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5 reasons consistency in your accounts receivable processes matters for your bottom line

6 minutes read
Published on 15-02-2024

Accounts receivable departments are facing a crisis they aren’t even aware of. 

You might be aware that the quality of your data could be better. You might also understand that your reporting is lacking and your processes aren’t transparent. 

But many in your position might not realize that the processes you think of as standard are the root cause of these problems – and that they’re standing in the way of your working capital optimization.  

Fragmented processes and disparate systems are at the root of all common accounts receivable challenges

Much of the work inherent to managing AR processes is both routine and predictable, whether that be updating customer accounts, creating and submitting invoices, recording and applying payments, and chasing overdue invoices.  

However, in many organizations, the solutions and workflows you use to manage these processes are actually an obstacle to performing them effectively and efficiently. 

Let’s take a look at how each of AR’s most common pain points can be traced back to a lack of integration in your technology, workflows, and data. And how each of these contributes to a lack of consistency that undermines the effective collection of cash, and thus working capital optimization, throughout your organization. 

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1. Processes take too long to complete due to excessive redundancy and manual input 

A great deal of the work that goes into traditional AR processes is routine and mechanical and can be easily automated with the application of the right technologies. Think of things like keeping your customer accounts up to date, creating and posting invoices, recording and applying payments, and various aspects of the collections process for overdue invoices (like keeping track of deadlines and writing reminders).  

An excess of mechanical labour in AR tasks often stems directly from a lack of formal processes and disconnected systems that require your teams to copy data across from one system to another, create each new invoices by hand, manually process customer remittance advices in order to apply cash, and keep track of multiple different spreadsheets to drive a given workflow forward.  

2. Frequent errors delay cash application and negatively impact customer relationships 

Irregular processes and excess manual work contribute to an increase in errors, as does siloed data and inaccurate or outdated customer records. 

Errors across invoicing, lost bills, and miscommunication result in more late payments and jeopardize customer relationships – with most businesses reporting that they’ve lost repeat business due to errors in the AR process. 

This means that minimizing errors is key to both the profitability of your AR process, and to your organization’s working capital optimization. 

3. Outdated or incomplete data makes reporting harder than it needs to be 

Disconnected processes and systems lead to patchy data generation and capture. As a result, gathering all the information needed to produce reports can be a lengthy process, and even discourage reporting with the level of frequency and accuracy needed to allow for high-quality strategic decision-making. 

The data question is therefore just as much about creating modern, integrated workflows as it is about effectively leveraging data. Especially if the data you have available to you is incomplete, out of date, and potentially erroneous. 

4. A lack of transparency prevents improvements 

All of these issues contribute to a lack of overall transparency across your AR processes. Transparency isn’t just important to ensure regulatory compliance, but to ensure that your senior leadership and teams understand your processes from beginning to end – and can thus identify opportunities for improvement and greater efficiency. 

5. Standardization and consistency improve your bottom line and cashflow 

The status quo operating environment for many AR teams has to change if you want to maintain reliable and transparent income streams for your business. And that means unifying and automating your processes to create streamlined and standardized ways of working. 

An integrated approach to handling your AR processes helps your organization to create a uniform approach to every part of the accounts receivable cycle that simplifies the way you work and supports working capital optimization: standardizing everything from the way you generate invoices, handle the process of following up on overdue invoices (including automating reminders and escalations with reference to your original payment terms), creating a centralized data repository for all payments and customer accounts, and improving your cash application by automatically matching incoming payments with their appropriate invoices and accounts. 

All of this not only contributes to your bottom line, cashflow, and overall financial health: it can help to solve many of your AR teams’ day-to-day headaches by eliminating their source: disconnected systems and processes that create unnecessary bottlenecks and opportunities for error. 

Ready to learn more? 

Serrala’s solutions are designed to create a coherent, end-to-end ecosystem for your invoice-to-cash processes that simplifies your accounting processes and allows for full working capital optimization. To learn more about how we can help you revolutionize your approach to accounts receivable – and how our solutions can streamline and automate every part of the process for greater efficiency, transparency, and decision velocity, check out our resources or book a demo.   

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