Skip to content
7 min read

Receivables Management Systems: What You Need to Know

Featured Image

It may not have a clever or catchy name, but receivables management systems is aptly named. It does exactly what it sounds like it should. It helps a business plan for and control its debt owed all the way through to the moment when payment is received and accounts are reconciled. It tracks how much is owed, from whom, and when. 

Technically, receivables management systems can include something as simple as an accounting ledger book or spreadsheets. But most businesses today have moved way beyond those manual, cumbersome tools and want the efficiency and insights that account receivables automated software provides. AR automated software can also help with cash management and forecasting.

In this article we’ll answer the most frequently asked questions about automated receivables management systems, covering the benefits and most common features found in the top AR software solutions. 

More importantly, we’ll explain how systems that leverage machine learning (ML) and artificial intelligence (AI) take account receivables and overall cash management to the next level, increasing cash flow and allowing finance teams to make more accurate forecasts from real-time cash positions, predict payments and identify risky accounts.

FAQ 1: What is AR automated software?

AR automated software is a type of receivables management system that leverages digital technology to automate steps in the different functions needed for managing receivables: invoicing, payment processing, collections, bank and customer account reconciliations and credit risk management. Most solutions will also prioritize accounts, generate analysis reports and identify short payments.

An automated AR solution will take care of creating, sending and tracking invoices for you. You can set it up to automatically send out recurring invoices and payment/overdue  reminders, accept online payments and much more. And instead of searching through hundreds of emails to verify a questionable detail to settle a dispute, you can view customer communications all in one place.

FAQ 2: Why do I need an automated receivables management system?

Because everyone’s doing it? Usually not a good answer, but in this case it fits. Even as far back as 2017, a McKinsey Global Survey found that 75% of companies had already started to automate some business processes or had plans to begin in the next year. Many of those respondents pointed to automating processes in the office of the CEO. 

Now more than ever before, businesses need to streamline for efficiency where they can to gain an edge over the competition. Using automated AR software is one way to do just that.

FAQ 3: If I add AR automation software will I have to change all my other systems?

If you choose the right software, no. It should integrate with your existing systems of record. Many effective solutions integrate with most of the top ERP and accounting systems and will list them on their product pages.

FAQ 4: Does implementing a system replace personnel?

Although some businesses find they can reduce headcount after adding an automated AR solution, that isn’t really the end goal. The real value of automating tedious and time-consuming manual tasks is that it frees up your accounts receivable team to use their expertise to focus on more strategic initiatives that will help the business grow. 

Then when it does, the right software allows you to easily scale without adding more members to your finance team.

Another benefit to automating manual tasks is that it drastically reduces the errors and omissions that are bound to happen when humans have volumes of data to enter and calculate.

So in effect the automated AR software doesn’t replace personnel; it just replaces the errors they make, providing a higher level of accuracy for your reporting.

FAQ 5: How does a receivables management system help accelerate collections?

Because invoices are automatically generated in electronic form, they can be sent immediately to your customers. Your customers then can take advantage of any early payment discounts you may have in place and send their payments online. In addition, since the invoices will be accurate, there won’t be any need to extend due dates while a discrepancy is figured out. 

All these time savers mean you can get paid faster which narrows your cash flow gap and keeps DSO under control.

FAQ 6: How does purchasing software save on costs?

Of course results vary depending on several factors, but many businesses realize a substantial ROI in just a few months. Over time, automating your receivables will save time and costs in a few ways. Number one, when you eliminate paper-based processes from your accounts receivables, the cost of processing payments goes down. You’ll save on supplies, postage and equipment.

Secondly, higher accuracy leads to savings. Not only will you save by not having a team member waste valuable time trying to find and correct an error, you won’t be overlooking late and overdue payments.

And finally, the right technology can increase cash flow which is crucial for operations and reinvesting in the business. Hindered growth is a cost most businesses can’t afford.

The bottom line is AR automation software means you’ll save on the true cost of carrying accounts receivable which takes into consideration expenses such as time, administration, opportunity, predictability, financing and bad debt.

FAQ 7: Will my customers be put off by losing a personal connection?

On the contrary, most customers will appreciate the benefits of your going digital with your AR. (They don’t like having to open envelopes any more than you like stuffing them.) 

Having accurate invoices, multiple payment options, early payment discounts and the ability to use a self-serve portal–all these are positives from your customers’ point of view.

FAQ 8: Will it take my team a long time to learn to use it?

It depends on which receivables management system you choose, but there are so many options out there that feature intuitive user interfaces and easy-to-read reporting that you should be able to find one that fits your implementation timeline. Keep in mind that the vendor should provide ample training as well which will shorten the learning curve.

FAQ 9: What if I have multiple business entities and do business internationally?

Again, there are plenty of choices out there. If you need the flexibility to track cash flows across different departments, companies, banks or currencies, just make sure you find out if the software can deliver that kind of customization and flexibility.

FAQ 10: Why does it matter if the software uses machine learning (ML) and artificial intelligence (AI)?

More accurate real-time cash forecasting is a major reason for going with an AI-enabled solution. AI technology makes it possible for the software to make judgment-based decisions much like a human would. The software learns over time to predict payments and identify high-risk accounts.

Additionally, you’ll have AI-driven data and analytics at your fingertips to accurately report the negative impact of disputes and deductions on your business.

FAQ 11: Is there one AR automation software that does it all for mid-market businesses?

Yes, there is. In fact, Payference was built to meet the cash management and forecasting needs of mid-market businesses who wanted all the benefits of AI-powered automated technology without paying for all the extras that were included in solutions meant for enterprise level businesses. Benefits such as:

  • Real-time cash positions

  • Better cash forecasting

  • Optimized working capital

  • Digital invoicing

  • Faster payments

  • Increased cash flow

  • Time and cost savings

  • Increased accuracy

  • Reduced DSO

  • Higher productivity

  • Improved customer relationships

Payference makes it possible for you to leverage the power of AI for improved working capital management and cash forecasting. Instead of gathering data from different sources, you can view all cash positions in real-time from one source.

Easy-to-use and customizable, the Payference platform seamlessly integrates with your accounting/ERP systems, banks and payment channels. And according to our customers, our support team is outstanding.

If you have questions about receivables management systems that didn’t make the above answers or about how Payference’s AR solution can help your business, give us a call or schedule a demo today.