What to Look For When Purchasing an Accounts Receivable Software

When purchasing accounts receivable software, making the right choice is crucial for making sure your goals are met and achieving a high return on investment. There are a range of different solutions available on the current market — automated, integrated, and autonomous — that address different needs and deliver different solutions.

Knowing exactly what to look for can help you make the best decision for your business needs and weed out accounts receivable automation software options that might not have the specific tools your business needs to thrive.

Use these points to refine your options.

1) Discover the General Needs of the Finance Team

The first and most important starting point is to learn the needs of your finance department overall. Some companies have a smaller financial department in which one person manages multiple financial operations: A/R, A/P, accounting, bookkeeping, and more.

Others have a dedicated team for A/R. Your customer may be at a point where it is looking for a general accounting platform that can help their small team juggle these different financial operations, or it may be interested in focusing on taking its A/R to another level.

Within accounts receivables solutions there are different levels of tools. Some simply help the A/R team streamline the dunning process with a variety of templates, while others automate tedious and error-prone tasks within the A/R process. Advanced accounts receivables solutions offer autonomous invoice-to-cash platforms that include artificial intelligence (AI) capabilities as sanity checks for current decisions while at the same time offer suggestions to proactively optimize results.

2) Understand Your Collections Teams’ Needs

Before you start looking for the perfect app to achieve fully automated accounts processes, it’s important to understand what your A/R collections team actually needs. The only way to identify these needs is to discuss the matter with your collections team. These are the employees who will use the software and whose work will be directly affected by its features, so there is no better starting point.

Use these questions as a starting point for getting a better idea of their main pain points:

• What are the top issues you need to resolve to boost collections?
• What are the most difficult issues you need to resolve to boost collections?
• What is it that makes these tasks more difficult than others?
• How do you think technology could help make your job easier?
• Which other internal stakeholders should we discuss this with before moving forward?

3) Examine Your Credit Needs

You’ll also need to take a good look at your credit needs and how much risk you are willing to take with customers. You will also need to look at how much time it takes to approve new customers, review credit applications, etc. This can be especially challenging as a company scales and onboards many customers. In addition, the information that is traditionally used to evaluate credit (e.g. credit scores, payment history, etc) is dynamic. In addition, a new merger or acquisition or new executive appointment can cause a sudden change in a customer’s credit, and you need software that can manage your customer credit data in real-time. This includes credit alerts in real-time that should be adjusted automatically for customers that are approaching their credit limit. Having accurate data on customer risk and the ability to apply it in real time allows companies to properly evaluate and manage customer risk and prioritize collections accordingly.

4) Understand Your Cash Application Needs

One of the traditionally most tedious and error-prone tasks in A/R is the manual matching of invoices to payments. Manual cash application consumes time and resources that could be better allocated to higher value tasks. Many companies want to automate this process to optimize their cash flow and enable more precise cash forecasting. Others may have already automated the process but are looking to centralize their payment and remittance data into a single source and integrate it with their ERP to more efficiently reconcile disputes. In today’s era of complex payments, companies need a cash application solution that supports multiple payment channels, types, and currencies, and the ability to make a partial payment all while integrating with ERP and other financial systems to synchronize payment data across platforms.

5) Define Your Collections Strategy

After completing your needs analysis, you still need to ensure the automated accounts receivable software you choose aligns with your collections’ strategy. This strategy should reflect your business goals and values, and you should be able to optimize it continuously.

For example, if your focus is on customer retention, then you want to ensure the tool does more than prompt customers for cash. It should also provide opportunities to communicate outside of invoice payments and build strong relationships, so you can boost payments without sacrificing customer relationships. You will also want to be sure that emails come from the individuals your customers are interacting with directly and that everything can be personalized.

On the other hand, if your focus is boosting payments, you need to find an automated accounts receivable software for which this is a core feature. This might focus exclusively on A/R activities: invoicing, sending reminders, offering payment options and tracking paid vs. unpaid invoices.

