Accounts receivables could turn out to be a significant issue for businesses if not managed properly.
Some of the common problems with accounts receivables include invoicing errors, customers who don’t pay on time, or discrepancies between the billing and received amounts.
In order to counter these problems, it’s essential to have a robust technology for tracking and managing the accounts receivables. Starting from an accounting software to track invoices and payments to setting up payment terms with customers and reviewing AR reports, your business must have everything covered.
How do you solve AR problems?
- Stay on top of invoices and ensure they are paid on time. Implement an invoice system and follow up with your customers.
- Send reminders for outstanding payments.
- Offer discounts for early payments.
- Negotiate with the customer to chalk out a payment plan.
- Consider leveraging a collections agency if invoices are not paid on time.
- Review your credit policy on a regular basis.
Basic Problems That Arise During AR Valuation
- Estimating uncollectible receivable value
- Allowance for doubtful accounts
- Late invoice payments
- Receivables timing
- Bad debt collection
- No accounts receivable management system
- Invoice disputes
- Identity theft
How to avoid common accounts receivables problems
Every business owner’s worst nightmare is clients who don’t pay their bills on time.
Get organized: The first step is to get organized. Keep track of who owes you money and when. Set up a system for sending reminders and following up with those who are late.
Invoicing software: Using invoicing software makes it easy to track who owes what and when payments are due. This will help you stay abreast of the developments.
Get a deposit upfront: If possible, negotiate with the customer and get a deposit before you kickstart a project. This will ensure you will not lose the entire money if something goes wrong.
Send invoices immediately: One of the best ways to avoid late payments is to send your invoices as soon as the project is done. This will ensure a shorter time to pay the bill.
Offer discounts: Some businesses offer discounts if their customers pay their bills early. This will encourage customers to pay their bills on time.
Have a straightforward payment policy: Make sure your customers know exactly when and how they need to pay their bills. Also, settle the debate with the customers on the payment methods or options your company offers.
Stay in touch with your customers: If you’re facing trouble receiving payments from your customer, reach out to them and work something out.
Reach out to collection agencies if you are facing trouble receiving payments from delinquent customers.
5 steps to managing AR
- Have a robust credit policy and ensure that all employees know it.
- Establish clear lines of communication between the sales, accounting, and collections teams.
- Keep your invoices and payments records intact.
- Follow up promptly on outstanding invoices.
- Offer incentives for prompt payments, if possible.
Top Features of an AR Software
- Better cash flow management
- Digital B2B payments
- Automated credit applications
- Invoice generation and distribution
- Automated cash application
- Automated collections emails
Need help streamlining and automating your accounts receivables?
Robotic Process Automation (RPA) is your ideal candidate.
Accounts receivables teams should implement RPA to automate monotonous, rule-based tasks such as invoicing and reconciliation. RPA along with artificial intelligence and machine learning help businesses overcome the challenges of dealing with complex workflows with negligible human intervention.
Robotic process automation is a software technology that substitutes human effort by executing rule-based business processes automatically. RPA can execute high-volume, monotonous tasks including cash reconciliation, OCR, and many others.
Use Cases of RPA in Accounts Receivables
Your business will receive payments in multiple payments. The customer would pay online and send you the remittance details via email. The payments need to be matched with the right invoices and the data must be entered into your ERP system, apply cash, and close the invoice. RPA tools can accelerate cash application and ensure error-free data.
According to a survey from the State of CFO’s Office, 37% of CFOs plan to send invoices immediately to improve cash flow.
End-to-end automation of the invoicing process is crucial to be able to send invoices on time and boost cash flow. RPA can capture details from the purchase orders and prepare the invoice for you. RPA warrants 100% error-free invoices and improves efficiency.
Accounts Receivables Reporting
AR management is a vital cog in cash flow and working capital management. Businesses are required to track AR metrics including days sales outstanding (DSO), days deduction outstanding (DDO), collection effectiveness index (CEI), etc. to ensure the business has the necessary capital and cash for everyday operations and future investments.
RPA automatically pulls data from multiple sources to prepare the AR reports and allows you to set permissions on who can view and share them.
Sometimes, the customer doesn’t make the full payment citing various reasons. To ensure you collect the full payment without hindering customer relationships, it’s crucial to track and identify deductions. RPA bots can auto-aggregate claims, bills of loading, proofs of delivery, and other documents from customer emails and service portals. RPA also takes credit points and promotions into consideration while matching deductions.
Benefits of RPA in AR &
- Saves time
- Improves productivity
- 100% error-free
- Quick implementation
- Saves costs
The market size of RPA is projected to reach $4.88 billion in 2030, a growth of 30.9% CAGR from 2021 to 2030.
Schedule a free consultation with our experts at InspiriSYS to know the perks of implementing RPA for your accounts receivables process.