Accounts receivable (AR) are an important part of any business. AR is the money owed to a business by another individual or business in exchange for property, goods, or services provided on credit. The first step of the AR process is sending an invoice to the customer, and the amount goes on the company’s balance sheet under “current assets.”
Alternatively, accounts payable (AP) are short-term debts that a business owns to a supplier for products received before any payment is made. These are listed under the “current liabilities” section of the balance sheet. Once the account has been paid, the item is removed from the liabilities section.
A balance sheet is an important financial statement that a business produces to depict total assets, liabilities, and net worth. The document provides a quick look at financial health. No one said that creating the balance sheet was an easy process. The balance sheet is the “value” of a company based on the books. Lenders, investors, and stakeholders use the information from this snapshot to make the major financial decisions about your business.
What is an AR Automation System?
When it comes to handling the business balance sheet, many components have to be factored in. To do this by hand can be exhausting and tedious, costing businesses more for accounting professionals than is ultimately necessary. What if there was a way to automate AR and simplify your AP workflow with automation?
Three Ways AR Automation Systems Make Business More Efficient
When it comes to repetitive tasks, people grow weary and then begin to make errors. Spreadsheets, invoices, and phone calls can go horrifically wrong if the decimal is in the wrong spot. There is a lot of room for user error – but not with automation. Automation within the AR and AP process can eliminate many business problems and increase accuracy.
Automation Saves Businesses Time and Money
If not for any other reason, the fact that less of the bottom line has to be used should be reason enough to explore automation. Money is crucial for your business and seems to be the determining factor for success. Think about the cost of sending invoices. If your business is creating thousands of invoices for AR accounts, each one has a cost attached.
For example, pretend your cost for a single invoice is $10. If you are sending 10,000 invoices in a year, the total cost is $100,000. You are spending $100,000 to send out bills for people to pay you – the logic seems slightly skewed.
Automation can reduce the amount spend, and the amount of time it takes to process invoices. Industries report automation processing 16 times more invoices per full-time employee (FTE) each month versus no automation in place. Imagine, instead of one employee handling 1,500 invoices manually a month (with a high risk of human error), using software to process 24,000 invoices with little to no error. The employee resources can be allocated to another area that needs focus instead of wasting them on repetitive tasks that can be automated.
Automation Reduced Employee Error
Employee error in AR, AP, and balance sheets can be costly. Even if they are accidental, it doesn’t mean that the funds will be recovered if they are lost. Human error in data entry is not a new concept. Some studies have been ongoing for years, looking at how monotonous tasks can increase human error.
Have you watched an accountant or bookkeeper enter records into a spreadsheet or accounting software? They rarely look at the keypad – because errors happen do not mean that these professionals are not good at their jobs. It does mean that there may be a more sustainable solution to keep errors out of your books.
Automation Increases Overall Customer Satisfaction
Happy customers tend to turn into returning customers. Returning customers spend more money, order more products, services, or whatever your offering is. All it takes is one time sending an invoice with the wrong amount, and they begin to question your professionalism. Even worse, you have someone handling your books, skimming from your customers. If only you had taken the time to look over the invoicing and overall accounting process.
As much as you don’t like to lose money, your customers don’t either. Choosing to automate your process and providing them peace of mind that there is consistency might change how they look at your business as a whole.
Don’t be surprised if you find that it is easier to accommodate customer service efforts when your employees aren’t all bogged down trying to handle the invoicing and AR/AP process. Automation frees up your employees to do more for your customers (and for you).
How Implementing Automation Software Works
It shouldn’t take months to get the ball rolling on automating your process. It should only take a few days to be up and running. Once you have the software solution you know you can’t live without, all you have to do is begin with the professional-grade implementations.
Your new software should be able to:
- Capture all documents – from any source, in any format, and automatically route it where it needs to go based on your company rules.
- Send you notifications daily with a list of invoices that need to be approved, re-routed, denied, etc.
- Once approved, invoices are submitted to AP for final payment authorization.
- The AP-authorized invoices are then sent to the financial system for payment.
- Documents within the entire system are retained or destroyed based on the rules and regulations of the company or industry.
Using an automated platform shouldn’t be more work than the old process – that is only counterintuitive. Moving forward with automation should be a smooth transition that creates better visibility and creates more transparency for the financial liabilities your business has.
As a business owner, you seek solutions to increase efficiency. You are always looking for the best way to save money, increase morale, and retain your customers. Incorporating an automated software solution into your business infrastructure can do that and more if you let it.