Episode 5: Understanding the Nitty-Gritties of AR Automation

Madhurima Gupta:
Welcome to The Mid-Market CFO Circle podcast powered by RadiusOne. I’m your host, Madhurima Gupta. I’m working as the Senior Product Marketing Manager at HighRadius. We hear you mid-market CFOs, and we understand the challenges that you face every day at work. On this podcast, we bring you conversations with the CFO community to help solve problems that you face every day. Our speaker today is Travis Smith. He’s currently working as CFO at DALYTE, an AiA Industries Company, which manufactures skylights and daylighting solutions. Travis has extensive experience across manufacturing, multi-unit retail, restaurants, professional services, and nonprofit management. Last year, he also published a book, it’s called “Accelerate Your Business in 45 Minutes”, and the book explains the steps that any business owner can take to grow their business exponentially. On that note, I’d like to welcome Travis to the show and I’m looking forward to understand from him how CFOs can find the right automation solution for their meets. Hi Travis.
Travis Smith:
Hi.
Madhurima Gupta:
It’s great to have you on the show today. Thank you for taking time.
Travis Smith:
Absolutely. I’m very excited to be here.
Madhurima Gupta:
So Travis, the very first question that I have for you is to understand what are the steps that a CFO should plan to ensure that he can get the AR automation, right?
Travis Smith:
So it’s really important to do your research and take time to evaluate the company needs in order to figure out exactly what the best solution is gonna be to put in place. Um, I see a lot of organizations kind of skip those initial steps and jump directly to product selection or product implementation without doing the full analysis of where they’re at in their company, looking at workflow,s product responsibilities, and, um, you know, the, the ideal solution really comes from that analysis and evaluation. I think the other piece of it is collaboration, bringing in the team members in the organization who actually do the day-to-day work is really important because they understand the challenges that the organization faces, the challenges that they face. And usually they have some really great ideas about things that could be improved upon. And if you bring them into the process, they’ll really have an ownership feel and buy-in. And, and I feel like that helps set you up for success.
Madhurima Gupta:
And you know, when CFOs are planning it properly, right, and they’re analyzing the challenges that they are trying to solve, or they are able to identify, what should the CFO offices do to ensure that they don’t miss out on important areas, right? Ensuring that things are not overlooked.
Travis Smith:
I think that really also comes back to the collaboration piece. Um, that’s just one of the things that I grew up in business, uh, really having instilled in me is, is that many minds are better than one mind. And involving the individuals who actually do the day-to-day work is a huge piece because they know all of the steps and intricacies involved. And a lot of times, uh, you know, as, as individuals rise up or titles rise up in an organization, they get more and more disconnected from those actual day-to-day steps, uh, their teams face in the trenches. So I think that that’s just the biggest thing they can do is make sure that they solicit input. Um, they don’t take it personally on things that are, or are not working as well as they could be. And they involve their team members in finding the solutions.
Madhurima Gupta:
Now, since you mentioned soliciting inputs from team members, one of the things that we’ve heard here at HighRadius from a lot of CFOs that we’ve spoken to is that often the problem that makes the maximum noise gets attention. Right. And, uh, it could also be the problem that, uh, eventually feeds your cash flow that gets, uh, you know, most, uh, noise, right, and most privilege of being heard first, right. That generally happens with collections. So what we have seen is that a lot of times, uh, CFOs overlook other parts of, let’s say the accounts receivable function, right? The most important aspect of optimization and prioritization often becomes the collections. Right. So why do you think that happens? And have you seen that happen in the first place?
Travis Smith:
Well, I mean, we’ve all heard the saying cash is king, right? Right. So that’s where individuals tend to focus is on the cash piece of it. Um, where they tend to miss is in the details that actually goes into, uh, the struggle that they’re having in collecting that cash. Um, you know, a lot of times it could all the way back to the sales process and how are, uh, contracts being written. What’s the communication with the customer around expectations and pay schedules. Um, and then, you know, you can push that forward to the relationships that the accounting team or the accounts receivable team, uh, has or can create with the customers. Uh, if you have good relationships and you foster good relationships, just a person to person, then when those calls are being made, it’s a much easier conversation. So there’s a lot more that goes into that collections piece than just getting the check in door and making sure it gets applied correctly and is, you know, in the bank and reflect it on the financial statements. There’s a lot of detail behind that that can really make or break that collection process.
Madhurima Gupta:
And what about ensuring that, um, you know, let’s say collections area making the most noise doesn’t, uh, overshadow the other areas that need attention. So how can a CFO ensure that they’re able to cut through the clutter and actually, uh, identify the underlying pain points or underlying challenges in the, uh, office?
