Finance professionals have been trying to speed up accounts receivables for decades. But with recent pandemic-related economic struggles, organizations of all sizes are even more inclined to expedite receipt of outstanding payments.
“The COVID pandemic was a crisis in which CFOs, treasurers and other finance professionals realized, due to a remote-based work environment, they needed to digitize for paperless, contactless processing in a hurry” says Seth Marlowe, Head of Treasury Strategy and Product Innovation, Synovus.
Since the outset of the pandemic, 83% of B2B firms implemented changes to their AR processes. More than 63% shifted away from physical invoices and 66.5% began receiving digital payments.1 More than seven in 10 described their companies as more digitally agile now than before the pandemic.2
CEOs see the value in this digital acceleration, with goals of modifying business models, improving innovation, controlling costs and improving cash flow in view.3 As many as 70% of businesses intend to upgrade their AR technology in the next three years.4 A little over 67% expect that automation will result in faster AR processes.5
Accelerated AR means more available cash.
For organizations seeking growth and flexibility, digital acceleration of AR is a must. Receiving payments faster offers broader opportunities for research, expansion, investment, and overall business health. But improving the cash conversion cycle isn’t always straightforward, and finance professionals must often tackle legacy systems and procedures to move forward.
For example, many businesses cling to manual processes. Ninety-two percent report using at least some spreadsheets to support credit management, and 90% report using at least some spreadsheets to support collections.6
These types of inefficiencies slow the AR process. Companies relying on paper invoices spend an inordinate amount of time troubleshooting, and a lack of data visibility hinders cash and customer management. On average, firms that rely on manual processes take 67% more time to follow up on overdue payments than companies that use automated AR processes.7 Manual processes also waste employee time that could be better spent on other tasks that move the business forward.
Manual processing also increases the opportunity for errors, which is costly. At least 30% of company revenue is lost to incorrect data. Additionally, it costs $10 to correct data in batch form and $100 per record if no action is taken.8
Demand for faster payments is driving automation and more options.
“Whether it’s pushing payments through card rails, PayPal or Zelle — even NACHA’s announcement on increased same-day ACH limits — the realities of faster payments and receivables posting are here,” says Marlowe.
Think about how personal payments have changed in recent years. Tap-to-pay technology is common. Mobile peer-to-peer payment services are ubiquitous — Venmo alone handled $159 billion in payment volume for 52 billion users in 2020.9
Clearly, consumers have made the leap to digital payments, but what about businesses?
A treasury survey revealed where many companies stand as it relates to accounts receivable
processing. It might be surprising that 42% of B2B payments were conducted via check in 2019. But nearly 60% of companies that pay using checks planned to convert their B2B payments from checks to electronic after 2020.10
So, organizations are adapting as benefits of AR automation, enterprise resource planning and straight-through processing (STP) become increasingly evident.
Faster collections According to a payments survey, the average days sales outstanding (DSO) for B2Bs is 42.6. This number rises to 52 days — 24% higher than a company with AR automation. Businesses with a moderate degree of automation achieve DSOs of 40 days, which is 23% lower than those still using manual systems.
Fewer follow-up delays Almost 15% of a typical company’s receivables are late, according to the same payments
survey. Companies with manual processes typically don’t follow up until 21-27 days after
payments are due, which delays payments and requires more follow-up time. Companies
with automated methods see an average reduction of 25% in follow-up delays.
Increased account visibility
Automating AR functions delivers more insight into payment transactions. It also provides information about customers — who’s paying and when, and who needs different credit terms — and makes forecasting and budgeting simpler.
Less human error
Manually entering payment information introduces the risk of error, as well as the potential for fraud. Automated solutions securely send critical remittance data with each digital payment, reducing or eliminating these risks.
Better customer experience
Business relationships take years to build. There’s a level of reputational risk that comes with placing a credit hold on customers because your receivables process is days behind actual cash receipts. A payment that is seamless and accurate offers a positive customer experience, enhances retention, and may even become a competitive advantage.
An integrated solution accelerates and optimizes the entire receivables process.
If you’re considering an AR solution look for a few key features, among others such as advanced reporting, alerts, and automated posting.
You’ll want to capture all types of payments, from both paper and electronic sources, and be able to aggregate them regardless of location, type, or channel. This reduces exceptions, eliminates unnecessary deductions, cuts labor costs, and better manages payment relationships.
An automated solution brings all payment data into one central repository. A dashboard with drill-down capabilities provides visibility into the entire receivables lifecycle and allows treasury professionals to make better, real-time business decisions.
Artificial intelligence (AI)
AI uses machine learning and sophisticated algorithms to reassociate invoices and electronically match payments to remittance. This results in greater STP and cost reductions – what Marlowe calls “bringing the dollars and the data back together.” Increasing STP quickens the application of cash to the balance sheet.
Tap into the power of AR as a growth driver.
Now’s the time to fully embrace efficient AR management. Expediting AR via automation will:
Lower your DSO.
Increase working capital and reduce the need for costly loans.
Improve team efficiencies and produce better, timelier data for cash and credit management.
Contact Synovus Treasury and Payment Solutions, your Treasury Consultant, or Relationship
Manager to learn how we can help you better manage your business’s AR for improved
cash flow and liquidity.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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