How To Choose The Best Accounts Receivable Automation Software

Introduction

Managing accounts receivables is critical for maintaining a healthy cash flow in any business. Metrics such as invoice aging, days sales outstanding, and bad debt directly impact cash inflows.

To streamline AR operations and reduce the time and effort required to mitigate credit risk, deliver invoices, collect payments, and match records, accounts receivable management software is essential.

However, with numerous options available, choosing the best software can be overwhelming. To simplify this process, we’ll provide tips on selecting the best accounts receivable tracking software for your business.

But before deciding on the most effective AR management software, you’ll first need to grasp the basics of the accounts receivable management software and how it can benefit your business.

What Is Accounts Receivable Management Software?

Accounts receivable management software is a tool that automates the process of managing and tracking money owed to a business by its customers. It helps streamline invoicing, payment collection, and reporting, improving cash flow and reducing the time spent on manual tasks.

The Need for Accounts Receivable Management Software for Your Business

Investing in an accounts receivable management software can also lead to increased efficiency and productivity. By automating many of the manual tasks involved in receivables management, businesses can free up their finance executives and collectors to focus on higher-value tasks like credit and collections strategies. With features like automated invoicing, collections prioritization, and deduction management, businesses can streamline their operations and improve their bottom line.

Accounts receivable management software is crucial for a business as it automates billing and collections, reducing manual errors and administrative costs. It enhances cash flow management, provides real-time financial insights, improves efficiency, and strengthens customer relationships by ensuring timely and accurate invoicing and payment processing. By investing in AR management software, businesses can reap several benefits:

• Improves Cash Flow: Accelerates the collection of payments, ensuring a steady cash inflow.
• Reduces Manual Errors: Automates invoicing and payment tracking, minimizing the risk of errors.
• Enhances Efficiency: Streamlines AR processes, saving time and reducing administrative workload.
• Provides Real-Time Insights: Offers up-to-date reports and analytics on outstanding invoices and payment status.
• Strengthens Customer Relationships: Enables timely and accurate invoicing, improving customer satisfaction and trust.
• Facilitates Better Decision-Making: Access to detailed financial data aids in strategic planning and financial management.
• Improves Compliance: Ensures adherence to accounting standards and regulatory requirements.
• Reduces Costs: Lowers the need for manual labor and reduces operational costs associated with billing and collections.
• Enhances Security: Safeguards sensitive financial information through secure, encrypted platforms.
• Supports Scalability: Easily handles increasing transaction volumes as the business grows.

Top 7 Benefits of Investing in An Accounts Receivable Automation Software

Investing in accounts receivable automation software not only enhances financial management but also supports business growth by optimizing cash flow, reducing costs, and improving customer relationships. Here are the top benefits of automating accounts receivable process:

1. Accelerated Payment Collection
   • Efficiency: Automation streamlines the invoicing process, sending invoices promptly and reducing delays in billing.
   • Reduced DSO: By facilitating quicker payments, businesses can lower their Days Sales Outstanding (DSO), improving cash flow.
2. Improved Cash Flow Management
   • Real-Time Visibility: Automation software provides real-time data on outstanding invoices and payment status, allowing businesses to monitor cash flow more effectively.
   • Forecasting: Enhanced visibility helps in accurate cash flow forecasting, aiding in better financial planning and decision-making.
3. Reduced Administrative Costs
   • Labor Savings: Automation reduces the need for manual data entry and administrative tasks, freeing up staff for more strategic activities.
   • Operational Efficiency: Lowered administrative overheads contribute to overall cost savings and improved profitability.
4. Enhanced Accuracy
   • Error Reduction: Automated processes minimize the risk of human error in invoicing and payment processing, ensuring more accurate financial records.
   • Consistency: Automation ensures that billing and collections processes are consistently followed, further reducing the likelihood of mistakes.
5. Better Customer Relationships
   • Timely Invoicing: Automation ensures that invoices are sent out promptly, leading to timely payments and fewer disputes.
   • Improved Communication: Automated reminders and notifications keep customers informed, enhancing transparency and trust.
6. Comprehensive Reporting and Analytics
   • Detailed Insights: Automation software provides in-depth reports and analytics on receivables, payment trends, and customer behavior.
   • Informed Decisions: Access to detailed data supports better financial decision-making and strategic planning, helping businesses identify areas for improvement.
7. Increased Efficiency
   • Streamlined Processes: Automation simplifies and speeds up the entire accounts receivable process, from invoicing to collections.
   • Productivity Boost: By reducing manual tasks, staff can focus on higher-value activities, boosting overall productivity and efficiency.

Once you have decided to invest in AR management software, the next step is to determine whether it has all the required characteristics and functionality. 

Features to Look for in Accounts Receivable Management Software

When selecting Accounts Receivable Management Software, choosing a solution that meets your business needs and optimizes your financial processes is crucial. The right software should streamline invoicing, enhance payment tracking, and improve cash flow management. Here are some key features to look for when evaluating your options.

