Sales, supply chain, and compliance aspects make the initial cash cycle a reasonably complex process. AR automation is one way by which organizations can shorten the cash conversion cycle and improve operational excellence. It also allows financial executives to build a solid foundation for a holistic, sustainable O2C process.
In general, most people think order cash is a simple process that involves taking orders, delivering products or services, and then you get paid.
But in reality, auto cash is a relatively complex multi-step process. The process starts with order management, credit fulfillment, and then going into Billings collection, dispute management, or evolutions. And then, you have the cash application, which stretches your accounts receivable (AR).
Sales, supply chain, and compliance aspects make the initial cash cycle a reasonably complex process when you start looking at some inefficiencies.
AR automation is one-way organizations can overcome this particular challenge because they can expedite the processing. AR automation is very scalable. So if you have sister companies, if you have subsidiaries across different units, and you’re using a cloud-based solution that doesn’t have to be deployed on site, AR automation is the best solution. From an accuracy perspective or the cost angle, since you reduce the overhead costs in mundane tasks, you can redirect your workforce to more complex and analytical studies.
We will now discuss some key market drivers for businesses to automate their AR processes to optimize or cash cycle.
The first and foremost is the pressure to reduce the sales outstanding. Businesses want the Billing to go on very smoothly, very effectively to collect the revenue. And honestly, in this environment where liquidity is still a concern and credit might be tight, you can generate ongoing operating income or cash flow through the better forecast. And then plan and allocate resources based on what’s happening with billing cycles.
The second biggest driver is to reduce overall costs. Many executives believe that some of the manual processes are eating into time and eating into the price as processes take time. Therefore, firms are missing out on some of the benefits of automation. Thirdly, customer pressure to extend payment terms.
Last but not least, drivers from the billing and automation side. Companies want to manage the credit risk and losses from bank debt and collection expenses.
Businesses want to improve the billing accuracy and under Billing for revenue assurance, which again ties in with more financial visibility, transparency, and better planning for the future.
AR Automation For Recurring Revenue Business Model
47% of the organizations currently have a subscription or a recurring revenue business model in place. One of AR’s benefits, especially if you’re in the cash cycle, is to optimize when a customer has a specific pattern and reaches out to you time and again. You can have an automated system with a builder sent out automatically so that you’re not chasing them constantly. That means you’re directing your workforce to the tricky accounts where you feel there’s a chance of default.
Key Challenges In Billing
Lack of staff resources or headcount is the first and foremost challenge of Billing. Somebody is manually keeping track of these bills, and then once the cash is received, allocating, it just adds to tedious processes. And then, you have difficulty consolidating information from multiple data sources. Reducing intake is highly critical, especially if you’re interacting between the procurement, finance, and sales department. How do you keep track of these different systems? What if you’re using other methods? Are you observing each of the sales in spreadsheets? A lot of companies still use it. Unfortunately, spreadsheets and they’re not going away anywhere. While updating these systems manually, you’re losing out a lot of time during the consolidation. And because there’s no consolidation, any changes in one system do not necessarily permeate to the other one, and you can’t see the whole picture as it stands.
So what are some of the key strategic actions that companies are taking? Leaders are streamlining the administrative processes to remove non-value-added steps and fine-tuning processes. They’re also investing in the automation of AR processes.
Most of the companies have done AR automation. They are using it as a foundation for continuous improvement, something like making the existing systems better by removing any non-value add process.
Other things include but are not limited to – How can you automate further by enhancing the existing systems? Can you provide unstructured data? Can you incorporate traditional BI tools, analytical tools, and existing capabilities? How can we integrate with the existing AR solutions? They are looking at it beyond arbitration and more of a compliance solution. How can they incorporate financial reporting to a compliance solution intermediary and entire taxation?
As a result, companies achieve the twin objectives of sanitization and centralization, providing uniformity across different geographic units or their sister companies, spread across the globe or even across the country. And this helps them reap the rewards in terms of resolution, dispute resolution as well.
The other areas that organizations are focusing on are real-time visibility, both invoice volume and exceptions. And what that does is build the case for excellent customer service. When you have real-time visibility, the executives can prioritize a more significant dispute, which’s a bigger concern than something that is not. And they can adhere to some of the more critical customers.
And then, on the technology side, performance dashboards are intended to support the continuous improvement initiatives across leading companies, leaders, and the best in class. So they’re tracking and measuring which systems are doing well, which are not doing well. And what are some of the areas in need of improvement?
So, if you want to automate your processes, optimize your artifact cycles. And don’t forget to tie those pieces together to connect the sub-processes effectively.
AR is a strategic function. It has to connect to the CFO’s office, and it should not relegate to a back-office role before the Office of the CFO, the CEO, see the cash flows impacting their balance sheet. They need to see how what kind of data is coming in what when the current status. Therefore, it’s vital to share the information seamlessly across enterprise applications.
CFOs’ across the globe have one goal in common: To create a best-in-class finance organization that drives business strategy and fuels revenue growth. The finance & Accounting process has to align with CFO goals and the overall company’s growth plan.
Techwave’s comprehensive end-to-end support for CFO offices adds significant value to a business, making us a strategic asset to our clients. Our BPO solutions can integrate into any ERP systems/tools. We make our clients’ financial functions lean and efficient through automation and agile technologies that are entirely driven by Metrics. We approach clients’ vision of creating stable finance & accounting processes with innovation, agility, and transparency.