Automation may be the key to A/R challenges

Your peers and your A/R team are concerned about delayed and re-negotiated B2B payments. 

Research from The Hackett Group found that many companies took even longer to pay suppliers during the first half of 2021 than they did at the start of the pandemic in 2020.

And last year, The Wall Street Journal reported that big organizations like Macy’s and Mondelez International were postponing the due dates on their bills to free up cash on their balance sheets.

But stretched out payment cycles isn’t the only thing you and your A/R department should be concerned about, said Steve Pinado, the president of Billtrust, an A/R automation solutions provider based in Lawrence Township, NJ.

Streamlining pressing cash application issues is essential to accelerate cash flow from sales, Pinado said in a Zoom interview.

A/R and vendor portals

While personalized vendor portals may be a boon for A/P teams, they’re often a burden for A/R.

“There has been a rise in the number of large buyers adopting platforms that are making their lives easier, but are creating more manual processes for their suppliers,” Pinado said.

For instance, it could take hours for an A/R staffer to retrieve remittance data and reconcile large payment volumes on a single customer’s vendor portal. It’s time that could be more efficiently used on other finance tasks. 

A recent survey commissioned by Billtrust found that most A/R teams (51%) interact with 11 to 20 A/P portals. More than one in four of those surveyed said they deal with 21 or more.

Imagine trying to remember that many login credentials. Pinado likened it to paying every single household bill via a different website.

Potentially slowing the process down even more are various invoicing rules you have to follow when using a customer’s portal. For example, you may have to enter their purchase order number to get paid.

Converting e-payments to cash

The good news about electronic payment data is it doesn’t have to be keyed in. That reduces labor costs and data entry mistakes. 

But the bad news is if there’s a large volume of payments, the corresponding remittance usually arrives separately.

More work gets created for A/R when they have to match the money with what it’s being used to pay for.

“To recognize revenue, you have to kill the line-item detail in your invoices to know that (a specific) product, among the thousands of items that may be on that invoice, is paid for,” Pinado said.

Relief for A/R

Digital processes intended to make B2B transactions easier can still hinder A/R teams. It’s because they still have to manually process remittances and type data into ERPs.

Many companies have automated invoice delivery and remittance collection. But to truly optimize A/R workflows, it may take going all-in on automation and digitization in Finance.

In a survey by PYMNTS.com, almost 50% of businesses said automating their A/R collections process lowered delinquency rates.

On its website, U.S. Bank said A/R automation supported by artificial intelligence and machine learning is a wise investment because it:

• reduces the need to research exceptions
• extracts ACH, direct debit, wire and credit card data from emails, attachments, electronic data interchange and payer web portals
• matches payments to open receivables using enriched remittance data, and
• creates receivables posting files that you can upload to your ERP.

“We had one client who discovered they had nearly half of their customers taking unearned prompt-pay discounts, costing their company almost $2 million a year,” U.S. Bank Working Capital Consultant John Melvin said online.

“The problem was the company’s A/R clerks were focused exclusively on manually applying every invoice. Their job was to key data – not to red-flag when a customer was 20 days late and taking a 2% discount.”

Besides workforce optimization, improvements to customer experience, security and audit tracking are other reasons to consider A/R automation, Pinado said.