Can Accounts Receivable Be Automated?

It’s inefficient and a little monotonous to manage your AR manually. Fortunately, there are specialized technologies available to make this procedure easier. With the help of automation, you can free up more time to devote to other important endeavors.

What’s even better? You are the one who determines the level of automation that you want in your business, and as a result, you can have more personalized interactions with your customers. This article will discuss how you can achieve automated AR and its benefits.

Why Automate Your AR?

AR automation uses software to streamline the invoicing, payment collection, and customer follow-up processes.

Most AR automation technologies go above and beyond by eliminating manual processes and improving collection by reconciling transactions with your accounting ledger tool.

You should bring your current team to every step of the transition to AR automation. That will ensure that the option you settle on is one that everyone is comfortable using.

Because you’ll need to give training to your staff for a successful transition, you should also roll out the automation progressively instead of all at once.

Here are a few benefits of using AR automation software:

  • Save time and energy
  • Cash flow management
  • Accessibility

Save Time and Energy

You could do much more for your business if you spent less time on administrative tasks like billing clients, determining payment terms, and sending out invoices.

That is especially the case if you have a sizable clientele and regularly modify invoices to reflect changes in quantities sold or prices negotiated with suppliers.

Additionally, your staff can stop stressing over what to say in their next letter to a client who is late on payments. They’ll be free to concentrate on more strategic issues without worrying about these details.

Cash Flow Management

Cash flow forecasting is essential to every business’s strategic planning process. However, manual forecasts can never hope to compete with those that automation systems can generate because of the massive volume of data the latter can process.

You can automate billing, payment alerts, payment reminders, and email communication processes to reduce bad debt and maintain a consistent stream of payments.

All clients can receive personalized communications with the appropriate tone and substance through automation, strengthening customer relations, and assisting your company in timely payment collection.

The automation of bidirectional communication works in tandem with client segmentation to ensure that all customers receive the most relevant messages.


It is possible to monitor KPIs like the average time it takes for customers to pay bills and the efficiency of your collection activities with the help of an interactive analytical dashboard accessible from most AR automation tools.

Furthermore, software systems monitor collection parameters, such as Days Sales Outstanding, that your staff can use to gather insightful information and identify patterns.

Best Practices for Automating Accounts Receivables

Here are the best practices you can adopt when automating accounts receivable in your business.

Establish Multi-Departmental Cooperation

The most crucial consideration is fostering cross-departmental collaboration in the organization. You might overlook this aspect if you’re only preoccupied with finding the best AR automation software.

Accounts receivable automation might be a top-down, strategic decision made by upper management, or it can originate from within your AR department. All relevant teams need to work together, regardless of who made the decision, to ensure a smooth rollout of the new system.

Ensure everyone who needs to be involved is in the planning and decision-making for any automated system’s implementation. By working together, you can map out the AR process from start to finish and pinpoint areas for improvement.

That will assist you in figuring out what your customers are having trouble with and where possible inefficiencies exist in the automation process. Consequently, the whole invoicing to collection process will benefit from good optimization.

Define Clear Objectives

A clear understanding of the project’s objectives and metrics for success is crucial before launching any AR automation. That will help everyone to maintain their focus during the implementation and evaluation of the automation system.

Among the typical objectives of AR automation are:

  • Make your processes more efficient and flexible.
  • Accelerate the time it takes to process and collect payments.
  • Offer reasonable net-payment terms without compromising cash flow.
  • Minimize bad debt and eliminate the possibility of fraudulent accounts.

The size and complexity of your firm will influence what you hope to accomplish through automation.

Process Mapping and SOP Documentation

Once you’ve gotten everyone on your team on board and figured out what you want to get out of AR automation, it’s time to map out the whole process from beginning to end. Doing so will assist you in uncovering where you can make changes and where automation might not work.

Depending on the complexity of your product’s billing and invoicing structure, you may need anywhere from two to three sessions to get everything in order.

To pinpoint the most pressing impediments and prioritize which steps to automate, it is necessary to draw up a comprehensive map of the process and develop specific standard operating procedures.

Here is a recommendation on how to do it correctly:

  • Identify AR key stakeholders. That will include departments such as sales, marketing, and accounting.
  • Document and record your team’s procedure in collecting payments.
  • Identify all the information you need at each step of the process.
  • Identify everything that is done manually. You can use this information to figure out which tasks you need to automate.

Other things to consider include:

  • What is your invoicing procedure? How soon do you send out invoices?
  • How do you process payments from clients?
  • What payment methods do your clients prefer?
  • How do you generate and send invoices at the moment?

AR Team Inclusion

It is worth noting that the whole automation process requires the involvement of your AR team. Your accounting and finance staff know the ins and outs of AR daily and can give you an honest assessment of where you need to improve.

Inquire about their best procedure for accounts receivable and the difficulties associated with debt collection or past-due accounts. For instance, inquire about the functionalities they would include if they were designing a system to facilitate their work.

You’ll get a comprehensive understanding of the AR procedure and make the shift to and deployment of the automation software go more smoothly.

AR Software Assessment

It’s time to assess software solutions once you’ve laid out the AR procedure and identified areas that need improvement. Consider the features you want and require in the system, and ensure that the software provides them.

Look for capabilities that let you set up dynamically configurable dashboards to show the appropriate key performance indicators of your AR procedure in real-time.

Ensure the software works with the most common payment options so that clients may make payments using different payment methods, including credit cards, debit cards, or ACH. Additionally, search for features that permit you to automatically give discounts to your clients and encourage them to pay their bills on time.

Aging reports make a list of how much money your clients owe you. They serve as a reliable measure of how well you handle collections. Because these reports show you data over time, automation will help you seamlessly spot anomalies in your collection procedure.

Additionally, you can maintain tabs on clients that frequently pay late. Consequently, you can act accordingly before bad debt causes a cash flow crisis that affects your company’s financial stability.

Accounting and Finance Tech Stack Integration

Ensure that the AR automation software you’re considering is compatible with your accounting software before deciding. That will increase the transparency of your AR process and reduce manual tasks. It will also assist in eliminating unneeded hassles and improve the system’s efficiency.

Get Approval From Relevant Parties

The final and most crucial step is gaining the approval of all relevant decision-makers and stakeholders. Ensure that everyone participating in the project knows the system’s effectiveness and why it is a good purchase.

That will help you prevent misaligned expectations and a steep learning curve for users. Furthermore, a pilot test will help you determine whether or not the software truly satisfies the requirements of your stakeholders and AR team. You’ll be able to find any problems before you can do a full deployment of the software.

Final Thoughts

Accounts receivable automation is a powerful solution that can aid business optimization and timely payment collection. Although automated AR often works, it’s not always a universally applicable answer.

Each company is distinct and has its own specific set of requirements, operations, and external factors. Thus, choosing software and designing a system that works well for your company is of utmost importance.

The secret to success is to figure out what you need, then pick a tool that will assist you to do that job better. AR automation will not only contribute to the expansion of your company, but it will also help save time. We hope the article will help answer all your questions on automated AR.