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Streamlining Your Accounts Receivable Process With Automation

Learn how your company can benefit from implementing accounts receivable automation. 

Aaron Klein

Aaron Klein

Introduction

In this modern world it is vital to operate your business with efficiency, and even more importantly, scalability at the forefront. Having set processes in place to manage your accounts receivable is a core factor in running a successful finance department. Approaching A/R processes manually is not only time consuming, but can also result in unforeseen delays, errors and inevitably, dissatisfied customers. Automating your account receivable processes removes these issues, allowing your business to operate with more speed and accuracy when collecting payments. This blog post will clearly illustrate how you can benefit from implementing accounts receivable automation.

What is Accounts Receivable (A/R)?

Accounts receivable refers to the money that a business is owed by its customers for goods or services that have been sold but not yet paid for. This is considered an asset for the business because it represents money that the company is entitled to receive in the future. Accounts receivable is typically recorded in a company’s balance sheet and is closely monitored by management to ensure that customers are paying on time and that there are no issues with the company’s credit policies. Additionally, businesses may use accounts receivable financing to borrow money using their accounts receivable as collateral. This can be a useful tool for businesses looking to improve their cash flow and finance growth.

Understanding the Accounts Receivable Process and its Challenges

The accounts receivable process in a business involves several steps to ensure that customers pay for the goods or services they have received. Below are the core steps involved in the A/R process:

1. Billing: The first step is to create an invoice for the customer, which details the goods or services provided, the price, and the payment terms. This invoice is typically sent to the customer either electronically or by mail.

2. Credit Approval: Before providing goods or services, some businesses conduct a credit check on their customers to determine their creditworthiness. This helps the business to decide whether to extend credit and under what terms.

3. Payment Collection: After the invoice is sent, the business will actively follow up on any unpaid invoices. This may include sending reminders, making phone calls, or sending statements.

4. Recording and Tracking: The business will keep a record of all the invoices and payments received in their accounting system. This allows the business to track who has paid and who has not, and to prepare accurate financial statements.

5. Reconciliation: The business will reconcile their accounts receivable records with the customer’s records to ensure that all invoices and payments have been recorded correctly.

6. Bad Debt: If a customer does not pay their invoice, the business may have to write off the debt as bad debt. This means that the business will no longer attempt to collect payment, and it will be recorded as a loss in the financial statements.

Overall, the accounts receivable process is a critical aspect of a business’s cash flow management, and it is important for businesses to have a system in place to effectively manage and monitor it.

Interested in Leveraging A/R Automation For Your Business?

Learn more about Dynamics 365 Finance and what it can do to streamline your finance operations
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Maximizing Efficiency and Improving Cash Flow: The Benefits of Accounts Receivable Automation

Accounts receivable (AR) automation is a process in which businesses can streamline their financial operations and improve their overall efficiency in collecting payments for goods or services. There are several different scenarios in which A/R automation can be implemented, each with its own set of benefits. With this in mind let’s take a deeper dive and explore some common scenarios in which AR automation can be used.

Invoice generation and distribution

  • Automating the process of creating, sending and tracking invoices can save businesses a significant amount of time and resources. Additionally automation can ensure that invoices are accurate, consistent and sent to the right person at the right time.

Payment processing and reconciliation

  • Automating the payment process can help businesses to streamline their cash flow and reduce the risk of errors. Automated systems can track payments, reconcile them with invoices and provide real-time visibility into cash flow.

Credit and collections management

  • Automation can help businesses to efficiently manage their credit and collections process. What's more automated systems can help businesses to identify and manage high-risk accounts, set credit limits, and automatically send reminders and follow-up emails to customers with overdue payments.

Reporting and analysis

  • Automated systems can provide businesses with real-time visibility into their accounts receivable data, which can help them to make more informed decisions. Automated reporting and analytics can also help businesses to identify trends and patterns in their customer's payment behavior.

Automated Reminders and Notifications

  • Automated systems can help businesses to send automated reminders and notifications to customers about their due payments and follow up with them. This can help businesses to increase the chances of timely payments and improve their cash flow.

Integration with other systems

  • Accounts receivable automation systems can integrate with other systems such as accounting, inventory, and CRM to provide a comprehensive view of business operations.

Reduce days sales outstanding

  • DSO is a key metric for financial health. Automation can streamline the process of invoicing, payment collection, and reconciliation. Automation gives businesses the ability to track customer payment history and provides insights into customer behavior that can be used to tailor payment terms and collection strategies. Finally automation also ensures compliance with government and industry regulations. All of this leads to fewer days between sales and receipt of payment. Which equates to a reduction in DOS and improves the cash flow for your business.

Frequently Asked Questions About Accounts Receivable (A/R)

What is the difference between accounts receivable (A/R) and accounts payable?

Accounts Receivable (A/R) is the money owed by customers for goods or services purchased on credit. Accounts Payable (A/P) is the money owed to suppliers for goods or services purchased on credit. In other words, A/R is the money a company is owed by its customers, while A/P is the money a company owes its suppliers.

What is the role of an accounts receivable clerk in a business?

The role of an accounts receivable clerk in a business is to manage the company’s accounts receivable. This includes tracking payments, issuing invoices, reconciling accounts, and coordinating with other departments in the organization. In addition they may also be responsible for preparing statements and reports related to accounts receivable.

What are some common accounts receivable errors?

Some common accounts receivable errors include incorrect invoicing, incorrect payment processing, and forgetting to apply payments. Therefore it is important to have a system in place to ensure that all accounts receivable transactions are accurate and up to date.

What are the benefits of automating accounts receivable?

Automating accounts receivable can help businesses save time and money. It can help to reduce errors and improve accuracy. Additionally automating accounts receivable can also help to reduce the number of accounts receivable disputes and reduce the amount of manual labor associated with tracking payments (Source: Microsoft Dynamics GP)

Conclusion

Accounts receivable automation is an invaluable tool for any business. It streamlines the process of managing and collecting payments, reduces manual data entry errors, and allows for more efficient customer service. By automating the A/R process, businesses can save time, reduce costs, and increase their cash flow.
Using Dynamics 365 Finance for A/R automation provides businesses with an easy-to-use platform that can be used to automate their invoices and manage their accounts receivable. The platform automatically collects customer information, applies discounts and deductions, and produces detailed reports. It also allows businesses to manage their accounts receivable in real-time and streamline their processes. Using Dynamics 365 Finance for A/R automation saves time and money, reducing errors and DSO. This means more money coming in with less effort going out – a win, win for any business.

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Streamlining Your Accounts Receivable Process With Automation

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Aaron Klein

Aaron Klein

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