As a small business owner, you have a lot on your plate; from managing finances and employees to keeping up with competitive forces and ever-changing technology. So, to effectively manage your business, you need to be organized and able to efficiently track your cash flow. Many small businesses use a combination of spreadsheets or accounting software and online tools to perform their daily accounts receivable (AR) workflows, including generating invoices and tracking collections. And while these processes are time-consuming and error-prone, this is the status quo for many small businesses. Not surprisingly, there is much friction in the customer journey and tracking cash flow takes a lot of effort. But with cash flow being the overall indicator of the health of a business, having a sightline to cash positions is necessary for making good business decisions. AR automation software can help to address the shortfalls of traditional AR workflows.
This article will explore:
- The shortcomings of traditional AR workflows for small businesses
- How AR automation helps small businesses
In this article
The Shortcomings of Traditional AR Workflows
Traditional accounts receivable workflows have little to no automation and utilize spreadsheets as the mainstay for reporting and processing. For startups, this works fine. But as your business starts to grow and your customer base increases, the billing and payment process will become highly complex if working from paper-based invoicing and fragmented accounting systems. Tack on the friction caused by manual processing and now you have the perfect recipe for what customers of today don’t want. Inefficiency! Customers have high expectations for personalized and seamless experiences, so businesses that cannot meet these expectations may quickly find themselves struggling to retain customers – the driving force of growth for business. To scale and grow, your AR processes should be able to adapt to the changing needs of your business. AR automation can help small businesses to overcome these challenges. Let’s look at how.
How AR Automation Helps Small Businesses
1. Optimize Invoicing with Electronic Invoice Presentment and Payment (EIPP)
Electronic invoice presentment and payment (EIPP) solutions help to streamline and automate the invoice to cash cycle. Instead of sending invoices by mail or via fax, invoices are sent directly to the customer via email or a self-service customer portal with embedded click-to-pay options. Since customers can pay in their preferred method of payment at their convenience, this improves the overall customer experience. For small businesses that rely on manual paper-based invoicing, EIPP allows for quicker invoicing, processing of greater invoice volumes and quicker time to revenue. With an optimized invoicing process in place, small businesses gain greater predictability of cash flow and better cash flow management. EIPP enables better invoice tracking and management and improved visibility into customer payment behaviour. This insight can help businesses to understand which customers are struggling to pay on time and which ones are a potential credit risk.
2. Reduce Late Payments with Automated Reminders and Notifications
Sending automated reminders and notifications to customers can help to improve the invoice-to-cash cycle by reducing the likelihood of late payments. Payment reminders can be set to go out at different cadences based on customer needs. Small businesses that have a standard practice of calling customers that are late with their payments will benefit from this functionality. Automated notices serve to keep invoices top of mind for customers so payments don’t get missed. And as your customer base increases, this solution will easily scale. So by reducing the amount of time and resources required for manual reminders, small businesses can improve their AR efficiency.
3. Better Tracking When AR Automation and Accounting Systems Can Talk
Integrating AR automation software with existing accounting and ERP systems enables seamless data reconciliation and improved accuracy of financial reporting. For small businesses, having accounts receivable data centralized, allows for easier matching of open invoices with incoming payments. Having integrated systems provides improved visibility of collections, making it easier to track payments and manage disputes effectively. With fewer billing disputes and more consistent data, the invoice-to-cash cycle is improved and collecting payments is more efficient.
Accounts receivable automation software may be the missing piece of the puzzle in your AR department. Whether you are struggling to reduce manual errors and disputed invoices or you want to unlock your cash flow and gain better oversight of your collections process, Cadency, the new AR automation platform by Datasoft, can help.
To find out if Cadency is the right solution for your business, book a demo.