save on manual AR tasks, you can spend on strategic activities that drive growth and profitability. It's like finding a hidden stash of extra hours in your day.
Minimized Bad Debt Losses
AR automation allows for better credit management by identifying risky customers early on. It's like having a crystal ball that predicts which customers might cause a dip in your cash flow. This way, you can take proactive measures to minimize bad debt losses.
Improved Financial Analysis
With real-time data and reports, you can make more accurate forecasts and strategic decisions. It's like having a financial GPS that guides you in making the most profitable turns for your business.
Reducing the time spent on manual tasks means less labor cost and fewer errors, which can lead to substantial cost savings. It's like finding money in the pocket of an old coat, except this time, you're finding it in your own business processes.
Strengthened Supplier Relationships
Just as you appreciate prompt payments from your customers, your suppliers appreciate the same from you. AR automation can help ensure you always pay your suppliers on time, which can strengthen relationships and may even earn you discounts or better terms. It's a win-win situation.
Reduced Late Payment Penalties
Ever forgotten about a bill only to be slapped with a late payment penalty? It's not a fun experience. AR automation helps avoid this by scheduling payments to ensure they're always paid on time. No more surprise penalties, just smooth sailing.
A more efficient AR process and improved cash flow can increase your business's credit score. This can make it easier to obtain financing for business growth or for those unexpected business expenses. It's kind of like improving your personal credit score, but for your business.
AR automation is like having a secret weapon in the world of business. It can enhance every facet of your accounts receivable process, from improving cash flow to enhancing customer relationships. So why not give it a try? Your bottom line will thank you.
What AR Processes Can My Business Automate?
Automation can be applied to a variety of AR processes, including:
Automated email reminders can be sent to customers about upcoming or overdue payments, ensuring you don't need to chase payments manually.
Automatic invoice generation ensures your invoices are accurate, professional, and sent promptly after a transaction, reducing the chance of errors and delayed payments.
Automated payment systems can accept a variety of payment methods, making it easier for your customers to pay their invoices promptly.
How to Implement AR Automation?
So, you're sold on AR automation and ready to bring your business into the future. But where do you start? Here's a quick step-by-step guide:
Assess Your Current Process: Before you can improve your AR process, you need to understand it thoroughly. Identify any bottlenecks or areas where you're spending too much time.
Set Your Goals: What do you hope to achieve with AR automation? Whether it's reducing late payments, improving cash flow, or freeing up time for strategic tasks, having clear goals will guide your automation journey.
Explore Your Options: There are a plethora of AR automation tools on the market. Research, ask for recommendations, and choose a tool that fits your business's needs and budget.
Implement Gradually: Going from zero to automation can be a shock to the system. Implement your new tool gradually, and give your team time to adapt to the new process.
Train Your Team: Even the best tools are useless if your team doesn't know how to use them. Ensure everyone understands the new system and its benefits.
Monitor and Adjust: Implementing AR automation is not a set-it-and-forget-it process. Monitor the results, get feedback from your team, and make adjustments as necessary.
Factors to Consider When Selecting a Service Provider
When selecting AR automation software provider, consider the following:
The software should be user-friendly and intuitive, minimizing the learning curve for your team.
The tool should easily integrate with your existing accounting or ERP systems.
Every business is unique, and your AR automation tool should be able to accommodate your specific needs.
The provider should have robust security measures in place to protect your financial data.
Reliable customer support is essential, particularly during the implementation phase.
What accounts receivable automation software do we recommend?
There's no one-size-fits-all solution when it comes to AR automation software. It's more like a bespoke suit—tailored to fit your business's specific needs. That being said, we believe that a combination of several software can often serve you better than a single platform claiming to do it all. Six of the most effective tools that we've seen businesses have success with, and which we gladly recommend, are Xero, Invoiced, Stripe, Chargebee, GoCardless, and Zapier.
Xero is a fantastic online accounting software for small to medium-sized businesses. Think of Xero as the reliable accountant you always wanted, but without the corny jokes. It's an incredibly user-friendly software that can manage all aspects of your financial processes, including AR. It's like the Swiss Army knife of accounting tools.
Invoiced is another key player in the AR automation game. As the name suggests, this software is all about invoices. It offers a streamlined solution for creating, delivering, and managing invoices. With Invoiced, you can say goodbye to the days of lost or late invoices.
Then there's Stripe. Stripe is a versatile online payment platform that makes collecting payments a breeze. With its easy-to-use interface and robust features, Stripe is like the reliable postal worker of your AR process—it delivers every time.
Chargebee is a subscription billing platform that's very helpful for businesses with recurring billing models. It automates invoice generation, payment collections, and even revenue recognition.
GoCardless is a brilliant tool for setting up and managing recurring direct debits. So, if you have customers who regularly pay the same amount, GoCardless is a no-brainer. .
Lastly, there's Zapier. Zapier is like the magical fairy dust of software, connecting all your separate tools to work together seamlessly. It can connect Xero to Stripe, Invoiced to GoCardless, or any other combination you can think of, automating workflows and saving you precious time.
So there you have it. These are our top picks for AR automation software. Each one has its strengths, but together, they form a formidable team, kind of like a superhero alliance for your AR process. By choosing the right combination for your business, you can truly automate your AR process and reap all the benefits we've discussed.
Why do we need accounts receivable automation?
To enhance efficiency, reduce manual errors, and ensure timely collections, leading to improved cash flow and customer satisfaction.
What are the benefits of RPA in accounts receivable?
Robotic Process Automation (RPA) can handle repetitive tasks at high speeds, enhancing accuracy and freeing up staff for more strategic roles.
What systems are used for accounts receivable?
Various systems, ranging from standalone AR tools to comprehensive ERP solutions, can be used. The choice depends on company size, industry, and specific needs.
How Does AR Automation Work?
It streamlines invoicing, payment processing, follow-ups, and reconciliations by integrating with existing finance systems and automating manual tasks.
Automation in accounts receivable is no longer a luxury but a necessity. In a world where time is money, businesses can ill-afford to get bogged down with manual processes. Leveraging automation can propel your business towards increased profitability, growth, and long-term success. Don't be left behind; dive into the future of AR today!
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