Many AR departments are still using inefficient, manual receivables and payment processing systems. Sihl decided it needed a change, and reaped the benefits of accounts receivable automation.
While accounts receivable (AR) departments are looking into automation solutions for their processes, they have a long way to go until they achieve end-to-end processing. In the report The Power of AR Automation, Paystream Advisors points out that many AR departments are still using inefficient, manual receivables and payment processing systems that are expensive, unreliable, and overly complex.
The report maintains, however, that AR automation is now within reach for most organizations. Cloudbased AR automation solutions reduce costs and build an easily traversed bridge between one company’s AR and another’s AP. The many benefits of AR automation, according to Paystream Advisors and other researchers, include:
- Accelerated cash flow;
- Reduced days sales outstanding (DSO);
- Elimination of printing and postage costs associated with paperbased billing;
- Streamlined management of invoice disputes;
- More capture of early payment discounts for the buyer;
- Reduced number of phone calls between AR and AP regarding invoice and payment status;
- Improved service for the supplier’s customers;
- Faster approval of invoices; and
- Additional savings from process efficiency gains
How the Old Process Worked
It was with all these benefits in mind that Sihl Inc. (Coventry, RI) recently implemented a cloudbased invoicing, accounts receivable management, and payment platform. Sihl produces digital print substrates including a vast range of films, papers, and specialty materials for inkjet, solvent, UV curable, latex and toner receptive wide format plotters, printers, and presses. Before implementing the AR automation platform, invoice processing was highly manual, says Jennifer Tavino, Senior Accountant at Sihl, who is responsible for accounts receivable.
“Our old system would generate invoices daily using a program that would take information from our shipping department and populate a Crystal Reports ,” she explains. “The invoices containing the information from the shipping department would be sent to our printer and automatically be printed out overnight.”
“Every morning I would come into work, collect all the printouts from the printer, stuff the paper invoices into envelopes, and mail them through regular postal mail,” Tavino continues. “I handled up to 50 invoices per day this way. As the accounting manager, I am solely responsible for accounts receivable. We had a part-time AR person who helped out, but she left right before we implemented the ARC system from Versapay.”
The manual process was not only cumbersome for Tavino, it was less than desirable for customers. “Many of our customers were requesting that we send invoices to them electronically,” she acknowledges. “However, we simply didn’t have any good way to accommodate their requests. The only way we could do it was to scan the printed version of the invoices into a PDF and then attach the PDFs to emails and send them that way, but that was time consuming. With so many of our customers pushing for einvoices, we knew that in the interest of customer service and keeping our customers happy, we really needed to find a way to support their requests.”
The slow-as-molasses manual process was also causing delays that negatively impacted AR’s ability to maintain a healthy cash flow. “If customers did not receive an invoice because it was ‘lost in the mail’ and called us to get a reprint, we’d have to go through a major process to get the reprint to them,” Tavino says. “It could take up to two weeks from the time the invoice was printed and mailed to the time the customer received it. Consequently, it would often take us a long time to get paid.”
Problems with the accounting system only added to the challenges AR was experiencing. “We had tried to get our accounting system to email invoices but we couldn’t get the features to work,” Tavino says. “We realized it was kind of a ‘nobrainer’ to bring our accounts receivable capabilities into the twentyfirst century with a secure, cloudbased AR automation solution.”
Sihl started the ball rolling on AR automation three years ago by reaching out to contacts at its current accounting software vendor . “We asked them if they partnered with any companies that had the kind of features we were looking for,” Tavino says. “We also did online research and looked at the major players in the marketplace to see what they would provide. We came up with five or six companies that offered features that were very similar to what we were looking to implement. We reached out to them and interviewed them. We had quite a few conversations in which we discussed our needs, and we decided to go with Versapay,” Tavino says.
The ARC system pulls information from the shipping department to create invoices, she explains. “We use the same file format as we used to but instead of the information being sent to Crystal Reports and then printed out manually, it is sent to Versapay. This all happens behind the scenes; it’s just a simple transfer of information. The system then generates reports that are sent electronically to customers.”
Questions to Ask a Prospective Automation Solution Provider
- According to Versapay’s John McLeod, AR people should ask the following questions when evaluating a potential AR automation solution provider.
- How will you ensure that you understand our business and our specific needs?
- How do you manage integrations with ERP and accounting systems?
- Do you have expertise on your staff to handle integrations?