Travis Smith:
So what I’ve used in the past is kind of a flowcharting mechanism, um, or a value stream mapping process. And in that process, um, you know, you really take everything from beginning to end, all of the different steps that are involved. Again, like I said, all the way back to the sales process and contracts, and then you write through, uh, what those steps are and the important part to it is putting a time to it. So certain activities may take five minutes. However, if there’s a wait time of two days on that, that really can start to add up as you work across the process. And so through value stream mapping, it’s a visual tool that really helps people see where your bottlenecks are and where the opportunities for improvement are. And, uh, I’m a very visual person. It’s a very effective tool that I’ve seen used in organizations for process improvements everywhere. However, uh, it could easily be applied to something such as cash collections.
Madhurima Gupta:
And, um, you mentioned that you can list out all the areas that need your attention. Now, can you explain when you listed out all of these problems, why is it important to prioritize the right set of challenges and how should a CFO figure those out?
Travis Smith:
So the key, um, to being able to get the best solution is identifying the proper areas for improvement just as you mentioned. Correct? And so when you look at that visually, whether it’s across the whiteboard or in one organization, we used, uh, the big easel pads and actually wrapped the process around our entire conference room. It shows where the challenges are and bringing in the individuals who are responsible for areas as you are, mapping that out again, provides you with the insight to what the struggles are. And what you may find is that some of the struggles can easily be fixed because you have duplication of process or one individual believes they’re waiting on another individual when they really are not. And so by laying that out and going through that process and really understanding it in detail should help everybody identify the true pain points. Some are gonna be easy, quick wins and some are gonna take more work and effort. However, it’s something that can be done, um, relatively easily, once it’s all laid out in front of you.
Madhurima Gupta:
And what about, um, you know, the fears that some CFOs have in terms of being left behind in a booming competitive economy, what should CFOs do to overcome this fear?
Travis Smith:
Well, I think, you know, everybody in the world right now is facing labor shortages and talent shortages. Um, I have yet to meet an executive where we’ve had a conversation and they just tell me that they have all of the amazing employees that they need. Right?. And so when it comes to evolution, I think that something that’s going to become even more critically important is gonna be the automation side of businesses. Two fronts on that. One is, we have to be able to get a high productivity from our employees. And the easiest way to do that is to help them automate some of their tasks. And two, whether it’s because the labor force is shrinking or the business is growing, companies have to be able to leverage more productivity out of employees. And, and so when that’s done properly, it can really drive a massive impact to the bottom line from a profitability standpoint, and it can help alleviate some of the pain points that we’re seeing with labor shortages and talent shortages in, in the economy right now.
Madhurima Gupta:
And Travis, in your experience, if we talk about accounts receivables in specific, right. Then what are the top, uh, tasks or processes that you would recommend CFOs to automate right away that can directly improve employee productivity?
Travis Smith:
Yeah, so obviously issuing of invoices, um, can be a time-consuming process, uh, right. For every sales transit action, whether you’re selling one item or 10,000 items, you have to issue an invoice to your customer in order to get paid. Um, that’s an area where, depending on your systems, you may be able to generate automatic invoices. Um, electronic communication is, you know, pretty much the standard now. So making sure your system can generate the invoice and automatically email it to your customers, um, drastically goes down on the amount of time that it takes for that to get received and processed on the other end. And then I think the other piece to this is automated communication and setting up some workflows so that your system can automatically send reminders on unpaid invoices to the clients, uh, or customers in order to make sure this stays the top of mind and it’s ringing on the right people. Um, it takes a long time for a person to sit down and type out emails or go through an AR aging, make calls and follow up. And those are really easy automatable steps with the software that’s out there today.
Madhurima Gupta:
And, um, what about, uh, you know, figuring out the areas where, you know, automation at times doesn’t work, right. Um, so often, you know, companies implement certain automation software. It could be a simple RPA bot, but they don’t see success with it immediately. Would you recommend a certain time frame that CFOs should let these, um, solutions run for before coming to any conclusion on whether an automation solution is working for them or not?
Travis Smith:
Well, I think it probably depends upon scale a little bit, um, both size of organization and scale of the project and implementation. Um, it’s always a learning curve and there’s always bugs that have to be worked out on any kind of implementation, whether it’s an automation implementation or an ERP implementation, or just implementing new processes and procedures. Now, all of that is going to come with any sort of automation. Um, you know, the process and procedures that the employees go through every day is going to change. And so you have to devote the time to proper documentation, to proper training, then go through the continual improvement loop. And I think that in order to truly do that effectively again, and depending on the size of the organization and the teams, you have to at least go nine to 12 months before you could really say, you know, if the automation is going or is not going to work, um, it’s just a, it’s a long process and there’s a lot of steps and details into actually getting it to work and being successful. And I do see organizations come cut off projects short because they think it’s the magic silver bullet. And really, it just takes hard work, dedication and continual improvement in order to get it over the finish line.
