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Don’t Forget the Other Side of the Story: Accounts Receivable Automation

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By: AvidXchange

May 27, 2015

This is a guest post from our friends at e2b teknologies, the publishers of Anytime Collect accounts receivable management softwareanytime_collect

Throughout the month of May, AvidXchange has been schooling you on how to convince your CFO it’s time to automate your payables, and they’ve made some great points! For example, by automating AP you can reduce inefficiencies, eliminate unnecessary costs, and drive future growth. But there are two sides to every story and your general ledger just so happens to have two sides, too! We’re here to chime in on automating the other side of it, receivables management, which carries identical benefits.

Just like in AP, manual processes in your accounts receivable department create major inefficiencies and excessive overhead which is wreaking havoc on your cash flow, increasing bad debt write-offs, and keeping your company from accessing the cash it needs to support growth goals.

Once you’ve convinced your CFO to automate payables, here are a few reasons we think they’re going to want to automate receivables, too:

Industry research from Paystream Advisors found that organizations who automate A/R see benefits such as:

  • 10 to 20 percent reductions in daily sales outstanding (DSO)
  • 25 percent reductions in past due receivables
  • 15 to 25 percent reductions in bad debt reserves
  • ROI in as little as 2 months. (try this ROI calculator to see how much you’ll save)

Statistics are great, but your CFO is going to want to know what exactly your organization stands to gain by automating accounts receivable, so here is how those statistics play out in the real world:

15-20% reduction in bad debt: The study found that the average company will write off 4% of A/R as bad debt. Let’s say you have a 10 million dollar company — that is $400,000 every year that you’re losing! Above we said companies see a 10-20% reduction in bad debt through automation, but even if you saw even less improvement (say, 10%) you’re still looking at saving $40,000 each year that you can put back into the company!

10-20% reduction in days sales outstanding: Did you know that the average credit terms across industries are 28 days — but the average DSO is 61 days? That’s more than double the agreed upon terms! So if you followed the averages outlined above and lower that DSO by 10-20% you are looking at getting paid roughly 6-12 days faster! That means accessing cash anywhere from one to two weeks faster, or better!

How does automation lead to such results? By putting your most time-consuming A/R management activities on auto-pilot and centralizing all of the related information into one single system, you can eliminate time wasted on manual processes such as updating spreadsheets, correcting data entry errors, sorting through aging reports, and prioritizing your activities. Instead, collectors can focus on value-added activities that drive results and timely payment, such as talking with customers about payment, settling disputes, and growing relationships.

This chart from the Paystream Advisors study we mentioned above shows you exactly what we’re talking about. It is a great tool to really illustrate to your CFO how automation can help collectors become more productive and collect cash faster than ever before:

Paystream_Traditional_vs_Automated

Are you ready to learn more about building a case for accounts receivable automation? Visit our resource center where you can learn everything you need to know about A/R management software, read case studies, pick up accounts receivable best practices, watch product demonstrations, and more. Click here to visit the resource center and get started today.

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AvidXchange

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