It is common knowledge that in business, whether big or small, cash flow management is the most essential factor in the continued survival of your organization. The problem arises when the company grows, it is very likely to get the sales locked up in Accounts Receivables. In the hope of achieving more sales, businesses often extend credit to their clients beyond their agreed time, and before they know it, they are in the middle of a cash crunch. The improper management of accounts receivables is one of the leading reasons for cash flow shortages.
While accounts receivable accounting is still being dominated by manual paper-based accounts receivable processes, these traditional procedures have drawbacks that hold down the company’s liquidity and working capital. In a study made by Novantas, 25% of company revenues are lost due to poor billing and ineffective accounts receivable practices. Here are some of the disadvantages of using manual accounts receivable processes:
- Long Overdue Accounts
- Big Overhead Costs
- Higher Past Due Accounts
- Poor And Inefficient Sales Analytics
The Great Alternative To Manual A/R Processes
When customers are paying later than expected, that’s when businesses start to suffer. There would be less money to pay for suppliers and the staff. In fact, it is one of the common causes of bankruptcy. It’s important to set up an accounts receivable system flowchart that clearly defines and maximizes the chances of getting paid by debtors and customers in a timely manner.
Fortunately, technology is revolutionizing how we do our accounts receivables processes. With the help of accounts receivable software for business, accounting tasks has never been easier than in the past. The accounts receivable software market is offering varied types of solutions for different kinds of businesses.
Some are focused on helping small businesses, where the accounting tasks can be done by the owner itself, using self-employment strategies instead of hiring an accountant to do the accounting tasks for them. Some are designed for large companies, with more complex functions and advanced features.
4 Outstanding Features Of A Good Accounts Receivables Software
As mentioned earlier, accounts receivable software differ depending on the company size, the package size of the software, and what the goal is in using the software. Basically, accounts receivable software was designed to automate the collection of overdue accounts, but with the advancing technology, software developers have offered more than that, including other functions like mobile app for invoicing, online payments, and more. Here are some features that every A/R software should have:
Online Bill Payments
When customers call in to read their credit card numbers or send in a check, it would be much more convenient if the process can be done through self-service. The ideal accounts receivable software should offer an online bill pay function that lets customers open a payment portal to check at open invoices and allow them to pay immediately.
- Automated Email Management
The time and effort spent by a collector on sending emails to customers reminding them to settle their bill is quite taxing and lengthy, so an automated email feature is a welcome addition to any accounts receivable software. Create the email template, set-up the recipients of the email, and the software will do the rest.
- Document Management
There are so many documents that need to be handled in accounts receivables accounting. There are statements, purchase orders, invoices and other documents that customers may want to see just to consider paying their invoices. A software that can access those documents and attach them to emails would surely improve payment times from customers.
- Invoice Disputes
Invoice disputes are one of the common causes of why an invoice is not being paid on time. If the invoice is disputed by customers, there is a lesser chance of collecting the payment in full. A software that properly escalates the dispute to the right person increases the chance of faster resolution. Another useful feature is the analysis of disputes, telling you the most common dispute in order to devise ways to address the issue.
- Phone Call Management
Phone calls are important in making a customer take action and settle payments. An accounts receivable software that incorporate a phone call feature allows businesses to transcribe and record phone conversations with customers. Another great feature is the automated voice recorder where customers can reach to find out their outstanding balance and open invoices.
6 Benefits That Technology Brings To Accounts Receivable Software
- Improved Cash Flow Management
Every organization has bills to settle and staff to pay. So if your inefficient accounts receivable process won’t get you paid in a timely manner, this will inevitably result in the organization having cash liquidity issues, where the company owes more than what is coming in. To have a good picture of your cash position accounts receivable software allows you to remind customers to pay, identification of invoices early in the accounting process, and provide easy payment channels. There are also A/R software applications that create statistical cash forecast based on previous payment history.
- Better Control Over Cash And Working Capital
When businesses have improved their A/R performance and improved their cash position, it would be easier to manage and enhance their working capital. Through the help of accounts receivable software, they can acquire the insights they need to make investment decisions like equipment purchases, facility expansion, staff recruitment, and other investments to further grow the business.
- Improved Communication With Customers
It would be easier for businesses to communicate with customers through A/R software. From a single screen, users can easily review account information, attach invoices, send emails, and make phone calls. Another advantage is that all communications are stored for future analysis and review.
- Enriched Customer Service
Most often, customers really want to pay on time and its the company’s fault that they pay late. Why? It’s either the invoice was not sent early enough for them to make a payment on time, or there is something wrong with the invoice and they wouldn’t pay until the issue is resolved. With accounts receivable management software, companies can automate the delivery of invoices to customers, provide alerts when there is a problem with the invoices, and offers everything a business needs to better serve the customers, and improving the relationship so that they will continue doing business.
- Lower Administrative Costs
In this digital age, mailing of statements and invoices or even sending it through fax machines are considered antiquated. A/R software applications are specifically designed to automate most activities that don’t require human intervention. Businesses can eliminate the cost of paying someone to type, print, fold, and mail envelopes through automation of all communication for all customers. They can likewise save in paper, envelopes, toner, postage, and most importantly, lost time.
- Enhanced Sales To Payment Cycle
Getting paid as soon as possible on the products you provide is one of the keys to the success of any business. With advanced accounts receivable software in place, invoices can be sent automatically to customers, and a customer portal and bill pay function gives them the option to make payments sooner than later.
The Time Is Now
For businesses thinking of migrating their manual accounts receivable accounting in favor of accounts receivable software, there is no better time than now. Automating your accounts receivables sooner than later will give your company a competitive edge in attracting and appealing to modern customers. Plus, maximizing your cash management is a sound business decision that should never be overlooked.