Madhurima Gupta:
And, um, Travis, you know, I noticed that you’ve worked across dozens of company across your career, right? So, uh, I wanted to understand that whenever you were in these companies, your, um, your peers within the company, uh, what were their outlook towards implementing automation solutions of finance function?
Travis Smith:
Early in my career? Um, there was more resistance, uh, to making that investment because it really is a cost and a lot of business owners see it just as a sunk cost and a cost center that doesn’t generate any true revenue, right? It’s not like sales or manufacturing where they’re generating products, uh, or selling products that can generate revenue. And so a lot of organizations struggle to invest in things like IT and proper systems and automation, uh, because they don’t necessarily see the value. And so it really is up to, you know, the CFO or the different department leaders to be able to create a presentation and bring that back to the executive leadership team or the decision-makers and show the value. And value is not always in revenue or net profits. However, when you automate and you are more efficient, then you can realize better profits. And that’s the key metric, right? Everybody gets excited about net profit or net income. And so when you can say, Hey, I can do 15 to 20% more work with the same labor cost that has a huge impact on the bottom line. And that’s really important when you’re making that presentation to the business leaders.
Madhurima Gupta:
And what about, uh, you know, helping mid-market CFOs ensure, um, the fact that AI is a solution that they should be thinking about implementing today, uh, and not wait far ahead in future. Is that something that you believe in?
Travis Smith:
It is. I mean, I think that every day, uh, that goes by, we see less and less people in the workforce. Uh, we see business complexity increasing and with the supply chain challenges in the world today, right. We’re seeing a pinch on our margins and on our bottom lines. And so it’s not going to get any better. I don’t believe in the foreseeable future, especially in mid-market companies. And so making that investment now should help save long-term pain and put ’em a little bit further, hopefully in their competition, which always gives a leg up towards, uh, you know, success in the long run.
Madhurima Gupta:
So, Travis, if I had to ask you three key areas that a mid-market CFO should immediately automate in their organization, right. What would these three areas be?
Travis Smith:
Well, I think automation in marketing is really important. Um, virtual marketing is critical to organizations. I think automation in accounting, um, or account around the accounts receivable function is also very important. Uh, cash is king, we’ve gotta be able to get it in the door faster and easier. And then I think the third piece is just around general business operations, you know, whether that be designing tools to flow chart, uh, process and procedures within the organization, or value stream mapping to identify areas where things are taking too long, or we have bottlenecks. Um, and then looking for solutions in that is, uh, key.
Madhurima Gupta:
And just another question on that. So when we are talking about automating the AR function, then what would be the key areas within the accounts receivables function and then, uh, in a mid-market CFO office that you would recommend, um, CFOs diving deep in to identify if automation can help.
Travis Smith:
Yeah. I think it goes back to the expedience, in the ease of getting billings out to clients, right, and reminding clients that payments are due and needed. Um, there can also be automation around payment collection. And we see that in some of the smaller software where when the invoice comes across, people are able to just click a button and make payment. Um, so automating on the front end, getting the invoice out, sending reminders, and then for the ease of payment collection, um, is absolutely where I would start.
Madhurima Gupta:
And if we talk about the manufacturing industry and given that you’re working in manufacturing industry, uh, company yourself, uh, when it comes to accounts receivable, what are the top three areas that you struggle with the most in terms of ensuring that your team is able to do more with less,
Travis Smith:
You know, for us, it is the, uh, follow-up. Um, we make sure that we get the invoice out pretty well. However, the follow-up has not been very good and that’s an opportunity for us, um, in that automation space to be sending the reminders. Um, when customers get over 30 days, um, you know, somebody has to print out a report and make phone calls or send emails. Uh, and then we see that the collections drag on. So for us, it really is about that follow-up and making sure we’re staying in front of the customer.
Madhurima Gupta:
Thanks for sharing that. Um, so that’s all from me today here folks, and I really hope that you learned a few things for sure, from Travis who has been really sweet to take his time out and talk to us about the challenges and how should one solve them. So thanks, Travis. We really appreciate you taking the time
Travis Smith:
For having me. It’s, uh, it’s been a great experience.
Madhurima Gupta:
Great. We’ll see you again next week. Stay tuned for more.