Automating your accounts receivable process is essential for optimizing the order-to-cash cycle. It can help reduce errors and speed up payment, allowing you to maintain a healthy cash flow. This blog will discuss the 6 best practices for accounts receivable automation in greater detail.
1) The first best practice is to ensure seamless integration of the tech stack. When implementing accounts receivable software, make sure that it integrates seamlessly into your existing tech stack. This will help you save time and money and avoid headaches when onboarding a new tool. The integration should cover all aspects of the process from order entry to cash application. Additionally, make sure to integrate the software with other key systems such as inventory management, general ledger, and cash management.
2) The second best practice is to incentivize advance payments. Establish payment conditions that include incentives for customers to pay early. Offer early or upfront payment discounts and provide multiple payment options to ensure a smooth payment experience. Additionally, make sure to set up automated payment reminders to encourage customers to pay on time.
3) The third best practice is to ensure quick dispute resolution. Monitor disputes, understand the reasons for them, and try to resolve them as soon as possible. This will help you avoid delayed collections. Additionally, ensure that you have a process in place for tracking the progress of dispute resolution and ensure that it is completed on time.
4) The fourth best practice is to have a robust dunning mechanism. Dunning is the method of communicating with a customer systematically to guarantee collections. Establish dunning rules to ensure payment on time. Make sure that the process is automated and that it includes sending payment reminders, escalating to different levels of management, and updating customers on their payment status.
5) The fifth best practice is to set up an AR dashboard. This will help you get a 360-degree view of your collections’ performance and enable you to make more informed decisions. The dashboard should include key metrics such as Days Sales Outstanding (DSO), Current AR Ratio, and Average Days Delinquent. Try Radix for free
6) The sixth best practice is to automate gradually. Implement the new functionality gradually and give AR teams time to adjust to the new system. Start by digitizing invoices before introducing consolidated billing, or by using a small number of customers as pilots.
By following these best practices for accounts receivable automation, you can ensure accurate, efficient, and secure collections. Automation can help.
