You know your accounts receivable (AR) department needs overhauling—you've been saying it for years—and now you've been tasked as just the person to do it.
Before you begin researching solutions, take mental note of the reasons you think you need to go in a new direction. Better yet, write them down and try to quantify impacts. Here are a couple points from a typical scenario:
- Your way of manually processing incoming paper payments or using a really costly lockbox solution has hit a wall.
- Chances are you have a bundle of over-worked (and yet somehow under-utilized) cash application employees who spend their days opening mail, batching checks, associating checks with remittances, manually keying in line item details, depositing everything, archiving everything.
What to consider when researching AR automation software
Once your rationale is established it's time to roll up your sleeves and start your search. You probably know that automation is going to be the way to go. Here are some things to be sure to think about and talk about when you embark on that journey to a new way of working.
When you automate the cash application process, say goodbye to the paper trail. Postage rates decline, auto cash rate soars, invoices clear faster and you get more accurate (and lower) days sales outstanding (DSO).
But for many, the biggest automation dividend lies in getting rid of data keying. Lockbox data keying fees are probably the biggest dollar item on the services budget. In addition to saving money, freeing up data entry workers and giving them new life by re-purposing them and harnessing the qualities you hired them for in the first place is a great way to both save money and get the most out of a smart FTE. A long-time data entry worker, who probably knows the ins and outs of accounts receivable (AR), holds in his/her head a lot of knowledge about your customers. And because of her experience, she's bound to be great at other things such as research, analytics, and more.
How about a new attitude toward electronic payments?
Many customers want to send more electronic payments. And why shouldn't they be able to? It's cheaper, quicker, and timelier. But if you're in the cash application business, you know very well why you're not out there convincing more people to pay this way: the pain of electronics is stopping you. Decoupled remittances and issues with EDI 820 data mapping are two of the most common reasons companies are reluctant to encourage their customers to pay electronically.
So when you can show your executive team a solution that not only automates checks, but also works with electronic payments and their decoupled remittances, that solution will sell itself.
Customer service dividends from automation
You may think that automating your cash application process is a benefit only to you and your company. But look a little deeper and you'll see how it's great for your customers, too (and they don't even have to change their behavior).
- Credit holds will go down because customer payments will be deposited and applied in a timely manner.
- There will be fewer collection calls since you'll have complete and accurate data about your customers’ payment activity.
- Because you're ready to accept electronic payments, your customers will save money paying that way.
Finally, you're going to have to teach the people around you to embrace change, and that’ll have to come from the top down. Be sure to keep in mind the quote below when you run up against any brick walls.
"Be the change you wish to see in the world.” — Mahatma Gandhi