Automate your cash application process using AR Robot to instantly match customer payments (checks, ACH, CC, Wire) to invoices. Use the robot to automate sending invoices, answering repetitive emails and improve overall collection.
Step 1. Robot captures all a new payment: checks (including Lockbox), ACH deposits, CC deposit or Wire
Step 2. Robot looks up remittance advice (if available). extracts emails, check stubs or even scanned images
Step 3. Find open invoices the payments received. Use 1:1, 1:M matching logic along with exceptions for discounts and credits.
Step 4. Apply payments towards customer invoices in ERP system
If a company has Receivables, then they’ve made a sale, but have not yet collected the money from the purchaser. Most companies operate by allowing a portion of their sales to be on credit, offering their clients the ability to pay after receiving the service.
For example, utility companies typically bill their customers after they have received electricity. While the utility or energy company waits for its customers to pay their bills, the unpaid invoices are considered Accounts Receivable. Also, businesses operate by enabling their clients to buy goods in credit.
It is advisable for a company to setup an AR process to determine the customers that have already paid and identify any payments that are overdue. This makes the receivables traceable and manageable.
Typical AR teams are responsible for:
Establishing Credit Practices
Invoicing Customers
Tracking Payments Received and Payments Due
Accounting for Accounts Receivables
So how does an AR robot help?
# Establishing Credit Practices
The robot is not helpful in this step. Establishing best practices requires human judgement and analysis.
# Invoicing Customers
Robot can build and email a PDF document to the buyer, detailing the products and services that have been rendered, the costs of those products and services, as well as the date payment is expected.
Each invoice will have a unique invoice number for easy retrieval. The longer a company takes to send an invoice, the longer it takes for the customer to make payments. Bots can send invoices promptly.
# Tracking Accounts Receivable
The robot keys out a payment deposited into the bank account, feeds it into the AR system, and then allocates it to an invoice. The bot also reconciles the AR ledger to be certain that all the payments are accounted for and properly posted, and finally issues monthly statements to clients. The statement provides details for the customers about the amounts owed as per previously sent invoices.
Robot can read scanned check images or extract details from a Lockbox to post cash toward open invoices. The robot can apply complex matching rules, as well as read remittance documents to finish this process. The only thing left for human is to handle a few exceptions as and when they occur.
# Accounting for Accounts Receivable
The Collections Officer establishes the due date for payments. After identification of unpaid debts, the robot makes journal entries to record the sales. The process involves both accounting for bad debt, and identifying early payment discounts.
Other benefits that stem from using an AR Robot:
Procurement:
The Purchasing department places the order and transmits a copy of the purchase order (PO) to the AP department. The organization receives the goods or services—either through the Receiving department or the employee who ordered them—and the vendor sends the invoice to AP.
Invoice Processing:
An AP clerk manually keys the invoice data into an accounting system before physically storing the paper document in a filing cabinet. New supplier information is entered using the organization’s naming conventions to avoid duplication. Both new and existing supplier information is checked for accuracy against internal sources, such as the master vendor file, and external sources, such as the IRS TIN matching service and the U.S. Treasury Department’s Office of Foreign Control (OFAC) list of organizations that are banned from business in the United States. You can learn more about electronic invoicing here.
Invoice Approval:
An AP Clerk conducts a three-way match. A three-way match compares the PO, the receipt, and the invoice to identify any inaccuracies or mismatched data. An AP Manager prepares and approves paperwork for any exceptions for short delivery, damaged items, wrong items shipped, or other issues.
Payment:
The AP team prepares the payment, either by writing a check or setting up a transaction via Automated Clearing House (ACH) or electronic funds transfer (EFT). An AP Manager, Controller, or CFO (depending on the company’s approval process) approves the payment, authorizing the department to take an early payment discount for a supplier if the payment is being made within the date range specified in the terms. The payment is sent via U.S. mail, wire transfer, ACH/EFT, shipping company, or courier.
Vendor Management:
The supplier calls the AP department to ask where the payment stands. An AP Clerk researches the question, and determines whether the invoice is still in the approval process, or the payment is in the mail.
System Upgrades:
The information technology (IT) department monitors the company’s enterprise resource planning (ERP) system and any hardware and software the AP department is using. The IT team approves and installs new versions of software as needed. The CTO’s team considers any proposals from AP for new technology and determines how to integrate it with the company’s legacy systems.
Reporting and Analyzing:
The AP department prepares and studies spreadsheets they’ve built in Excel, or a similar tool, analyzing all transactions, monitoring the department’s performance and metrics, including days payable outstanding (DPO). The CFO oversees the organization’s cash flow through conversations with the AP Director. The CEO receives written and verbal reports from the CFO on the performance of the organization.
A study by Boston Consulting Group in 2020 found that over 20% of accounting departments are either in the process of or have already adopted robots in the last few years.
CFOs of such organizations are rewarded for delivering maximum ROI with such minimal disruption to the existing workflows.
Here are some of today’s most common accounts receivable (AR) problems:
Late Payments
Many customers are paying late to conserve cash to ramp up during the economic recovery. Customers are “stretching” suppliers, letting their Days Payable Outstanding (DPO) increase with a corresponding rise in your DSO.
