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Accounts Receivable Automation: The Answer to the Collection Challenge

AR Automation

You love for your organization to get paid, and get paid quickly. But, while you can send invoices to your customers, you can’t ensure that they will pay by your deadline. Organizations often face a lag in business payments from their customers, typically 30 days but sometimes up to 90 days or even longer. Because those customers payments are necessary to support your business—operations, employees, and more—payment delays negatively impact your operation and its cash flow. Few organizations are immune from this phenomenon. That’s where accounts receivable (AR) automation can help.

What Are Accounts Receivable?

Accounts receivable (AR) are sales for which you have yet to collect payment. While some businesses operate by having customers make payment before receiving goods or services, others provide the goods or services first and then request payment afterwards. As an accounts receivable example, think of your local electric supplier, which allows you to run up a month’s worth of electricity before requiring you to pay. If your business operates this way, you are essentially selling on credit. Accounts receivable shouldn’t be confused with accounts payable (AP), which is money you owe to someone else for purchases you’ve made.

What Are the Standard Accounts Receivable Processes?

The standard accounts receivable collections process involves four basic steps:

  1. Establish Your Credit Practices: To make sure your customers understand what’s expected of them in the form of payment, it’s important that you develop specific credit practices, generally available to customers in writing, that outline the terms of your purchasing agreement.
  2. Invoice Customers: Invoicing involves sending payment requests, either on paper or electronically, to customers each time a sale is made; invoices typically include a due date and a gentle reminder about any penalties the customer may incur for late payments.
  3. Track Payments Received and Payments Due: Since your cash flow depends on the timely processing of invoices, it’s imperative that you track any payments you receive and any that are still outstanding; a follow-up plan for reminding customers and collecting past-due invoices, with increasing levels of inducements, is also needed.
  4. Account for AR and Bad Debt: Depending on which method of accounting you employ, cash or accrual, you will use a different process when recording receivables and accounting for bad debt.

Why Accounts Receivable Automation?

You’ve no doubt heard a bit—or a lot—about automating business processes. It’s the practice of taking day-to-day activities, subtracting the labor-intensive administrative part of them, and transferring that “burden” to technology.

AR automation migrates invoicing efforts to digital practices. It automatically creates invoices based on your company’s data, delivers them electronically on set dates, sends reminders, and reconciles payments with accounting systems. It also supports multiple types of payment, including ACH, credit card, and PayPal.

How Does Bill.com Accounts Receivable Automation Help My Company Save Time and Effort?

Every business wants to save time on invoicing and collections and get paid faster; AR automation can make that happen.

  1. Bill.com digitizes the entire AR process, meaning that paper is eliminated. No more printing and mailing invoices. They’re delivered digitally and immediately. You can even manage this process while on the go.
  2. Bill.com automatically generates your invoices, credit memos, emails, and reminders from built-in dynamic templates you can easily configure. Select your item and quantity and your invoice is ready—no more formatting Word documents! Your invoices are based on a list of goods, services, descriptions, and prices that you create in advance, so your invoiced items are always presented consistently, saving time if customers have questions later.
  3. It enables digital business payments so you can get paid faster and your clients can set up automatic recurring payments, saving you both time and effort. Many organizations are frustrated with the pain of accepting credit card payments, so Bill.com not only makes it easy and affordable to accept payments via credit card, but offers other options like secure ACH payments from your customer’s bank, without either of you having to exchange bank account information.

Benefits of Auto-Payments via Accounts Receivable Automation

Your customers’ internal review process is one of the reasons collecting payment can take so long.

However, you can erase that delay by setting up automatic payments with your customers. Auto-payments also allow you to stabilize and enhance control of your cash flow. You’ll have set dates on when your business will receive payments and can plan accordingly. It’s no secret that most organizations prompt their customers to set up automatic payments for this very reason.

With the ability to digitize payments, eliminate the time and effort of creating invoices manually, and collect payments more quickly, AR automation with Bill.com eliminates hassles for both you and your customers.

Are you a business, nonprofit, or accounting firm ready to give AR automation a try? Learn more or sign up for risk-free trial.

If you are an accounting firm who is already a Bill.com customer, you have AR automation included in your Bill.com Accountant Console—visit the Console Features tab to enable Accounts Receivable for any or all of your clients.

January 23, 2019
Mark Gervase
Director, Product Marketing, Bill.com
Mark works with accounting firms and bookkeepers to grow their businesses and achieve efficiencies through automation and cloud technologies. He is a former CPA, has a background in financial technology, and holds an MBA and BA in Economics from the University of California Berkeley.