4 hidden costs of outdated AR technology

Blog | April 29, 2024

Reading time: 7 min
4 hidden costs of ar technology_masthead_woman sitting at her desk with a laptop in front of her

This blog post and its URL were updated on April 29, 2024. Explore the latest version for enhanced details and fresh insights.

In today's fast-paced business landscape, staying ahead of the curve is paramount to success. As finance teams navigate the ever-evolving demands of the digital age, one AR technology stands out as a beacon of efficiency: AR automation. From streamlining invoicing processes to optimizing cash flow, accounts receivable automation software has become a cornerstone of modern finance departments, empowering organizations to maximize productivity and minimize costs.

In this comprehensive guide, we will explore the world of AR technology, its myriad benefits, best practices, and critical considerations for implementation. From reducing days sales outstanding (DSO) to improving customer satisfaction, AR automation can transform your finance department from a cost center into a strategic asset.

So, let's launch into the future of finance with AR automation technology leading the way as your trusted ally.

The Productivity Imperative: Why apex performance matters most in 2024

Download the white paper
Contact us image of virtual call with communication icon

What is AR automation in accounting?

What is AR automation, and how does it transform your traditional accounts receivable process?

At its core, AR automation is a suite of advanced software solutions designed to streamline every aspect of the accounts receivable lifecycle.

By leveraging cutting-edge AR technologies such as artificial intelligence and robotic process automation, AR automation software automates manual tasks, accelerates invoice delivery, and enhances payment processing accuracy. It's a game-changer for finance teams, allowing them to shift their focus from tedious administrative tasks to strategic initiatives that drive business growth.

What is the AR process workflow?

Understanding the accounts receivable (AR) process workflow is crucial for maintaining a healthy order to cash cycle, cash flow, and efficient financial operations within any organization.

At its core, the AR process workflow involves the management of invoices, payments, and customer interactions from the moment a sale is made until the payment is received.

The workflow typically begins with generating and distributing customer invoices for goods or services rendered. This step is vital as it initiates the billing cycle and records the transaction.

Once invoices are sent out, the next phase involves tracking and monitoring payment statuses. This includes following up on overdue payments, reconciling payments with invoices, and addressing any discrepancies or issues that may arise.

Furthermore, the AR process workflow encompasses customer communication regarding payment reminders, inquiries, and disputes. Effective communication is essential for fostering positive customer relationships while ensuring timely payments.

Additionally, the workflow may involve implementing strategies to optimize cash flow, such as offering discounts for early payment or establishing payment plans for larger invoices. A well-defined and efficient AR process workflow is essential for maximizing revenue and minimizing outstanding balances.

4 hidden costs of ar technology_employees in an office sitting in a row and working on their laptops

What are the hidden costs of outdated AR technology?

Exploring the hidden costs of outdated AR technology unveils a myriad of challenges lurking beneath the surface.

From the conventional practice of printing invoices in-house to the complexities of accepting paper checks (U.S.-based), outdated AR processes can significantly impact operational efficiency and financial outcomes. However, advancements in AR automation technology provide a beacon of hope, offering solutions to streamline processes and mitigate these hidden costs.

By exploring the hidden costs of outdated AR technology, finance leaders can gain valuable insights to drive strategic decision-making and optimize their financial operations.

Hidden cost #1 - Printing invoices in-house

Printing invoices in-house may seem like a conventional approach, but it's crucial to consider the underlying costs. Resources such as paper, toner, and envelopes are depleted rapidly, adding to operational expenses. Additionally, the unpredictability of machinery maintenance can exacerbate inefficiencies.

However, there's a solution to streamline this process effectively: AR automation technology. This advanced software offers a range of features designed to address invoicing challenges efficiently.

AR software eliminates manual labor and reduces postage-related concerns by automating tasks like invoice delivery and transitioning to e-invoicing, a.k.a. electronic invoicing. Embracing AR automation enables you to enhance invoicing efficiency significantly, optimize workflow, and drive operational excellence.

Hidden cost #2 - Accepting paper checks

Paper checks, which are still used in the U.S., can indeed be a headache for finance departments. The seemingly simple act of accepting paper checks comes with a myriad of hidden costs and inefficiencies that can impact the bottom line.

