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

Automation delivers finance departments many benefits, including accurate predictions and insights related to revenue and sales so that CFOs and their teams can make better business decisions. 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 and employee adaptability to new technologies, adherence to compliance, how easily the automation technology integrates with other financial tools. These concerns have contributed to red tape and limited adoption rates.

Here are some of the most common challenges faced by A/R departments and how your company can resolve them with many of the accounts receivable automation tools on the market today.

1. Too Much Time Spent on Manual Repetitive Collection Tasks

Many businesses still rely on manual processes to manage their accounts receivable and get things done, even though these tasks can be automated. These tasks include: dunning emails, escalations, updating customer records, and the accepting and processing of payments, all of which are time consuming  and resource heavy.

With automation, your customers receive personalized reminder emails in advance of the due date, on the schedule you choose, based on past templates. Invoices can be paid 24/7 through a self-service payment portal. Customers can keep a credit card on file or choose another method. Payments are reconciled automatically, your ERP is updated with the new payment data, and the customer receives payment confirmation within a few minutes.

2. Ignoring Invoices Until They Are Very Late (DSO)

The vast majority of accounting teams experience payment delinquencies. But many don’t consider it a problem until the receivables are “very” late (a different definition at every company, but usually an invoice reaches this definition at around 60 days).  Although there are tax benefits of writing off bad debt, it still negatively impacts the company’s bottom line.

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.

What often happens is that A/R teams sound the alarm bells and put a lot of manual effort into trying to collect invoices only once they are “very” late.

But an ounce of prevention is worth a pound of cure. With automation, you can set up workflows that send reminder emails before an invoice is due on autopilot, which has statistically shown to improve the chance of timely payments. A/R teams can easily send multiple customized emails within a specific time period, without being constrained by time. Every customer gets the right attention before invoices become “very” late.

They can also segment customers to optimize how specific audiences receive which reminder and when. Finally, since automation replaces the routine and time-consuming tasks traditionally executed with human intervention, it enables your team to escalate problematic customers to the appropriate contact for escalation long before invoices are overdue.

3. Data Errors

Microsoft Excel represents companies’ first attempt at accounts receivable automation and going paperless. While Excel does automate the process of data calculation, it is also 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 size increases. 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 automation, and A/R software in particular, eliminates these problems by pulling data directly from reputable sources. These include sales agreements, invoices, and bank statements, in addition to internal business data existing in ERPs, CRMs and other financial systems. It can then keep this data updated in real-time and deliver accurate insights such as cash flow forecasting in a centralized dashboard. It also enables data analysis that is more advanced and delivers greater insights than analysis done with Excel.

4. Poor Customer Experience

A good customer experience goes beyond the sales process and customer support. It also includes the processes of paying for your goods or services.  Every customer has to do this if they want to remain a customer and you want the experience to be as easy and satisfying as possible. The less friction customers experience in the payments process, the easier it is to close a sale and the higher the likelihood you’ll receive timely payments. This in turn contributes to the financial performance of the company.

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 churn 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 than either a collections call or a payment reminder because the customer perceives it as a standard business procedure. Automating dunning notices also eliminates the risk of the A/R team writing text that can damage the customer relationship or cause confusion, especially when employees are in dealing with customers that have long-standing overdue or unpaid invoices.

5. Inability to Communicate a Consistent Dunning Message

As a company scales and manages dozens of dunning emails for each customer, the messaging of the emails must be consistent, with final approval by the A/R team.

However, this can be difficult to enforce when the business lacks visibility into which messaging is more successful based on past results. Without A/R software, most companies are unable to view the number of dunning emails their customers get, the content in each email, or when their A/R representatives decided to follow up. In addition, there cannot be an expectation of a consistent, standardized messaging for the A/R team. An automation solution, however, delivers accurate A/R data to confirm what is working and helps standardize the dunning messaging process to ensure that it is the most successful one for the future of the team.

How Gaviti Helps A/R Teams Improve their Cash Flow

Many accounts receivables automation software solutions exist on the market, all offering different benefits and features for companies with different needs. However, Gaviti takes A/R a step further with its autonomous invoice-to-cash management platform that eliminates the need for constant human control or supervision in the performance of tasks.

Its platforms delivers benefits such as:

• Personalized and automated dunning workflows that send reminder emails before an invoice is due, optimizing how specific audiences receive which reminder and when, significantly increasing engagement and improving the chance of timely payments.
• Reliable cash flow forecasting and reporting in a centralized dashboard to enable your A/R team to make better decisions based on more advanced, accurate, and up-to-date data insights than those achievable in Excel.
• Resolution of disputes in under an hour, eliminating the friction of the manual dispute resolution process while delivering a superior customer experience and reducing write-offs.
• Full visibility of dunning performance to deliver all A/R stakeholders a clear view of every step of the dunning process, including the ability to see which messaging is more successful based on past results.

Want to learn more about Gaviti’s autonomous invoice-to-cash A/R management solution and how it can standardize your collections process and improve cash flow? Get a demo today! 

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