Automated Invoicing

The first aspect to consider is automated invoicing. This feature should allow you to create and send professional, branded invoices with ease.

Ask yourself these questions before deciding:

• Can you create customizable templates for your invoices?
• Is it possible to schedule and automate recurring invoices for regular clients?

Payment Processing

Payment processing capabilities are essential for handling various payment methods and ensuring secure transactions.

Consider the following points:

• Does the software support multiple payment methods such as credit cards, debit cards, bank transfers, and digital wallets?
• Is there seamless integration with popular payment gateways?

Real-Time Reporting and Analytics

Having access to real-time reporting and analytics is crucial for gaining insights into your financial operations.

Evaluate these aspects:

• Are there visual dashboards that provide quick insights into receivables, aging reports, and payment trends?
• Can you generate detailed reports on outstanding invoices, payment history, and customer behavior?

Automated Reminders and Notifications

Automated reminders and notifications help ensure timely payments and keep customers informed.

Key considerations include:

• Does the software send automated email or SMS reminders for upcoming and overdue payments?
• Are there notifications to confirm receipt of payments?

Customer Management

Effective customer management tools can enhance the payment experience and streamline communication.

Ask these questions:

• Is there a self-service portal where customers can view invoices, make payments, and track their payment history?
• Are there tools for easy communication with customers regarding billing and payments?

Integration Capabilities

Integration capabilities are important for ensuring that your AR software works seamlessly with other systems.

Consider these points:

• Does the software integrate with enterprise resource planning (ERP) and customer relationship management (CRM) systems?
• Is it compatible with popular accounting software?

Security and Compliance

Security and compliance features are crucial for protecting sensitive financial data and meeting regulatory requirements.

Evaluate the following:

• Does the software offer advanced encryption to protect sensitive financial data?
• Are there features that ensure compliance with industry standards and regulatory requirements?

Customizable Workflows

Customizable workflows allow you to tailor the software to your business processes and requirements.

Consider these aspects:

• Can you create flexible workflows that match your business processes?
• Are there automated workflows for invoice approval and payment authorization?

Cash Application

Cash application features can streamline the reconciliation process and reduce manual efforts.

Key questions include:

• Does the software automatically match payments to invoices for faster reconciliation?
• Are there tools for easy reconciliation of bank statements with accounts receivable?

Dispute Management

Effective dispute management tools can help resolve issues quickly and efficiently.

Consider these points:

• Can you track and manage disputes and deductions efficiently?
• Are there pre-defined workflows to handle disputes and resolve issues quickly?

Mobile Accessibility

Mobile accessibility ensures that you can manage accounts receivable on the go.

Ask these questions:

• Is there a mobile app that allows you to access and manage accounts receivable from mobile devices?
• Does the software have a responsive design that works seamlessly on both desktop and mobile devices?

Scalability

Scalability features ensure that the software can grow with your business.

Consider these aspects:

• Does the software have features that can scale with your business, accommodating increasing transaction volumes and new requirements?

Customer Support

Reliable customer support is crucial for addressing any issues or queries you have.

Evaluate the following:

• Is there round-the-clock customer support available to assist with any issues or queries?
• Can you access training materials, tutorials, and a knowledge base for effective software use?

5 Steps to Choose the Best Accounts Receivable Management Software

When choosing the best account receivable management solution for your business, following specific steps can help you make the right decision. Here are the steps:

1. Huddle up internally

Start by connecting with your team members who work on accounts receivable workflows to understand their challenges and requirements. This will help you set clear objectives about what you want to achieve with AR automation software. 

Some questions to ask your team include:

What are the bottlenecks in your AR process?

• Is the DSO consistently high?
• Are more clients turning bankrupt?
• Is the error rate high in reconciliation?
• How much time do you spend on invoicing?
• What is the process you follow to make collection calls?

How much are you losing because of these bottlenecks?

• $$$ in bad debt and unpaid invoices per month
• Cost of additional FTE needed for completing tasks
• Delay in closing the books

Do we currently have any resources that can help work around it?

• Tech tools
• Expert professionals
• Outsourcing agencies

It’s important to assess how well you’ve automated the different steps in your AR process to identify gaps and understand which processes need to be automated on priority to improve efficiency.

2. Do your research

Once you assess your needs and the gaps in your system, you need to look for solution vendors that can help plug the gaps. Research various AR solutions and compare their features, pricing, regulatory compliance levels, and integrations. Opting for cloud-based solutions can save you CAPEX costs and improve scalability, while on-premise-hosted solutions give you better control over your data and processes. 