Firstly, there are the lockbox fees imposed by banks for processing paper checks. These fees can add up quickly, especially for businesses dealing with a high volume of transactions. Moreover, the manual data entry required to reconcile paper checks with invoices is prone to errors, leading to discrepancies that require time-consuming investigation and resolution.

For CFOs (chief financial officers), AR Managers, and VPs of Finance, the impact of accepting paper checks extends beyond just financial costs. It also affects operational efficiency and customer satisfaction. Processing paper checks involves manual labor and can result in delays in updating account information and reconciling payments.

This can lead to frustrated customers and strained relationships, especially if errors or discrepancies occur frequently. Additionally, the reliance on paper checks can hinder efforts to digitize and modernize financial processes, making it challenging to keep pace with competitors who have embraced digital payment solutions.

Fortunately, AR technology offers a solution to these challenges. By leveraging advanced technologies such as artificial intelligence and robotic process automation, AR software can streamline accepting and processing payments, regardless of the payment method.

With automated matching algorithms, payments can be quickly and accurately reconciled with invoices, reducing the need for manual intervention and minimizing the risk of errors. This improves efficiency and accuracy and enhances customer satisfaction by providing a seamless payment experience.

Hidden cost #3 - Outdated customer service

In today's hyper-competitive business landscape, providing exceptional customer service is more critical than ever. However, relying on outdated tools and processes within your accounts receivable (AR) department can hinder your ability to meet customer expectations and maintain satisfaction levels. In an era where customers expect seamless interactions and lightning-fast resolution times, you must deliver to sustain business and keep your reputation.

For CFOs, AR Managers, and VPs of Finance, the implications of outdated customer service tools extend beyond customer satisfaction. It can also impact operational efficiency and resource allocation within the finance department. Manual processes such as handling customer inquiries and resolving disputes can be time-consuming and labor-intensive, diverting valuable resources from more strategic initiatives.

This is where AR automation improves customer service within the accounts receivable department. By leveraging self-service portals and online bill pay options, AR technology empowers customers to take control of their accounts and resolve issues on their terms. This reduces the burden on finance team members and enhances the customer experience by providing convenient access to account information and support services.

Furthermore, features like 24/7 account access ensure that customers always have the support they need, whenever they need it, regardless of time zone or location. This level of accessibility and responsiveness not only improves customer satisfaction but also strengthens customer loyalty and retention rates. Ultimately, AR technology enables finance teams to deliver exceptional customer service while maximizing operational efficiency and resource utilization.

Hidden cost #4 - Not accepting credit cards

Not accepting credit cards in finance can have significant financial implications beyond interchange fees.

While it's true that other payment methods like paper checks and ACH (automated clearing house) don't charge fees, the cost of not embracing credit card payments can be far greater than anticipated for CFOs, AR Managers, and VPs Finance.

Credit cards are convenient and safe, and that's why your customers want to use them. Refusing to accept credit cards means your customers will begin finding new suppliers who do. But you won't come out ahead when you compare the cost of manually processing paper checks to the cost of credit card processing fees.

Another thing to remember is that there are ways to lower your credit card processing fees. A merchant services provider with Level 3 data can shave around 50 basis points from each transaction, including the remit information needed to apply the payment immediately. Offering early pay discounts, along with the means to electronic pay within ten days, will help speed up cash flow and reduce days sales outstanding (DSO), which can bring additional cost savings.

AR automation: Your path to accelerated cash flow and streamlined finance

In the ever-evolving landscape of finance, one thing remains constant: the need for efficiency. Streamlining accounts receivable processes is crucial for optimizing cash flow and maintaining a competitive edge in today's market. AR technology emerges as the solution, offering CFOs, AR Managers, and VPs of Finance the tools they need to revolutionize their operations.

By embracing the power of automation, businesses can bid farewell to outdated practices that drain resources and hinder growth. With AR automation, you can streamline manual tasks, reduce errors, and maximize efficiency. This improves the bottom line and enhances customer satisfaction by providing a seamless payment experience.

So why wait? The time to embrace AR automation is now! Leap into the future of finance and unlock the full potential of your accounts receivable processes.

Talk with an expert about AI-powered AR software that can move your finances forward in the digital age.

Book a no-pressure call with Sales
Contact us image of virtual call with communication icon