Small and medium businesses have relied on traditional banking services to receive international payments. This approach is not only expensive but also includes hidden costs associated with currency conversion. Additionally, the lack of visibility to track payments keeps businesses in the dark about their transactions. While automated accounts receivable (AR) solutions offer a way out, these solutions take time to implement and require employee training to maximize their potential. So the question arises; Are these intelligent solutions reliable for small business growth? This article will compare the two approaches to answer this question and discuss the benefits of each approach.
Accounts Receivable Automation vs. Traditional AR Methods– Everything you need to know
Accounts Receivable is an essential part of any business that involves invoicing and collecting payments from customers. In recent years, businesses have increasingly turned to automation to streamline their AR processes. These solutions are designed to simplify and accelerate the AR process, reducing the amount of manual effort required and minimizing errors. Here's a closer look at how receivable automation software compares to traditional AR methods.
Traditional AR Methods
Traditionally, AR processes are largely manual. Invoices necessitate printing and mailing or emailing to customers, and payments were typically received via checks or wire transfers. Tracking payments, reconciling accounts, and handling disputes were also cumbersome in this approach. The manual approach can be time-consuming, labor-intensive, and prone to errors, leading to delays in payments and potentially negatively impacting cash flow.
Receivable Automation Software Or AR Automation
Receivable automation software automates many of the manual tasks involved in the AR process. It typically includes features like electronic invoicing, online payment processing, automated reminders and follow-ups, and real-time reporting and analytics. Employing an AR automation solution provides greater visibility into workflows, allowing you to track invoices and payments, and streamline reconciliation. These features can help businesses speed up the payment process, reduce errors, and improve their overall AR performance.
Benefits of Traditional AR Methods
- Involve manual processes such as printing, mailing, and tracking invoices and payments.
- Often rely on paper-based systems and spreadsheets, which can be time-consuming and prone to errors.
- May require additional resources to manage the AR process, including staffing and administrative costs.
- Lack real-time visibility into customer balances and invoice status, making it difficult to monitor and manage the AR process effectively.
- Can result in delayed payments and decreased cash flow.
Benefits of Receivable Automation Software
- Automates the entire AR process, including invoice creation, sending, and follow-up.
- Integrates with accounting software to provide real-time visibility into customer balances, invoice status, and payment history.
- Provides alerts and notifications for overdue invoices, allowing businesses to take quick action.
- Accepts payments using various methods, allowing businesses to receive ACH payments, credit card payments, and bank transfers.
- Reduces errors and increases efficiency, resulting in a faster and more accurate AR process.
- Improves cash flow and reduces the time it takes to receive payments.
What are the drawbacks of Receivable automation software?
There are a few potential drawbacks to Receivable automation software.
First, it cannot be easy to manage payments if your business relies heavily on manual processing.
Second, training employees to get used to the system takes time. The employees may also resist to change which further increases the time to implement this solution.
Finally, mechanical systems can be more expensive than conventional AR methods if you don’t have any computer-based system at all.
Which Type of AR Method is The Best for Your Business?
The choice between traditional AR methods and receivable automation depends on the specific needs and goals of your business. Here are some factors to consider when deciding which method is better for your business:
Volume of Invoices: If your business has a high volume of invoices, receivable automation can help you streamline the invoicing process and reduce the amount of time and effort required to manage your accounts receivable. Automation can also help reduce errors and improve accuracy.
Time Constraints: If your business is short on time or has a small team, receivable automation can help free up staff resources and improve efficiency. Automation can reduce the need for manual data entry and follow-up tasks, allowing staff to focus on other important tasks.
Cash Flow Management: Receivable automation can provide businesses with better visibility into customer account status and help identify potential issues early on. This can help improve cash flow and reduce the likelihood of delinquent payments.
Customer Relationships: If building and maintaining strong customer relationships is a priority for your business, receivable automation can help. Automation can provide better visibility into customer account status, allowing businesses to proactively address issues and provide better customer service.
Conclusion
AR automation software offers numerous advantages over traditional AR methods, such as increased efficiency, accuracy, and cost savings. By automating routine tasks, businesses can streamline their AR processes, reduce errors, and focus on higher-value activities such as collections and customer relationships. Additionally, automation software provides real-time visibility into AR workflows and empowers businesses with analytical data and insights to make data-driven decisions and optimize cash flow. While traditional AR methods may still have a place in certain industries, for most businesses, receivable automation software is the way of the future. By implementing the right solution, businesses can stay ahead of the competition and achieve long-term success.