6) Ask About Experience in a Specific Business Industry

When researching options, you might also notice some accounts receivable software developers tend to focus on specific markets. Others might attempt to reach all potential markets, but still seem to attract a specific sector.

Finding a software provider that caters to your specific niche is crucial. With this goal in mind, here are some questions to ask:

• Does the vendor have prior experience working with my products, my services, my industry or organizations of my size?
• Does the vendor have a solid understanding of the unique regulations that impact the way I do business and how I can seek collections?
• Is this accounts receivable collections software compatible with my existing accounting systems and IT infrastructure?
• What is the vendor’s strategic plan for the next three to five years and does it align with my plan for my business?
• What other business systems does this software integrate with?

7) Ensure Legal Compliance and Standardization

Some industries and locations have strict rules regarding data management and use. For example, in California, businesses must consider any applicable regulations in the California Consumer Privacy Act. Across the country, businesses in law, insurance, health and accounting also need to follow regulations for their specific industry.

Additionally, accounting and collections follow specific guidelines. This is especially true when customers are individuals and not other business entities. Payment portals and gateways in particular should comply with relevant geographic and industry regulations as they process sensitive consumer data that needs to be protected.

8) Consider Accounts Receivable Key Performance Indicators (KPIs)

Most software companies, whether they are in the A/R space or not, offer software demos before purchase . This provides the perfect opportunity for you to view different products over a predetermined period and determine whether it works well for you.  Testing your accounts receivable automation software using established KPIs will make it easier for you to make an objective decision.

These are some of the main ones to consider:

• Accounts receivable aging
• Average collection period
• Average days delinquent
• Days sales outstanding
• Receivables turnover ratio
• Total amount recovered

9) Analyzing and Forecasting Cash Flow

Since accounts receivable automation software collects data in real-time (like the KPIs above), it can analyze and predict customer behavior based on patterns and past behavior. This includes an accurate prediction of how much cash your business will have at any point in time. Cash forecasting allows businesses to reduce their dependence on short-term loans and get a more accurate picture of their financial health. With this, they can take better advantage of investment or other business opportunities and negotiate better terms with suppliers.

How Gaviti Delivers You Autonomous Accounts Receivable Software

The right automated accounts receivable software allows you to address your A/R team’s needs, communicate effectively with different stakeholders, and help facilitate both the A/R and collections strategy your business has chosen to pursue.

Although some A/R solutions also have AI components that can help your team work effectively, not all AI solutions are equal. For example, Gaviti’s AI pilot works throughout your entire A/R solution both to gather information, optimize text and workflows, and make proactive suggestions for improvement. (e.g., improve emails, workflows, suggest credit limits, etc). This both helps your business to both evaluate the effectiveness of current A/R processes while at the same time improving future ones.

Its autonomous invoice-to-cash A/R management platform includes:

• Collections Analytics. A comprehensive dashboard of collections analytics that enables you to see trends and offers a data-driven approach to help improve the dunning process over time.
• Self-Service Payment Portal. Multiple payment options for customers that include an autopay option and the ability to see all outstanding invoices in Gaviti’s customer payment portal.
• Dispute Management. Fully customizable workflow for routing and tracking disputes, with alerts and resolutions communicated in real-time. Identify trends and proactively reduce similar disputes in the future.
• Cash Application. Match 95% of payments with both remittance automation and AI-powered remittance auto-matching. (Payments made through Gaviti’s Self-Service Payment Portal benefit from 100% automated matching).
• Credit Management. De-riskify decision making involved in whether to grant customers credit with Gaviti’s AI pilot that gathers information on customer creditworthiness and makes relevant suggestions. Includes online credit applications, credit request forms, and pro-active flagging of risky customers.

Want to learn more about how Gaviti’s autonomous invoice-to-cash accounts receivable platform goes a step beyond automated accounts receivable software? Speak to a specialist today!

See why Gaviti is ranked as the #1 Credit & Collections Software on G2: