As B2B companies work to more closely manage working capital and reduce costs, Accounts Receivable (AR) automation delivers a solid way to create long-term efficiencies, reduce outstanding sales, improve buyer satisfaction, and grow your businesses.
While AR innovation has been relatively commonplace among Business-to-Consumer (B2C) companies largely due to consumer demand, progress in the Business-to-Business (B2B) realm has been very slow, with larger firms ahead of small- and medium-sized businesses in digitizing and automating their AR processes.
If AR automation is a proven road to success, why is it that 40 percent of U.S. B2B payments made in 2022 were made with paper checks?
A key reason is good-old-fashioned resistance to change, backed by a lack of standardization, fear of complexity and fragmentation of decision-making. As well, there are some complications, such as the need for digitization of both buyers’ AP processes and suppliers’ AR processes in order for both to integrate yet still work independently of each other.
It can get even more complicated if a supplier offers dynamic discounting, as it can result in a lack of alignment and data sharing between the buyer and supplier. This can create more complication and confusion, such as whether a buyer can take advantage of a discount for which they qualify even if their invoice payment falls outside the discount timeframe due to processing time. This can result in more work for a supplier to validate that the data coming from different sources is accurate.
However, these challenges do not stand in the way of AR automation, which replaces the manual, labor-intensive processes with a smoother digital process.
Benefits for B2B Companies to Automate AR Processes:
- Accelerate Cash Flow. Replacing check acceptance with multiple digital payment options makes it easier for your customers to complete payments on time.
- Reduce Days Sales Outstanding (DSO). Simplifying payments for your customer helps you get paid faster, leading to an increase in cash flow and lower Days DSO, often by weeks.
- Attract New Customers and Retain Existing Ones. Accepting business credit card payments can attract new customers, prevent attrition and increase revenue. Implementing Commercial Card Optimization can also reduce transaction costs by automatically collecting and transmitting additional data points that help qualify transactions for reduced cost Level 2 and Level 3 interchange rates.
- Reduce Fraud. Implementing advanced payment security strategies with a proven payments provider can secure payment and transaction data and reduce business and compliance risks. Choose a provider that maintains a Level 1 PCI DSS certification and offers a layered security approach that includes EMV 3D Secure, point-to-point encryption, tokenization and fraud protection solutions.
- Create More Stable, Long-Term Efficiencies. These include increasing operational efficiency by reducing manual processes and reallocating staff to more important tasks, increasing cash flow, cash visibility and future cash predictions and controlling costs by cutting time spent on check processing, reconciliation and settlement.
- Improve Insights and Future View. Automation gives you the ability to run a variety of reports, providing greater transparency into how your funds are moving, including trends analysis to help you identify revenue growth opportunities.
- Increased Customer Satisfaction. Better communication enables your customer to know where they stand on invoices and get them paid on time in the way they want to pay, creating less work for the customer to pay your invoices.
Getting Started: The First Steps to AR Transformation
Digitize Your Invoice Delivery. This small yet impactful process delivers your invoices directly to the buyer’s ERP or AP platform, which can help reduce DSO by days or even weeks. It also enables multiple payment channel or credit options and provides a more secure way for interaction between a buyer and supplier.
Bottom Line: Increase Revenues and Financial Health for Your Company
Automating your AR processes with faster, electronic payment methods streamlines your accounting processes, strengthens security and fraud prevention and contributes to better overall financial health, giving your company the opportunity to increase revenues, improve customer experience and gain a competitive advantage.
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