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Common Challenges Faced by A/R Teams That Can Be Overcome Through Automation

Automation has revolutionized commerce and even our everyday lives. Despite this, automation in accounts receivable has met its fair share of skepticism from business leaders worldwide. Some of the main concerns include change management, compliance, and integration. These concerns have contributed to red tape and limited adoption rates. Even so, automation has continued to grow and tackles some of the most common challenges faced by A/R departments.

1. Inefficient and Costly A/R Operations

Many businesses still rely on manual processes to manage their accounts receivable. Consequently, the average accounting team of one to 10 workers spends as much as 10,000 hours per year manually completing accounting tasks. These hours amount to roughly $300,000 of payroll expenses, and the cost grows exponentially with business operations.

Companies that embrace automation have a much higher likelihood of improving efficiency and benefiting from economies of scale. One way they accomplish this is by reducing the headcount. Bots can work around the clock and free up workers to tackle other important tasks that require creativity and human intelligence.

With labor shortages on the rise, accounts receivable automation also provides an excellent way to avoid the growth-reducing challenge of finding qualified workers. The digitization aspect of automation also makes recruiting workers easier because it facilitates opportunities for hybrid and remote work.

2. High Days Sales Outstanding

Did you know that 93% of accounting teams experience payment delinquencies? Sure, there are tax benefits of writing off bad debt, but it still negatively impacts the company’s bottom line. To make matters worse, accounts receivable teams spend a great deal of time tackling the menial tasks that make up the process of chasing payments.

The longer an invoice goes unpaid, the lower the chances of recovering that debt. This, in turn, contributes to higher bad debt to sales ratios. Consider the following statistics on bad debts:

  • At 90 days past due, companies have a 69.9% chance of recovering payment.
  • At 180 days past due, companies have a 52.1% chance of recovering the amount.
  • At 365 days past due, companies have only a 22.8% chance of recovering compensation.

These figures imply that the sooner companies address payments, the better. Automation facilitates timely and consistent invoicing to reduce days sales outstanding. It also continues to prompt payments when A/R teams include effective dunning management strategies.

3. Data Errors

Microsoft Excel represents companies’ first attempt at accounts receivable automation and going paperless. Excel does automate the process of calculating data, but it is highly susceptible to human error that typically occurs during the data entry process. Not surprisingly, 94% of spreadsheets have errors.

Spreadsheets also take longer to load as the file gets bigger. This is true whether you use Microsoft Excel, Google Sheets, or another alternative. Additionally, spreadsheets with several columns do not render well on smaller screens, such as smartphones and tablets. That can significantly reduce work flexibility.

Advanced technology eliminates these problems by pulling data directly from reputable sources. These include sales agreements, invoices, and bank statements. It can then analyze this data in a centralized dashboard.

4. Poor Customer Experience

Over the past few years, companies have increasingly focused on the customer experience. Good experiences go beyond the sales process and how companies tackle complaints. It also covers the payment process. The fewer frictions customers experience, the easier it is to close a sale and the higher the likelihood of on-time payments.

Customer experience also significantly impacts customer loyalty. Gone are the days when customers remained loyal out of convenience ? or complacency. They now move on to competitors quickly and often at the slightest inconvenience.

Companies can significantly reduce attrition by providing smooth invoicing and payment processes. Automation in accounts receivable facilitates this by putting some control back into the customers’ hands. They can log into their customer portal and manage invoices and payments with ease and without needing to make a phone call or send an email.

An automated dunning notice strategy can also do wonders to improve customer retention. Receiving standardized notices feels a lot less confrontational because they read as a standard business procedure. Automating dunning notices also eliminates the risk of the A/R team writing these letters while frustrated and then having that show through in the content.

The Bottom Line

Tech-savvy financial managers who embraced A/R technology saw it as more than a way to automate menial tasks. They have also strategically used fintech to grow their customer base and company operations. Continued growth and other accounts receivable automation benefits have made A/R software an indispensable inclusion in business strategies at these organizations.

Are you looking for ways to boost your financial performance and improve the customer experience? Automation technology could be the missing piece of the puzzle for your business. Book a Gaviti demo to see what our software can help your business achieve.


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