The AR Maturity Spectrum

Blog | December 29, 2020

Reading time: 5 min

Nearly every company in the world – large and small – are taking major steps to shore up their cash flow and financial processes. The COVID-19 pandemic and its attendant remote work forces and slowdowns have proven that flexibility is necessary for business continuity. And when assessing where that flexibility matters, the majority of businesses have identified their accounts receivable processes. 

That’s why 7 out of 10 firms surveyed are committed to digitizing their accounts receivable processes in the near future. The benefits of digitizing accounts receivable is twofold: 

First, digitized processes add transparency and flexibility that AR professionals need to effectively manage their company's cash flow. According to a recent IDC Opinion piece, “[t]he inherent unpredictability of AR can often leave large sums of money tied up on the balance sheet... As a result, unlocking these funds becomes one of the top reasons for adopting a modern AR solution.”

Secondly, digitized AR solutions deliver enormous benefits to the customer relationship. That means happy customers enjoy seamless invoicing and payments processes, of course, but it also means an enhanced relationship. In an environment where businesses strategically pay late on a regular basis, having robust credit and collections tools gives AR teams more influence on their buyers’ payment behavior. 

The benefits of digitizing are readily apparent, but where should an AR team begin? And what should their end goal be? 

The field of accounts receivable automation is rapidly developing and there are many solutions, features and benefits to consider. At Billtrust, we are advocates for the entire field of AR digitization and we have developed the AR Maturity Spectrum to help you and your team determine where you currently are and what possibilities are open to you.

abstract illustration of keyboard with invoices and a check, Legacy paper-heavy AR processes list

Legacy: Paper-heavy processes

If your AR processes are heavily dependent on paper invoices and checks sent through the mail, then you are here on the spectrum. 

Some AR tech point solutions

  • These solutions may eliminate manual work, but they often don’t “talk” to each other and still require intervention by AR professionals. 

Manual labor

  • This includes manually filling out webforms and calling in requests.

Paper invoices & paper checks

  • These are inefficient and expensive methods in normal times. During the COVID-19 pandemic, with the accompanying postal slowdowns and empty offices, they could be unreliable. 

Disparate remittance

  • Electronic payments often feature disparate or decoupled remittance. Without automated solutions, AR professionals are required to search for this remittance in emails and web portals. 

If these features describe the state of AR at your firm, you’re not alone. AR processes have seen under-investment for years

But that’s changing fast. Firms with higher levels of automation were able to respond to pandemic-related disruptions much more effectively than those further back on the spectrum.

abstract illustration of computer with invoices, Modern STP list

Modern: Straight-through processing

Fully automated AR processes save time, cut down on errors and deliver excellent customer experiences. More and more AR practitioners are discovering the benefits of straight-through-processing (STP). 

Digital invoice presentment

  • Digital invoices are faster, less expensive, don’t require presence in offices to receive them and lead to faster payment. According to a United States Federal Reserve Bank of Minneapolis study, 92% of e-invoices were “paid on time” compared to 45% of paper invoices
  • Possesses a self-service portal that customers can use to view and pay invoices electronically. Also able to transmit emailed invoices. 

Digital payments

  • Digital payments are received and processed faster than paper checks. 
  • Opening up one or more digital payment channels can nudge buyers towards a cleaner payment method and smooth downstream reconciliation processes. It also delivers DSO benefits by eliminating postage and handling time.

Ecosystem connectivity

  • Solutions from trusted vendors are more compatible with the digital ecosystem than customizations built in-house. 

Labor-only for complex exceptions

  • The vast majority of invoice delivery, payment acceptance and cash application tasks are handled automatically. Exceptions are even made easier with AI-generated “suggested actions” that can solve most exceptions in a few clicks. 
  • Machine learning can help your systems grow "smarter" over time and automatically correct issues to take them out of the exceptions queue altogether.

COVID-19 disruptions have demonstrated the unsustainability of manual processes and the need to convert more AR activities to STP. 

But STP processes have the additional benefit of freeing up AR practitioners to work more strategically. And new solutions that add an informative data layer to AR transactions are allowing them to influence their customers’ behavior to their business’s benefit.

abstract illustration of computer with invoices, brain icon with listsAdvanced STP integrated data and AI list

Advanced: Straight-through processing with integrated data & AI

Straight-through-processing technologies with integrated data layers and AI grant even greater insights, control and flexibility to AR teams. 

Modern ERP + AR & AP ecosystem connectors

  • Advanced vendor solutions allow firms to automatically invoice into AP portals and get their payment preferences met no matter how their systems are configured.
  • Straight-through-processing technologies remove the friction from AR / AP interactions. Customer experience is improved. Ease of doing business becomes a competitive advantage – especially in highly commoditized industries.

Electronic payments with remittance

  • Straight-through-processing technologies are capable of retrieving decoupled remittance data from emails and websites, processing payments and automatically applying them to open invoices. Credit lines are quickly refreshed - enabling further sales.
  • Tailored processes
    • Advanced AR automation empowers firms to offer flexible payment channels and dynamic customer experiences, such as automatically adjusting credit terms or offering tailored terms.
  • Greater insights
    • Both the customer and the internal AR team can track statuses and progress real-time through cloud-based portals.

Learn more about AR automation

Wherever your team lands on the AR Maturity Spectrum, a Billtrust expert is ready to talk to you about how AR automation with integrated payments can improve your processes, unlock cash flow and give you more influence over your customers’ payment behavior. 

Please fill out the contact form and we’ll be in touch soon.