Why you should automate your Accounts Receivable (AR) Process

Accounts Payable and Accounts Receivable work and in hand in any finance department. You would think every company is aware of its revenue and how much each client or partner is worth at any given time, but that’s not always the case. Not all financial departments have great processes or bookkeeping practices. A well organized AR process can optimize a team’s time spent on manual tasks, enable better cash flow projection and noncompliance reduction. 

What is an accounts receivable (AR) process?

Accounts receivable include all of a company’s earnings from product or service sales. It’s one of the key processes to understand what the company will receive in a particular month/quarter/year, in order to plan or project purchases and investments.

This process must be monitored on a daily basis to ensure that the predictions will be accurate. There is often a small gap between the predictions and actuals. Some payments might be delayed, for example. But, if you plan what you can in advance, it’s possible to maintain healthy financial management and good cash flow.

Why is it important to have an organized accounts receivable process?

1. Efficient collection process

Collecting payments can be one of the most unpleasant parts of the accounts receivable process, but it is key to ensuring a company’s success. Customers can occasionally fail to pay on time, not because of a lack of funds, but because the company fails to charge them or doesn’t effectively send reminders for payment.

Leveraging a software that automatically reminds them of the deadline can help your AR team get ahead of this type of problem. When a payment is delayed, you should not take long to notify the customer and apply late charges. Not doing so could delay the payment further and hinder your cash flow.

One best practice is to track more closely those clients who have a tendency of sending delayed payments. This might reduce the risk of them continuously impacting your business.

2. Default risk control

A well-structured process allows you to collect data on non-compliance rates and therefore implement more assertive planning. This offers the best method of maintaining control over your company’s numbers and tendencies. The ideal scenario is that the non-compliance rate not go beyond 5% to be considered financially healthy.

Once you have this part of the process under control, you can encourage the clients with a history of paying on time to continue to do so by offering some benefits like discounts or preferred services. 

3. Healthy cash flow planning 

Once you have all the data about your accounts receivable and your non-compliance rate, you can measure what your monthly income should be.

By doing that, you’ll be able to define how much you can spend and invest. And when tracking your accounts receivable, you get to apply interest on delayed payments from previous months.

These are just a few benefits you can get by having an organized AR process. Our first tip is for you to take your data out of spreadsheets and put it into a standardized workflow processing tool where you can automate manual tasks, gain greater visibility into your accounts receivable and payable tasks and guarantee more accurate monthly projections. Try Pipefy today!

Written by
Marina Mazetto
Customer Success Manager at Pipefy. Graduated in Business Administration and specialized in Process Management and Continuous Improvement.
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