As an accountant, you know how important the cash flow is for any business. Keeping the revenue stream steady and consistent is paramount, and a significant aspect of achieving this is ensuring that clients can seamlessly and promptly settle their payments.

This is precisely where automating your accounts receivable (AR) process becomes your trusted ally. By optimising how invoices are generated, managed, and settled, you unlock a wealth of benefits—enhanced productivity, heightened client satisfaction, and a healthier bottom line for your firm.

In this article, we will deep dive into the world of AR automation. We will uncover its advantages and provide you with a step-by-step walkthrough on implementing this game-changing automation into your business operations.

 

Why traditional invoicing is no longer the best option

Traditional invoicing, though once the norm, is now showing its age in the modern business landscape. The world is moving at a rapid pace, and businesses are expected to keep up with the momentum. Invoicing, a fundamental part of any business’s financial operation, has also evolved, and traditional methods are being overshadowed by more efficient, accurate, and convenient alternatives.

In the absence of an automated accounts receivable (AR) system, businesses craft and dispatch client invoices manually. Essentially, it involves the company owner or the designated accounts receivable handler generating an invoice during the billing period and filling in all the essential details themselves.

Typically, this manual process encompasses:

• Entering Business Information: Providing the company’s details, including name, address, contact information, etc.
• Itemizing Products or Services: Listing each product or service rendered, accompanied by their respective prices.
• Calculating Total Amount Owed: Aggregating the charges to determine the total payable amount.
• Setting Payment Terms: Specifying the agreed-upon terms for payment.

Following this, the business dispatches the invoice to the client, usually via email, although some companies still resort to traditional postal services for sending paper invoices.

As one can imagine, this manual procedure demands both time and effort, especially when dealing with multiple clients. While the act of generating an invoice is not inherently complicated, the cumulative effort can be taxing, diverting attention from more strategic and high-value tasks.

Hence, automating invoicing processes emerges as an appealing proposition, allowing for enhanced efficiency and liberation from this laborious manual routine.

 

What is accounts receivable automation?

Accounts Receivable (AR) automation is a technological solution designed to streamline and optimise the invoicing and payment collection process within a business. It involves leveraging specialised software and tools to automate various tasks and workflows associated with accounts receivable management. 

The primary goal is to enhance efficiency, accuracy, and speed in invoicing, collections, and ultimately, the cash flow of a business.

Here’s a more detailed breakdown of what accounts receivable automation entails:

• Invoicing Automation: AR automation enables the automatic generation and delivery of invoices to clients based on predefined billing cycles or triggered events. The software can pull data from relevant systems to populate invoice details, reducing manual data entry.
• Payment Reminders and Notifications: The system can send automated reminders and notifications to clients for upcoming or overdue payments, improving the chances of timely payments.
• Online Payment Portals: Many AR automation solutions provide a secure online portal where clients can view their invoices and make payments directly. This accelerates the payment process and improves cash flow.
• Payment Reconciliation: The automation system can reconcile received payments with the corresponding invoices, saving significant time and effort compared to manual reconciliation processes.
• Data Analytics and Reporting: AR automation tools often come with built-in analytics and reporting features. They can generate reports on key AR metrics like Days Sales Outstanding (DSO), payment trends, and collection efficiency, helping businesses make informed decisions.
• Customer Communication: Automated communication tools can handle interactions with customers regarding invoices, payments, and general inquiries, providing a better customer experience.
• Scalability: AR automation solutions are designed to handle a high volume of transactions and can scale as a business grows, ensuring the process remains efficient and effective.

By implementing accounts receivable automation, businesses reduce the manual workload, minimise errors, accelerate payment cycles, and improve overall efficiency in managing receivables. 

Ultimately, it leads to better cash flow management, enhanced customer relationships, and increased focus on strategic financial planning and growth.

 

How to automate accounts receivable in your accounting firms?

Ready to automate your accounts receivable process? While the precise approach will vary based on your unique needs and current systems, adhering to some general best practices can guide you in the right direction.

Define your process

Start by clearly defining your AR procedure or envisioning how you want it to operate. Break down each step of your billing process to identify the ideal software and configurations.

Questions to consider:

• When do invoices need to be sent? Define the billing frequency based on client agreements.
• What’s your value pricing payment structure? Determine if it’s hourly, per-project, upfront, or based on service delivery.
• Payment methods: Decide which payment methods you’ll accept, such as credit/debit cards or ACH, BNPL payments.
• Invoice reminders: Establish a system for sending reminders in case of delayed payments and define penalties for late payments.

Find the right payment solution

Navigating payment conversations and ensuring timely payments can indeed be challenging. Thankfully, several software solutions can help streamline this process and alleviate the awkwardness associated with payment discussions. For example, with Fresh Proposals- an engagement letter software you can.

• Request advance payment while accepting letters
• Get authorization & get paid, set up recurring fee
• Let clients select payment options eg Credit Card, ACH, BNPL

Benefits of AR automation

Discovering and establishing the perfect AR automation system may require an initial investment of time, but the results are undeniably rewarding. Here’s a glimpse of the advantages you can unlock by embracing automation for your invoicing processes.

• Enhanced Efficiency: AR automation significantly speeds up repetitive manual tasks like data entry, invoice generation, and payment tracking. This efficiency frees up valuable time, allowing your team to focus on strategic activities and customer engagement.
• Faster Payment Processing: Automated invoicing and online payment options speed up the payment cycle. Clients can pay instantly, improving cash flow and reducing the average Days Sales Outstanding (DSO).
• Improved Accuracy and Reduced Errors: Automation minimizes human errors associated with manual data entry, calculations, and invoicing. This leads to accurate financial records and reduces discrepancies in billing and payments.
• Customized Invoicing: AR automation allows for customized invoice templates, personalized for each client or project. This enhances professionalism and reinforces your brand image.
• Automatic Payment Reminders: Automated systems can send timely payment reminders to clients, reducing the need for manual follow-ups and enhancing payment collection rates.
• Better Cash Flow Management: By accelerating payment cycles and reducing overdue payments, AR automation helps maintain steady cash flow, providing financial stability and flexibility for your business operations.
• Real-time Monitoring and Reporting: AR automation provides real-time insights into your accounts receivable status. You can track payments, pending invoices, and customer payment patterns, enabling informed decision-making.
• Enhanced Customer Experience: Automated systems facilitate smoother transactions for clients. They can view invoices online, make instant payments, and access payment history, leading to a positive customer experience.
• Integration Capabilities: Many AR automation tools seamlessly integrate with your CRM systems, and existing accounting, allowing seamless data flow and reducing the need for manual data entry.
• Cost Savings: Over time, automation reduces administrative costs associated with manual invoicing and follow-ups. It also optimised resource allocation, leading to cost efficiencies.

 

Conclusion

Automating accounts receivable is a powerful step toward an efficient and productive accounting firm. By choosing the right tool and effectively implementing it into your workflow, you can witness a transformation in your operations. 

Embrace automation, and you’ll not only streamline your processes but also elevate your client experience—a win-win for your firm and your clients.