Time Required to Manage Collections Process
Successful collections are driven by customer contact. There never seems to be enough time to manage collections processes and contact customers effectively. Between staff turnover due to the “The Great Resignation” (Current estimates note that upwards of 26% of the U.S. workforce could be planning to leave their current job sometime in 2021), absenteeism, and manual processes that consume time needed for customer contact.
Resolving Payment Disputes
The first time you learn of payment disputes is usually after customers have taken an unauthorized deduction. Staff constraints and manual systems have made it difficult to resolve disputes in a timely manner.
Credit Approvals and Credit Lines
The pandemic impacted the finances of many companies, making it difficult to decide on credit approvals for new customers, and extend credit lines for existing customers. Slow recovery and unclear data have made it difficult to manage credit approvals and lines, particularly when routine processes are manual.
Maintaining Customer Experience with Late Payers
Finding a balance between collections and customer experience with late payers is always a challenge. Retaining customers is essential, but you need cash flow to survive. How do you balance the need to provide an exceptional customer experience with sufficient cash flow to fulfill orders and pay staff?
These problems can be overcome. They can be solved with credit and collection policies and AR Robot!
Credit and Collection Policies
A surprising number of companies don’t have credit and collection policies. If you don’t have policies, develop them now. Policies provide a framework for your AR team and rules for the robot to obey. Your team can react faster when they don’t have to run every situation up the chain of command.
Frequently review and adjust your policies so they are compatible with current business conditions.
Accounts Receivable Robot
Through robots, collections can be streamlined with automated email reminders based on customer payment habits. Electronic invoicing and electronic payment options reduce the O2C cycle, errors and late payments helping to eliminate the need for time consuming follow-up calls. At the same time, customer online portals make it easy for customers to pay electronically, obtain document copies, and report disputes for faster resolution.
In the back-end, robots allow for more enhanced credit review frequency. This enhanced speed can be leveraged to expedite credit approvals and set credit limits. Customer credit ratings and timeliness of payments can be monitored closely. Your team will know if credit limits need to be revised, and collection follow-up increased. Analysis and reporting with drill-down enabled dashboards provide the tools you need to manage effectively. They give stakeholders the visibility they need to stay informed of AR department performance, accounts receivable quality and cash flow.
Credit and collection policies provide a framework to guide your team. AR automation gives them the tools they need to achieve department goals.
With a connected accounting solution, like award-winning
, for your finance team to coordinate work with customers and vendors, you can go digital and enjoy the benefits of office automation.
Error reduction:
When tasks that are performed by humans are handed over to software robots, the possibility to human error is eradicated.
Better efficiency:
Software robots perform tasks at a faster pace than humans who are assigned the same type of work in similar working conditions because robots are not bored of doing repetitive work.
Higher Productivity:
Humans cannot put in work at continuous stretches without scheduled breaks in between due to boredom, loss of concentration and fatigue. On handing such mundane tasks to software robots, idle time is reduced thereby improving productivity in the organization.
Better Accuracy:
Robots have a higher accuracy during the execution of tasks compared to humans.
Drives down costs:
When manpower is reduced due to software robots performing those tasks, the costs of maintenance, space rent and other costs are significantly reduced.
Benefits of Automating Accounts Receivables
Accounts Receivable brings a few challenges for organizations of different sizes and structures. There is continuous pressure to get better at fund management and keeping track of accounts receivables will keep the organization in good shape financially. This can be taken care of by adopting automation technologies.
The following are benefits of automating accounts receivables:
Fast-track Payments:
There may be customers who transact with your organization and take a long time to make payments thereby causing inconvenience to you. Automating accounts receivables will help in this regard. Automation will help to make invoices available to the customers who can then pay promptly which will help reduce delays in payment. Automation will bring speed to invoicing.
Saves Time:
An old adage says Time is money. Therefore if time is saved in automating your accounting procedures then money is definitely saved. If workers are too burdened then automating these tasks will surely save time. It allows the employees to focus on work that is more important.
Reduced Incidence of Errors:
Since ages the accounting and financial departments of organizations have been people oriented. Where there are humans handling operations, human error is bound to occur. This comes at a certain cost. Automation can help to bring down such errors leading to lowering costs and happier customers.
Customer Service Improves:
Your customers will not only bring revenue but also spread word about your company. If your customers are unhappy with the glitches that occur from your end thereby affecting them, they will spread negative word of mouth which can damage your company’s reputation. On the other hand if by automation, your customers receive better service it will spread good word about your company and draw more customers. Your brand reputation will definitely be boosted.
Cost of Processing Payments decreases:
When you automate workflows the costs associated with processing of payments goes down. The company can then invest this money saved into other areas that require attention and financial injection. Productivity definitely improves. The workers that once looked after mundane tasks can now put their brains to strategic tasks.
Standardize Processes:
When you transact with a customer you can receive the payment immediately or agree on credit where the payment is made at a future date. As soon as credit comes into the picture we incur an accounts receivable. The date of collection is based on the terms and conditions as agreed upon by both parties. Members of your workforce need to understand these terms thoroughly and maintain records against many such customers that avail credit facilities. Automating the accounts receivables process will surely standardize the entire process thereby making work simpler. The collection manager’s work becomes easier and collections are streamlined.
Therefore it doesn’t take much effort to realize that it is a wise decision for organizations to automate their workflows when it comes to accounts receivable. An important decision is to ascertain to what extent and identify the tasks that need to be automated. It will bring numerous benefits that will help organizations to compete better.
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