- With which ERP vendors have you already developed a connector?
- Do you have an integrated payments component within the solution?
- Can credit cards be accepted within the solution?
- Is your solution compliant with PCI (Payment Card Industry Data Security Standards) Level 1?
- How do you drive end-customer adoption of the AR automation platform?
- Do you require a minimum term on the contract?
- How do you manage and deliver a hassle-free integration?
- Do you have customers we can speak with about their experience using your platform?
- How intuitive is your interface for both the supplier users as well as the end customer users?
- How does your system support collaboration between us as the supplier and our customers?
- Will our invoices look similar on the site?
- Can your platform handle short pays?
- Can you provide automated notifications?
- Do you provide analytics, and if so, are they at the customer level? Division/department level? Consolidated customer base level?
“Of course there could be many more questions an AR manager might want to ask, particularly at the detailed functional level, such as those at the bottom of the list,” McLeod points out. “But these questions represent a good start.”
Steps to Success
Tavino explains that the following steps helped Sihl achieve a successful implementation:
1. Make sure all invoice information is accurate and up-to-date.
Before implementing AR automation, it is always critical to go through all the customer information in your existing records to make sure it is complete, accurate, and current.“Before we implemented ARC, the customer contact information in our accounting system was not all up-to-date,” Tavino acknowledges. “We went through all of our customer information and got all our records up to date before we automated. We had to make sure we had correct email addresses for all our customers, since we would be needing them to create the contacts in the system.”
2. Create invoices that will look familiar to your customers.
Even if your customers have been chomping at the bit for einvoices, you still want to make sure the new invoice delivery method is comfortable and familiar. That’s why it’s important to work with your provider to come up with an invoice that won’t throw your customers for a loop,” she says. “Our new provider took our invoices and set up the e-invoices in their system to look exactly like our traditional invoices,” Tavino says. “This was very helpful.”
3. Prepare customers.
To prepare customers for the new way invoices and payments would be processed, Sihl sent them special notifications. “Versapay gave us a customer notification template that we could alter as we needed for our company,” Tavino explains. “Using this template, we sent a notification to each of our customers via email as well as in a marketing blast. We also sent the same letter out with customer statements at end of first month we were live with the new system. We wanted to cover all the bases, so we printed out statements and sent them in regular postal mail even to those customers who could get their statements online.”
4. Test the system with a group customers and then roll it out on a larger scale.
“We reached out to a group of customers and found half a dozen customers who were willing to test the system with us,” Tavino says. “We did the initial go live with this group of customers.” “Everything went great, and by the end of the week we had all of our major customers on board,” she says. “We are still in the process of bringing some of our less frequent customers onto the system.”
Sihl has achieved its major goal in implementing the ARC system and has already experienced a very high rate of adoption of the new platform. “We are now getting invoices to our customers in a much more efficient manner and keeping up with the times,” Tavino reports. “We have also reduced our average days to receive payment significantly because we’re not waiting so long for invoices to get to customers and for payments to get back to us, which is fantastic for our cash flow,” she adds.
“Automating AR makes your life so much easier. It has saved time and money in terms of paper and postage. It’s a wonderful thing to be able to get invoices to your customers without having to do anything,” she says. “Now that I’m not stuffing envelopes all the time, I have much more time to do my accounting job, analyze financial statements, and helping other people with their accounting tasks.”
Customer satisfaction has increased, too. “Our customers love getting their invoices electronically. I have not gotten any negative feedback from customers at all. The process is much more streamlined and efficient for them,” Tavino points out. “It’s great to have customers be able to go right into the system themselves and simply click on a link to get copies of their invoices.” Customers can log onto the system whenever they like to check their invoices and their current aging and make payments.
Any time a company implements a new system—whether in accounts receivable, accounts payable, or another functional area—it invariably identifies needs that were not originally considered. That’s why it’s so important to make sure up front that a provider will be willing and able to add new capabilities to the system as additional needs arise.
“There were a few functions we did not get when we initially implemented the platform,” Tavino says. “I’ve been working with Versapay to come up with a way to make some additional capabilities possible for us. For example, there are prepayments. We want to do prepayments via credit cards through the provider’s secure environment. We have a handful of ‘cash in advance’ customers, so we need to receive their payments before we invoice them. We have been delighted at how our requests are being accommodated.”
Originally published February 1, 2016 by The Accounts Receivable Network