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3 Best Practices for Harnessing the Power of Accounts Receivable Automation

Published on 6 min read

As businesses work to shore up their cash flow in the face of economic instability, there’s no better time to digitize accounts receivable practices.

In this blog, we cover three best practices—exemplified by real Versapay customers—for companies interested in implementing AR automation.

People in boardroom clapping

With a pandemic-induced recession that’s created a cash crunch, a rapid shift to remote work, and a critical business imperative for digitization, organizations need to modernize their accounts receivable (AR) processes now more than ever.

Businesses face several challenges and opportunities in this area. AR is still largely manual, as 75% of businesses haven’t yet automated their cash application processes according to a recent Institute of Finance and Management (IOFM) survey. AR departments also face increased complexity with more diverse payment options, including plastic and virtual cards, ACH, check, wire, faster or Real-Time Payments, and even mobile wallets.

Payment deposits are often decoupled from remittance data, and it requires too much time and legwork for AR teams to piece together this information and gain true visibility into their organization’s finances.

As businesses achieve their growth goals, payment volumes only increase and it can be difficult for AR teams to manage the increase in complexity without adding headcount.

The risks of not digitizing accounts receivable practices

Outdated AR processes pose financial risks as well. Overdue invoices and manual processes mean it takes longer for companies to access capital. In the aforementioned IOFM survey, 59% of financial leaders said the economic downturn had increased their:

  • Late payments
  • Number of aging balances
  • Percentage of bad debt, and
  • Days sales outstanding (DSO)

Together, all these factors significantly impact organizations’ cash flow, ability to pay employees, and opportunity to invest in new business strategies and technologies.

The time has come for organizations to harness automation to transform their AR. With the right partner, AR transformation isn’t just achievable—it’s scalable.

In this blog, we break down three best practices for taking advantage of AR automation, based on the experiences of Versapay customers.

These businesses used Versapay’s advanced cash application features (previously known as DadePay) to address their cash application challenges, reduce their payment processing costs, and scale their AR operations to drive growth and better financial performance.

Best practice #1: Use automation to reduce costs

When Würth Canada, an industrial supply wholesaler, set an aggressive goal of $270 million in sales by 2025, the company knew it would need to modernize its AR processes to get there.

The company wanted to develop more efficient and cost-effective ways to collect check payments in the field and reconcile customer payments. However, it had to overcome several challenges, including handling payments from a diverse customer base that ranged from small auto repair shops to large enterprises. With 40,000 customers across Canada, Würth Canada also had to figure out how to streamline check collections—the preferred payment method for many of its customers. Many customers either mailed their check payments or delivered them in person, a costly process that also took too much time since sales reps had to mail these payments back to the main office.

To solve these challenges, the wholesaler implemented Versapay’s mobile check deposit and advanced cash application solutions. Their main objective was to eliminate inbound courier costs for customer payments and enable sales reps to more easily collect checks in the field when they met with customers in person.

As a result, the wholesaler unlocked significant cost savings and maximized their customer service. Its AR team now spends 75% less time on AR-related activities. The company collects around 1,000 checks per month at an average cost of $13 (CAD), which has saved it $10,000 (CAD) to $15,000 (CAD) a month in inbound courier fees alone. The company also has saved 1.5 salaries by not requiring additional staff, which has completely offset the cost of its investment in AR automation solutions.

The wholesaler’s experience demonstrates the significant ROI companies can reap by making a strategic investment in technology modernization. By automating its AR processes, the company is now better positioned to achieve its sales goals and long-term growth objectives.

Due to the automation in [Versapay], we’ve been able to reduce 16 hours of daily work to about four hours.
Michael Malone, Credit Manager/Company Compliance Officer, Würth Canada

Best practice #2: Empower customers to pay on their own terms

Cash flow management is an ongoing challenge for many businesses. This was no different for Haas Door, a family-owned garage door manufacturer in the Midwest. Its customers mostly made check payments, and a small number paid via ACH, but the company struggled with manual cash application and reconciliation processes.

The company sought to automate its AR processes to increase payment volume and reduce days sales outstanding. It implemented a custom online invoicing portal, along with Versapay’s Advanced Cash Application solution. As a result, the Haas Door has been able to give customers more flexible payment options such as electronic payments and the ability to schedule payments.

This has helped out the company’s AR team, as they’ve been able to integrate these payments into their AR workflow to perform seamless invoice matching.

As a result of these changes, ACH payments now make up 70% of the company’s payments. The increase in self-transacted payments means the company has been able to maintain the same staff levels despite its payment volume increasing significantly. Staff now can spend more time engaging in meaningful conversations with customers and building those relationships, which is a boon for a small business.

Not only has automation allowed the company to deploy its resources more effectively, but it has also helped improve the customer payment experience.

We feel strongly that [Versapay] helps us maintain a certain image—that we are a professional and efficient company to do business with. We are serious about making it easy to do business with us.
Arlan Yoder, Vice President of Finance, Haas Door Company

Best practice #3: Embrace mobile to improve customer experience and employee productivity

One of the largest independent food distributors in the U.S. has a large, complex financial operation. The company generates roughly 7.3 million invoices a year and receives about 3.1 million payments annually in both U.S. and Canadian dollars.

With such multi-faceted financial operations, the distributor sought to consolidate and scale its AR processes, improve processing accuracy, reduce its processing costs, and find a way to allow drivers and sales reps to collect mobile payments in the field. The AR team was also in need of more comprehensive analytics to better track performance. The company turned to DadePay (since acquired by Versapay) to access all these capabilities.

The food distributor has particularly benefited from Versapay’s mobile payment capture capabilities. Its workforce includes more than 5,000 sales reps and drivers who collect payments via cash or check at customers’ place of business in the U.S. and Canada. Some of these payments previously didn’t include remittance information when employees collected them on-site. The cost, time, and business risks of transporting these payments only created more inefficiencies, along with additional fees related to moving and reconciling these payments.

Since implementing Versapay, the distributor’s customers can better track cash payments, support multiple currencies, and free its drivers and sales reps to spend more time engaging with customers. The company also has been able to better control its deposit, application, and reconciliation activities, reduce payment errors, and make more timely bank deposits. It has also reduced its overall cost to serve by 29%.

The results demonstrate that companies that better align their payments experience with their operations can simultaneously increase their agility and deliver better customer service.

The ultimate advantage of AR automation

Modernizing AR is an ongoing process. Your company can lay the foundation for AR automation by working with a technology partner with diverse industry experience and advanced, AI-driven technology for cash application. Over time, you can build on that foundation and onboard more capabilities—from remote payment capture and mobile AR to an online customer portal—to transform your processes.

Versapay’s advanced cash application features can help you reduce time spent on AR by 75% and significantly decrease costs. These numbers only tell part of the story, however. For any organization, the long-term value of implementing AR automation, transforming your payments experience, and improving your customer relationships is truly priceless.

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