The accounts receivable process is a core element of the finance process. Here we explain what the accounts receivable process is, how it works within financial operations, and how to create and improve your own accounts receivable process.
What is the accounts receivable process?
The accounts receivable process deals with suppliers providing goods and/or services to a buyer on credit, with a legal agreement requiring that the buyer provide payment for the goods or services by the agreed upon date. Depending on the supplier and/or reliability of the buyer, a payment agreement can require the buyer to pay in full within 30, 45, or 60 days.
To illustrate how the accounts receivable process works, think of an IOU or a loan — something is received or provided today, but payment isn’t due until tomorrow or much later.
Why is the accounts receivable process important?
Whether it’s a misplaced invoice, a missed deadline, a paper trail of documents, or a human error due to manual processing, a bottleneck in the accounts receivable process can be detrimental to a business.
The accounts receivable process is an important part of a company’s financial operations because it provides a quick glance at a company’s financial health, and serves as a way to analyze and measure a company’s liquidity.
Accounts receivable at a glance
|$3 trillion||Total amount US companies are owed in outstanding accounts receivable |
|$16-$22||Cost of manually processing individual invoices |
|42%||Amount of B2B payments paid via paper check |
|$3B||Expected market size of accounts receivable automation by 2024 |
|43%||Number of overdue B2B invoices in the US |
|6 days||Average time spent manually processing a physical invoice |
|4%||Total uncollectible B2B receivables in the US |
Sources:  Deep Dive: Accelerating Accounts Receivable With Automated Technologies. PYMNTS.  Accounts Receivable Automation Global Forecast to 2024. Markets and Markets.  US: Business Environment Strained by Cash Flow Issues. Atradius.
How does the accounts receivable process work?
The accounts receivable process begins when a buyer places an order. From there, like a domino falling, this action triggers the following steps:
While the example above details a best-case scenario where payment is provided on time, a fully formed accounts receivable process also accounts for bumps in the accounts receivable process, like a late payment or uncollectible payment.
Here’s what a dynamic accounts receivable end-to-end process looks like in action:
Best practice: Before you get start building out your accounts receivable workflow, be sure to complete the following:
4 tips to improve your accounts receivable processes
Integrate your accounts receivable software with a BPM platform to solve common problems
The accounts receivable process may seem like a very tedious process, but accounts receivable software can take the guesswork out of managing your business.
Whether you’re a small business or a large enterprise, it’s common to use software to manage the accounts receivable process. Commonly used software that can be integrated with Pipefy includes FreshBooks, Netsuite, QuickBooks, SAP, and XERO.
By integrating your accounts receivable software with a BPM, you can take the guesswork out of managing your business and improve the reliability of your financial operations by centralizing and automating critical tasks, like invoicing and payment collection.
Now that we’ve broken down the accounts receivable process and how to improve it, keep reading to learn more about the benefits of business process automation and how a BPM platform can help automate your business processes.
The accounts receivable process is a core element of the finance process."
See why companies choose Pipefy to help them optimize and automate their accounts receivable workflow