Finance and operations teams have a lot on their plate. With what Gartner is calling a “triple squeeze” of supply chain disruptions, talent scarcity, and inflationary pressures, the plate may soon start to crack. CFOs and their teams know maintaining a steady cash flow is the best defense against financial instability. That’s why investing in financial automation to optimize processes like order-to-cash (O2C) is a top priority for CFOs in 2023.

Yet, there’s one crucial element within the O2C process that demands special attention: accounts receivable (AR). Efficient AR management can significantly influence a company’s cash flow, working capital, and overall financial well-being. In this guide, we’ll explore how accounts receivable automation, or AR automation, can enhance cash flow management within the O2C cycle. 

Why efficient AR management matters for cash flow

Before we do a deep dive into AR automation, it’s important to understand why efficient AR management serves as an anchor to financial success. In today’s economic climate, where capital is scarce and market competition is relentless, finance and operations teams are learning that a steady cash flow and revenue growth are fundamental strategies for survival. 

The AR process lies at the core of maintaining this equilibrium. It encompasses a series of critical steps, including invoicing, collections, payment processing, and revenue reconciliation. How a business manages each of these steps determines whether it flourishes or flounders. 

Understanding the accounts receivable (AR) process

The accounts receivable process is the series of steps a business follows to track and collect payments from its customers or clients who owe money for products or services they have received. It typically involves creating and sending invoices, monitoring payment due dates, following up with customers for payment, and recording received payments in the company's financial records. The goal of this process is to ensure that the company receives the money it is owed in a timely and organized manner

The AR process typically comprises the following steps: 

• Invoicing: The creation and distribution of invoices to customers.

• Collections: Follow-up with customers for payments and management of outstanding balances.

• Payment processing: Receiving and processing customer payments.

• Revenue reconciliation: Ensuring that these payments received align with invoices issued.

At first glance, these steps might seem straightforward. However, anyone involved in AR management knows that the devil lies in the details. Each stage of this process can be riddled with challenges, particularly when handled manually. In fact, teams relying on manual processes for revenue collection spend 30% of their time prioritizing and gathering information to make a collection, and only 20% of their time actually communicating with customers.

The role of automation in managing accounts receivable

Enter AR automation, a powerful solution that can transform how finance and operations teams approach the AR process. AR automation involves leveraging an automation platform to optimize AR-related tasks. Here’s how:

Reduced manual effort: According to a recent study, a staggering 77% of AR teams are in a continuous state of playing catch-up due to manual tasks. AR automation eliminates the need for time-consuming manual data entry and document handling. It frees up finance teams from mundane tasks, allowing them to concentrate on strategic activities that positively impact revenue.

Faster payments: Automated invoicing and payment reminders expedite the collections process. Customers receive accurate invoices lightning-fast, leading to quicker payments and improved cash flow. 

Improved accuracy: In the same study, it was found AR professionals spend up to half their day dealing with invoice disputes. Automation reduces the risk of errors associated with manual data entry, enhancing data integrity and financial reporting accuracy. 

Elevated customer experiences: Today’s buyers expect a smooth, efficient payment process. Delivering a headache-free buying experience positively impacts their perception of your business, and makes them more likely to remain customers and refer others. 

Real-time insights: AR automation provides real-time visibility into your AR process. While finance teams can access up-to-date information on outstanding balances, collections efforts, and cash flow projections, sales and customer success teams can also leverage AR insights to inform renewal and expansion strategies. 

The limitations of AR automation solutions

AR point solutions, while proficient at automating certain AR tasks, often come with inherent limitations. They are designed with a narrow focus, addressing only a subset of AR processes. This leads to a fragmented automation landscape within an organization, with separate tools for different tasks, each requiring its own integration efforts and maintenance. With their limited functionality and lackluster integration capabilities, they become just another tool on your already bloated tech stack. 

Growth-focused businesses understand that the true potential of AR automation, or any type of automated process, is unlocked when integrated into a broader automation strategy. In the case of the accounts receivable process, that’s the O2C cycle. 

In the O2C cycle, AR management is just one piece of the puzzle. To optimize the entire revenue lifecycle, it’s essential to integrate AR automation with your Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), and billing systems. Integration across your revenue stack ensures a smooth data flow between different stages of the O2C process. For instance, when a sale is closed in the CRM system, it triggers the creation of corresponding invoices in the AR system, eliminating manual effort and enhancing data accuracy. 

Why choose low-code iPaaS for AR automation

Low-code iPaaS solutions, such as Tray.io, offer a distinct advantage by providing a unified platform for automation across the entire O2C cycle and beyond. Uncertain economic conditions have businesses aiming for speed and efficiency in their cash flow to not only stay afloat, but prosper. Achieving end-to-end automation across the revenue lifecycle should be a top goal for CFOs and finance teams - and here’s how leveraging a low-code iPaaS platform can get them there: 

1. Effortless integration: With a vast library of pre-built connectors, organizations can effortlessly connect their entire revenue tech stack. With over 600 connectors available out of the box and the ability to create custom connectors using low-code tools, finance and operations teams can establish seamless integration between AR, CRM, ERP, billing systems, and more. This eliminates the need for manual workarounds and ensures data flows smoothly across systems.

2. End-to-end automation: Low-code iPaaS solutions empower organizations to automate not only AR processes but also other critical O2C functions, such as order management, contract approvals, and revenue reconciliation. This comprehensive approach transforms the entire revenue cycle, enhancing efficiency and accuracy while freeing up teams to focus on more strategic projects.

3. Flexibility and customization: Finance teams can tailor automation workflows to meet their specific business needs. Low-code iPaaS solutions like Tray.io provide the flexibility to design, customize, and configure automation processes according to unique requirements, ensuring a perfect fit for the organization's workflows.

AR automation is only the beginning

When automating your accounts receivable process, remember that it's not just a tool but a catalyst for financial efficiency. By automating your AR processes, you're not only speeding up cash flow but also enhancing your competitiveness in a dynamic business landscape. Learn more about how automation platforms like Tray.io can eliminate manual work and free up finance teams.