The Buyer's Guide to Selecting Accounts Receivable Automation Software

The global pandemic has made it more clear to businesses than ever before that cash is king.

Unfortunately, with the shift to remote work, the all-important tasks of managing cash flow and optimizing working capital have become exceptionally challenging. Legacy accounting systems are ill-suited for maintaining business continuity when everyone is working from home. They don’t provide accounts receivable (AR) professionals with the transparency, flexibility, and visibility into collections and cash management activities they need to ensure the business remains competitive and emerges through the economic downturn stronger than before.

Finance teams now realize this and are actively taking steps to modernize their AR processes, with nearly 60% of businesses surveyed by the International Data Corportation (IDC) planning to use a SaaS solution for accounts receivable in the next 12 months.

When choosing the best accounts receivable automation software for your business, it’s important you select a vendor that’s going to be the best partner for your organization, helping you deliver on your key requirements both now and as you grow. For B2B buyers researching their options, the 2020-2021 IDC MarketScape for Worldwide SaaS and Cloud-Enabled AR Automation Applications is an invaluable resource.

In this report, IDC identifies common challenges AR teams face when automation is not built into their processes along with advice for evaluating accounts receivable automation software. In this blog, we’ll discuss what these challenges may look like, break down some of IDC’s top recommendations, and offer our unique perspective on how to best narrow down your search.

We've even provided a handy downloadable checklist to help you narrow down your choice of accounts receivable automation software vendors.

For more insights to help guide your investigation and selection of AR automation software, you can access a free excerpt of the IDC MarketScape for Worldwide SaaS and Cloud-Enabled Midmarket Accounts Receivable Automation Software here.

The top 5 challenges faced by AR teams with zero automation

1. Cash management

IDC cites cash management—which involves managing remittance information, applying cash, and posting payments—as the most time-consuming function for AR teams. Remittance data can come in a variety of file formats and must often be manually matched to its corresponding payment as the dollars and data don’t always travel together.

How many hours per week do you spend synchronizing remittance information and reconciling it with open accounts receivable? Probably too many.

When AR processes are digitized and automated, payments can be automatically reconciled and applied to their correct invoices.

2. Trade promotions management

Discounts are great for generating sales and incentivizing early payments, but if not communicated accurately—both to the customer and internally—they can cause headaches for your AR team. For instance, a sales rep may have promised a discount during the sales process that didn’t get communicated to Finance. So now that customer’s invoice is for the wrong amount and it looks like they’ve short paid when they haven’t.

Investigating and resolving disputes around unexpected short pays is one of the most time-consuming tasks for AR professionals, particularly when managed completely manually.

The right AR automation software can circumvent these types of issues entirely by providing customers and internal teams with complete visibility and transparency into what was agreed and what is owed, giving your team a single source of truth for all open receivables.

3. Credit management

Businesses want to ensure they’re extending credit to the right people. Without convenient visibility into your customers’ payment history and behavior, reviewing and evaluating their credit worthiness can be an arduous task.

When you can point to certain trends in customers’ payment behavior—are they usually a few days late on payment but always pay the full amount?—you have a better idea of which accounts you can be more lenient with and which accounts you should double down on.

4. Payments

Without any automation in place, sending invoices and processing payments can eat up much of AR departments’ time, especially if still reliant on paper processes. PYMNTS.com found that these are the functions AR teams assign the most resources to, with 25% and 23% of staff dedicated to supporting invoicing and managing payments, respectively.

AR automation software does away with old-school paper processes by empowering AR teams to send invoices and accept payments digitally. By embracing online invoicing and payments, both customers and suppliers benefit from increased efficiency, convenience, and cost reduction.

5. Collections management

No one wants to chase customers to get paid. Traditional collections—focused on phoning customers to remind them to pay and sending multiple dunning letters—can be exhausting work that takes your team away from high-value initiatives and potentially sours customer relationships.

Rather than using resources to hound customers for payments, work smarter—not harder—by automating your collections efforts so you're only reaching out to the most at-risk accounts.

These are all challenges that create a significant strain on your team, hurting their efficiency and the speed at which your business can access cash as a result. When researching AR software, the ability to automate these otherwise time-intensive tasks should be core features to look for.

Now let’s look at how best to evaluate automated accounts receivable software.

Step 1: Before you start your research

Your research will be made much easier if before firing up Google, you take some time to connect with the team members whose work would be directly impacted by an AR automation solution to learn what their main challenges are.

You’ll also want to take stock of any existing solutions your colleagues use so that you’re not duplicating what’s already in place, and if those existing systems aren’t meeting the team’s needs, find out why.

Some questions you can ask at this stage are:

• What are the issues we would like to resolve and what are the risks of not doing anything?
• Are these issues due to a gap in technology, knowledge and/or headcount?
• Which internal stakeholders should we include in the evaluation processes?

Step 2: During your research

A principal factor in determining which vendor you ultimately choose should be how well they align with your business’ unique goals and values. If boosting customer satisfaction is important to you—which is greatly impacted by your interactions with customers when managing invoices, collections, and payments—does the vendor prioritize customer experience?

Some questions you can ask at this stage are:

• Does the vendor have experience with my type of product, service, industry, and company size?
• Does the vendor understand the regulations that will impact my business?
• What is the vendor’s strategic investment outlook for the next three to five years?
• Can the system integrate with my company’s other IT systems and those of my partners?

Step 3: How you’ll ensure your success after implementation

It’s equally important to consider what your partnership with your chosen vendor will look like post-launch. A solution that works out-of-the-box is great, but if your needs and existing systems are complex, you’ll want to work with someone who can support the customization you need to get the most value out of your AR solution.

If your accounts receivable automation software provides customers with their own payment portal, you’ll want to work out a plan to incentivize them to adopt it. After all, what good is a shiny new system if no one is using it? You’ll want a partner with the expertise to guide you in delivering a smooth experience and simple learning curve to customers.

Some questions you can ask in preparation for this stage are:

• Does the vendor have a strategy to encourage rapid adoption among employees and customers?
• Does the vendor provide the right amount of training for employees to master the new features with the system?
• What support can the vendor offer us to ensure our ongoing success post-implementation?

Now that you have a clearer idea of what you'll need to do before, during, and after your research, you're ready to get started. To make this process easier for you, we've created a downloadable checklist with all the criteria you'd need to find the right accounts receivable automation software for your business.