One of the major challenges that the respective AR or Accounts Receivable teams at your business tend to face can be narrowed down to three main categories –increased dependency on manual practices of AR management, lack of the overall speed of management, and higher operating costs while managing accounts receivables.
Major financial players in the business environment are stuck due to the pandemic. They have become too occupied with dealing with the pandemic for making the shift to digitization & automation. This is into effect even when they are aware of the fact that this could help in their overall ability to ensure proactive responses.
Pandemic Leading to Accounts Receivable Automation for B2B Payments
While it has been over two decades since the overall automation of accounting & finance options became a primary form of minimizing costs & time for organizations, still only around 5 percent of organizations around the world have been capable of fully investing in this high-end technology.
Most companies out there have automated around less than half of the respective back-office operations. Most of the rest have around a quarter or less in the automation process. Until the advent of the pandemic, addressing the issue of the slow adoption rate was not regarded as a priority. However, with the ongoing pandemic, the given viewpoints are changing significantly.
Challenges with Manual Functions
The functions related to the AP (Accounts Payable) and AR (Accounts Receivables) tend to remain as the most labor-intensive aspects of the workloads of the respective accounting & finance teams. This holds true even when the given set of functions are the primary operations to be automated in the first place. In a recent survey, it was observed that around 50 percent of financial chiefs or executives of businesses revealed that the given two functions tend to be the most manual-centric tasks of the respective staff.
In a typical organizational setup, the financial staff is known to continue spending several hours in manually carrying out vital tasks –like checking the overall accuracy of invoices, checking the status of payments, ensuring internal approvals, tracking invoice accruals, and moving invoices across internal processes.
As per a recent study report, it has been revealed that a finance team comprising of around 20 people can lose around 1920 hours equivalent on an annual basis or an estimated amount of around $124,800 in total costs in the implementation of the given manual tasks. At the same time, if it is a matter of a large-scale company having around 100 employees, the finance team can end up loading around 9,600 hours along with approximately $624,000 per year on the overall costs.
There are some other processes in the finance sector that could be slow to ensure automation. Some of these are tax management, treasury, vendor management, FP&A, procurement, audit readiness, and others. Financial staff is known to get bogged down as they are expected to prepare for audits. This is because of the amount of evidence-based data that they are required to obtain manually.
Moreover, treasury also appears to be immensely time-consuming due to the level of reconciliation that is required to be implemented –especially in organizations implementing businesses in varying geographies with multiple currencies. At the same time, the task of vendor management is also known to involve complicated quality checks on a frequent basis.
Moving to the Cloud for Improved Results
When the move to the respective cloud-based ERP system was achieved by the finance departments some two decades ago, it helped in increasing the overall efficiencies. However, the given set of systems has been designed to help companies in maintaining a record of financial transactions & data. The systems were not designed to take up the level of automated processing as well as predictive analysis that is expected out of finance teams in the modern era.
ERP systems have achieved immensely by making a shift to the cloud while improving the overall user visibility and experiences. However, there happens to be a disconnect with the expectations related to the ERP systems for natively automating the redundant tasks. Going forward, the ultimate objective of most of the financial experts or teams is coming across technology that can aid in taking away most manual tasks from the plates of the respective team members. This is because the modern concept of remote working due to the pandemic has revealed major routine inefficiencies. This tends to consume a lot of their energy & time.
Maximizing Collection Automation for Delivering More Time for AP & AR Management
This can be achieved through the creation of multiple customer categories –like new customers, strategic customers, and regular customers. As a business owner, you are given the option of creating multiple collection workflows. Here are some:
- For new customers, you can consider creating a tight collection schedule. This can be achieved by sending across payment notices before the invoices become due and sending reminders in a span of every 2 weeks. Then, you can regard triggering a call right after the second reminder.
- In case of regular customers, you can go forward with using an automated system for email reminder for monitoring the same.
- When strategic customers are concerned, you should aim at combining automated reminders while imparting a highly personalized approach.
Dealing with Challenges Related to B2B Payments During the Pandemic
Challenges that are associated with the management of the respective AR processed for B2B payments have become quite complicated since the advent of the pandemic. This is because firms are expected to come across alternative ways for performing financial & accounting functions that were conventionally handled manually in a typical office environment. The pandemic is prompting a major share of the organizations to change the respective credit limits and payment terms while adopting digital payment and invoicing methods.
Organizations that have employed state-of-the-art technology solutions for managing Accounts Receivable (AR) have been highly flexible at adapting to the ever-changing market dynamics of the modern era.