—
In this blog, you will learn what AR automation, which tasks can be automated is and the advantages of AR automation. The process is defined, and a way to automate and optimize it step by step is described, appropriate tools and KPIs to be followed, possible mistakes, growing influence of AI, and differences between automated and outsourced account receivable are analysed.
The manual approach to invoicing will lead to delays, longer DSO and cash-flow issues. AR automation decreases the manual efforts required for the process of invoicing, tracking, reconciliation and payments in the accounting software and payment system.
What is Accounts Receivable Automation?
Manual AR:Â Invoice, email, wait, follow up, payment, reconcile – all done manually.
Automated AR:Â Invoice, automatic delivery, reminder, payment, matching, reconciliation – software takes care of repetitive tasks.
What are some of the tasks in Accounts Receivable that can be automated?
- Customer Onboarding – Recording the billing details correctly at setup.
- Invoice creation – creation of invoices from sales and/or contract data.
- Automatic invoice delivery – emails or portals are sent out automatically as soon as the invoice is sent out.
- Payment reminders – generating follow-up reminders as deadlines for payments approach.
- Online payments – Allowing customers to pay online with their electronic wallets or credit cards.
- Payment matching – automatically matching payments to the correct invoice
- Collections – marking late payments & initiating collection procedures
- Reconciliation – automatically reconciling payments with bank statements
- AR Reporting – Automatically create reports of current receivables
What are the advantages of Accounts Receivable Automation?
- Reminders and online are faster payments, which shorten payment cycles.
- Lower administrative tasks – reduced manual entry and follow-up tasks
- Less manual errors – errors are reduced by automation of matching
- Improved customer experience – details about what needs to be paid and when
- Better customer experience – simpler looking invoice and payment methods
- More regular collections – follow-ups take place at regular intervals
- Better AR reporting – accurate reports without manual compilation
AR Automation for Real Estate & Property Management
Accounts receivable automation can be particularly useful for businesses managing recurring rent, tenant payments, owner charges, and other property-related transactions. Real estate and property management bookkeeping services can combine accounting expertise with technology to help manage receivables, reconciliations, financial reporting, and ongoing bookkeeping requirements.
For property managers and real estate businesses, integrating AR automation with the accounting workflow can improve visibility into outstanding balances and reduce repetitive administrative work.
How to Automate Accounts Receivable Process?
- Document the steps in your current AR process – from invoice to reconciliation.
- Look for manual bottlenecks – find where there are delays and errors most often.
- Avoid data duplication and inconsistencies in customer and invoice information – clean data minimizes mistakes later on.
- Automate creation of invoices – create invoices from sales data.
- Facilitate online payment – provide more than one payment method for the online customer.
- Remind customers of payments before and after due dates – automate reminders of payments.
- Automatic payment matching – automatically match payments to invoices with the help of software.
- Integrate AR with your accounting system – sync information between systems
- Define exception workflows – how the unusual cases flow.
- Monitor AR KPIs – track the performance to continue to improve
How does the AR Automation Workflow look like?
Customer setup → generate invoice → deliver invoice → send payment reminder → online payment → match payments to invoice → bank reconciliation → AR reporting → collect for exceptions.
Which Accounts Receivable Automation Tools are the best?
- Accounting Platform – essential to businesses for invoicing and bookkeeping.
- AR Automation Platforms – dedicate for Reminders, matching and collections
- Payment processors – platforms designed to handle online customer payments.
- The ERP-based AR automation – AR features integrated into enterprise systems.
- AI-powered AR tools – tools with AI for matching, forecasting and collections
The size of the business, the software already in use and the AR requirements are factors to consider when deciding on fit.
How to select AR Automation Software?
- Integrations with accounting apps – seamless integration with your books
- Companies that are ERP compatible – Supports your overall business systems
- Forms – handles the forms your customers use.
- Customer experience – adapts to your customers’ experience.
- Ability to automate beyond reminders and matching – invoicing is only a part of automation
- Available to customers for self-service access, customer portal is a key feature.
- Security – safeguards financial and customer information.
- Real-time AR visibility, Reporting.
- Efficient – fast and consumes a minimum amount of resources
- Pricing – is clear, fits your budget.
- Implementation – reasonable setup time and support
What are the AR KPIs to track following automation?
- Days Sales Outstanding (DSO) – (Accounts Receivable ÷ Total Credit Sales) × Days
- Average Days to Pay – average time spent to pay by customers
- Collection Effectiveness Index – percentage of receivables collected in a period
- Aging receivables – outstanding amounts by 30 days, 60 days and 90 days, etc.
- Overdue invoice rate – the ratio of overdue invoices to the total number of invoices.
- The cash application rate – payments which are automatically captured to invoices.
- Bad debt rate – number of receivables classified as uncollectible.
What are some of the common mistakes in AR Automation?
- Automating a broken process
- Bad customer data
- Automatic Exceptions
- Lack of payment controls
- Ignoring the customer experience
- No human oversight
- Poor system integration
What’s the impact of Artificial Intelligence on Accounts Receivable?
- AI invoice processing – extracting and automating the data.
- Intelligent payment matching – accurately matching for complex and partial payments
- predictive collections – Prioritizing accounts that are likely to pay late.
- Customer payment behaviour – Identifying patterns and making decisions on follow up payment.
- Automated exception detection – alerting any unusual transactions for review
- Accurate cash-flow forecasting – more accurate forecasting of incoming payments.
- AI collections – recommending next best actions for overdue items, and
AI is merely a tool for AR teams, not to replace them.
Automated AR or Outsourced AR: Which Is Right for You?
| Automated AR | Outsourced AR | |
| Technology | High | High |
| Human oversight | Required | Included |
| Collections | Automated + human | Managed |
| Reconciliation | Automated + reviewed | Managed |
| Exceptions | Internal team | Provider support |
Automation can handle many repetitive accounts receivable tasks, but some businesses may prefer professional support to manage the process. Outsourced bookkeeping services can help businesses manage invoicing, payment tracking, reconciliation, reporting, and other accounting activities while reducing the workload on their internal teams.
The right approach depends on your business size, transaction volume, existing accounting systems, and the level of internal expertise available.Â
Is Accounts Receivable 100% Automatable?
While it’s possible for most businesses to automate a large amount of repetitive AR tasks, it’s not recommended that you take the human element out of the process entirely. Areas such as exceptions, disputed invoices, unusual payments, credit decisions and complex customer relations still might require human oversight.
Frequently Asked Questions
What is AR automation? Â
A software solution that automates the invoicing, reminder, payment, matching and reconciling processes with very little manual effort.
How do I Automate accounts receivable?
Map your process, standardise data and automate your invoice, reminder, matching and reporting.
What type of AR tasks can be automated?
Onboarding, Invoicing, Delivery, Reminders, Payment, Matching, Collections, Reconciliations, Reporting and so on.
Can QuickBooks automate Accounts Receivable?
Yes, QuickBooks can automate Accounts Receivable, but you may need to add additional integrations to be able to do so.
How does AR automation boost business productivity?
AR automation enables workers to concentrate on other essential business tasks instead of manual data entry, hence saving time.
Is AR automation redundant for accounting personnel?
No, AR automation is not meant to replace accounting personnel, but rather to reduce manual work, which requires that some work is done by people.
Are there any other KPIs I should be monitoring?
DSO, average days to pay, collection effectiveness index, aging receivables, overdue rate, cash application rate, and bad debt rate
—
