The traditional accounts receivables system has so many drawbacks. Every step in this process is a chance for things to go wrong. Papers get lost. Emails get overlooked. Data gets entered incorrectly. And every mistake means more delays, more work, and less money in your bank account.
In fact, 81% of businesses are dealing with more delayed payments than ever before. Half of all companies surveyed said their customers are paying late, and 77% of AR teams admitted they’re falling behind on their targets.
Think about what your accounts receivables (AR) team could be doing if they weren’t stuck in this cycle. They could be building better relationships with customers. Spotting payment trends. Finding ways to improve your cash flow.
And most importantly, improving your bottom line.
The Measurable ROI of Automation in AR
The financial case for AR automation is compelling and well-documented. According to a report by Billtrust, organizations implementing AR automation can achieve an impressive 390% ROI over a three-year period. This substantial return demonstrates that automation is not merely an operational improvement but a strategic investment with quantifiable financial benefits.
PYMNTS research reveals additional benefits: almost 85% of companies automating AR reported that AP automation leads to efficient, accurate, or streamlined processes, and almost 73% reported an increase in cash flow, savings, and growth. Such substantial returns come from several key areas:
1. Reduced Days Sales Outstanding (DSO)
Days Sales Outstanding (DSO) is all about how long it usually takes for a business to collect payment after making a sale. Companies that switch to accounts receivable automation often experience a 32% drop in their DSO. This can have a big impact on working capital.
For example, if a business pulls in a million a year, just cutting down DSO by two weeks can free up hundreds of thousands of dollars in cash. Having that extra cash on hand gives companies the flexibility to invest in growth, pay down debt, or improve their balance sheet.
2. Lower Processing Costs
Processing invoices manually can rack up a bunch of direct costs, like preparing documents, printing, mailing supplies, postage, and filing. Even though each cost might seem small on its own, they really add up when you’re dealing with thousands of invoices.
The bigger hit, though, is the time it takes for the staff. When you handle things manually, employees have to create invoices, send them out, chase after unpaid balances, process payments, and put together reports. That’s a lot of time that could be used for more valuable work.
Automation cuts out most of these costs. Sending invoices electronically means no more printing or postage fees. Automated workflows save on the time staff spend on routine tasks. Plus, when you integrate with accounting systems, you avoid duplicate data entry and manual reconciliations.
For businesses that are growing, these efficiencies mean you can do more without hiring more people. The same team can manage way more invoices, helping the organization scale up without proportionally increasing back-office expenses.
3. Fewer Errors and Disputes
Manual processes inevitably introduce errors — incorrect amounts, missing purchase order numbers, wrong addresses, or misapplied payments. Each error potentially delays payment and requires staff time to investigate and resolve.
In fact, 63% of firms with highly automated AR processes experience fewer invoicing errors. And having fewer mistakes means there are less customer disputes, quicker payments, and less load on admin tasks. This lets the team spend time tackling real issues instead of fixing avoidable errors. Plus, customers get accurate and professional invoices that are simpler for them to handle and pay.
4. Improved Team Efficiency
When routine accounts receivable tasks get automated, staff can shift their focus to things that actually need human judgment and expertise. Instead of wasting hours on data entry or processing payments, they can prioritize building customer relationships, tackling tricky problems, and analyzing payment trends.
This change not only makes things run smoother but also boosts job satisfaction and personal growth. Employees get to learn new skills that add real value and play a bigger role in the success of the company.
The result? Better employee retention and stronger team performance overall.
Getting Started with AR Automation
Implementing AR automation need not be overwhelming or disruptive. Many organizations achieve significant results through a phased approach that delivers incremental benefits while moving towards a completely automated accounts receivables system. Here’s an incremental approach to help you start:
- Digital invoicing is a good place to start. Switching from paper to electronic delivery cuts costs and speeds up invoice sending, helping with Days Sales Outstanding (DSO) without major changes.
- Customer payment portals simplify the payment process, giving clients easy options to review and pay invoices, which often leads to faster payments and fewer questions.
- Automated reminders keep track of unpaid invoices without adding extra work for staff, boosting collection rates, especially since many accounts receivable teams are not hitting their targets.
- Dashboard reporting provides a clear view of receivables performance, helping finance leaders manage issues proactively.
Each of these tools offers its own benefits while driving overall improvements in accounts receivable. Organizations can implement them at their own pace and see returns along the way.
Want help automating your AR processes? Call Capital Recovery at 470-297-1120. Our financial experts will help transform your manual processing into a completely automated AR system.