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How to Overcome the Top Accounts Receivable Challenges

  • 6 min read

Learn how an AR Manager can tackle some of the most common accounts receivable challenges efficiently & effectively regardless of vertical.

Common AR Challenges And How to Overcome Them

Most accounts receivable (AR) professionals would agree that their roles can be pretty tedious. Because many organizations haven’t fully modernized their approaches to AR, these teams are spending a high volume of hours on low-value tasks. In this blog, we’ll delve into the top challenges most critical for accounts receivable managers, and most importantly, how you can solve them.

Jump to the challenge you're currently facing:

  1. Late payments
  2. Data management
  3. Time management
  4. Customer management
  5. Payment management
  6. Cash management

1. Late payments

The challenge: Making sure the company gets paid on time is the core function of an AR department. When customers pay late, this makes balancing cash and accessing working capital exceptionally difficult. If you have little way of knowing exactly why your customers haven’t paid yet, or why they’ve short paid or taken deductions, then you’ll have difficulty addressing the roadblocks that could be holding up payments from customers who are willing and trying to pay.

The solution: A great place to start is looking at the way you communicate with your customers. In contrast to fielding customers’ questions through phone and email—which can easily be a full-time job in itself—an online portal that lets customers comment on specific invoices and line-item details cuts out this unnecessary back and forth. Your team is then able to answer messages quickly and directly via the portal and never has to search for the context of a particular question.

2. Data management

The challenge: Between ERPs, bank lockboxes, ecommerce sites, and spreadsheets, AR managers require data from multiple sources. But the more places you pull data from, the more time-consuming a process it is and the likelier you are to get stale or inaccurate data.

The solution: The more you can consolidate your data and give your team a single source of truth for all things AR, the better. One way you can facilitate this is by opting for an order-to-cash solution that integrates directly with your ERP. To account for the complexities of your particular ERP instance, make sure you select a vendor that will partner with you throughout the implementation process and post-launch to ensure all of your systems are integrating smoothly.

3. Time management

The challenge: There are better uses for your time than resending invoices, calling customers, or sifting through a sea of emails to track down the status of an invoice. With old-school approaches to AR, teams end up spending much of their effort on manual tasks, which could be redirected towards projects that will actually help move the needle for the business.

The solution: Automating key back-office AR functions like invoice delivery and collections task management saves time and reduces your margin of error, meaning you also spend less time troubleshooting.

4. Customer management

The challenge: Billing and payment are important aspects of the customer experience and AR managers are the face of this part of the journey. Ensuring your customers have a positive experience is particularly important as you navigate the current economic downturn, seeing as a good experience can promote customer retention and even be a competitive differentiator. Traditional approaches to AR tend to be operation-centric rather than customer-centric, meaning teams’ focus is on completing an overwhelming list of day-to-day tasks rather than making sure customers’ needs are met.

The solution: B2B buyers’ expectations are very much informed by their experiences as consumers. Customers are looking for flexibility and convenience in the way they receive invoices and pay you. To deliver on these expectations, you should support a variety of invoice delivery and payment method options and give customers the power to customize their preferences. A self-service customer portal is a great vehicle for this, as it gives customers control of their account 24/7.

5. Payment management

The challenge: Many AR teams are hesitant to lean into digital payments due to concerns around security, compliance, costs, and cash application. Although card payments, for example, are incredibly convenient for buyers, they often only represent a small portion of businesses’ total payment acceptance volume due to high processing fees.

The solution: You can increase your acceptance of digital payments by working with a payment facilitator that is able to provide lower processing costs thanks to volume pricing and interchange optimization (which is achieved by the processor sending more data through with each transaction, so that issuing banks lower their interchange fees and customers get a rate reduction in turn).

6. Cash management

The challenge: For AR teams that still accept a high volume of paper checks, cash management remains a big challenge. Checks can take days or weeks to arrive and often with minimal remittance information, making it difficult to reconcile these payments with open AR. With your cash tied up in these lengthy processes, accessing your working capital becomes an issue—one made even more urgent in a turbulent economy.

The solution: You can unlock cashflow by first moving away from accepting checks in favor of online payments made via a payment portal, which can be processed in real-time and capture remittance data at the time of payment—meaning less time spent matching payment to invoice for your team. For the checks that you do accept—and other payment methods where remittance travels separately such as ACH—you can automate cash application with tools for auto-matching (like portal crawling, inbox scanning, and OCR for instance).

Addressing these core challenges positions you for DSO reduction, better visibility into the status of your AR, and improved relationships with customers. Finding an order-to-cash solution that can deliver on all the recommendations outlined above makes your and your team’s lives much easier.

🚨 Not certain which challenges you're specifically facingor don't see your challenge listed above? Take our six-minute assessment and get a personalized diagnosis of the challenges you face in your accounts receivable process. You’ll get a customized accounts receivable transformation roadmap to learn exactly where you are in your digital AR journey, how you stack up against peers, and how to set your AR team up for success.

Or, read our more recently updated article, 9 Common Problems with Accounts Receivable (and how to Improve Your Processes with Automation) for a more detailed analysis on the biggest challenges finance leaders say are inhibiting their collections processes.

About the author

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Nicole Bennett

Nicole Bennett is the Senior Content Marketing Specialist at Versapay. She is passionate about telling compelling stories that drive real-world value for businesses and is a staunch supporter of the Oxford comma. Before joining Versapay, Nicole held various marketing roles in SaaS, financial services, and higher ed.

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