Key accounts receivable software features:

Feature	Description
Billing and invoicing	Auto-generate invoices and deliver them via emails or directly to customers’ accounting or AP systems.
Payment processing	Process multiple payments including ACH, checks, and wire transfers. Allow customers to schedule payments, pay in installments or partially.
Aging reports	Keep track of aging receivables and categorize them based on the number of days outstanding (< 30 days, etc.).
Worklist prioritization	Automatically rank outstanding accounts based on the amount and days overdue.
Customer self-service portals	Allow customers to identify their amounts due and pay anytime using their preferred channels.
Credit risk scoring	Check the credit scores of customers using predefined models and data from multiple sources.
Automated dunning	Automatically sends reminder emails to customers about their payment due dates and amounts.

Other good-to-have features include automated cash reconciliation, in-app calling for collectors, and deductions management.

Integrations

When selecting an AR solution, ensure it can integrate with your ERP, accounting, or CRM software. Look for plug-and-play integrators to speed up implementation and avoid extra costs. Out-of-the-box integrators can help you navigate the process without much IT support. HighRadius’ solutions are built for all popular ERP systems, including NetSuite, Sage Intacct, Microsoft Dynamics, SAP, and Oracle.

Pricing

This is one of the key deciding factors in your software purchase journey. AR software solutions may be priced on a per-user basis or the number of invoices sent. Check if your company policies allow you to subscribe to the vendors’ pricing model. Study if they fall within your budget limits and can help you achieve target ROIs within the specified timelines.

3. Score and shortlist vendors

Along with evaluating the software solutions, check the vendors’ credibility, clientele, and service levels. You don’t want to be stuck with an unresponsive vendor after the software implementation.

Some key parameters to evaluate the vendor on include:

1. Application uptime: This metric helps you gauge whether your application will be available 24×7. It will also give an idea of which party will be responsible if the service is disrupted by planned downtime or unplanned outages. The common industry standard is to support 99.9% uptime.
2. Response levels: This metric promises how much time it will take your AR SaaS vendor to recover from a cybersecurity incident from the time it has been detected. Other business continuity and disaster recovery metrics, such as recovery time objective (RTO) and recovery point objective (RPO), help you know how much time it will take for you to get your data in case of an incident and how much of the data you’ll be able to recover, respectively. The shorter the RTO, RPO, and incident response time, the better the vendor’s service.
3. Security measures: Since financial and client info is one of the most confidential data, it is pertinent that your AR solution adheres to the highest security standards. This also helps from a regulatory standpoint. If you are using SaaS AR software, check for the multi-tenant security measures, location of data centers, data retention, data encryption, and access privileges.
4. Grievance TAT: Check the customer service turn-around-time (TAT) of the vendor. Does the vendor promise to reply or initiate action on your grievance within four hours? How long does the vendor say they take to resolve issues – less than 48 hours or more? To provide your customers excellent customer service, your AR application and payment portal must be available at all times without any hiccups.

Ensure that the above metrics are covered in the service level agreement you sign with the AR software vendor. Add any other conditions or services that are crucial to meet your business goals. Track whether the AR software vendor upholds all the promises mentioned in the SLA.

4. Take demos of the software

Once you’ve shortlisted a few vendors, the next steps are to touch base with them via email, chatbot, or social media to better understand their offerings and start a conversation.Take demos of the solutions to get a feel of their interface and features. Chat with the solution experts to understand the limitations of the product and any additional costs due to customization or other requirements.

Questions to ask during a demo session:

• Can you show me how to use this <feature name> function?
• Is there an alternative way of doing this <task>?
• I have this <problem>, how can the solution help me?
• What features are available on the mobile app?
• Do you service other clients within my industry?
• Can you provide customer testimonials?

5. Get stakeholder buy-in

Share your solution comparison and vendor analysis with all the stakeholders, such as the CFO, finance director, AR manager, and other executives. Include the stakeholders in the demo calls and other high-level discussions. Based on your interactions with the vendors and the scores you’ve allotted to their solutions and services, shortlist 1-2 vendors to proceed with.

These five steps can help you choose the best accounts receivable collection tools for your business. And if you’re looking for an AR software solution that can help streamline your AR processes, HighRadius can help. In the next section, we’ll discuss how HighRadius can help streamline your AR processes.

Streamline Your AR Processes with HighRadius

Want to streamline your accounts receivable processes? HighRadius’ Accounts Receivables suite of solutions can help. With HighRadius, you can automate your entire AR process, from invoice delivery and tracking to collections worklist prioritization, payment predictions, and cash projections. Powered by AI and RPA-based tools, HighRadius’ solutions can help you reduce manual efforts and errors, improve efficiency, and increase cash flow.

More than 700 of the world’s leading companies have transformed their order to cash, receivables, and treasury processes with HighRadius. Our customers include PepsiCo, Anheuser-Busch InBev, Sanofi, Kellogg Company, Sysmex, and many more.

HighRadius offers AI-powered Cloud-based tools for the Office of the CFO, which brings modern digital transformation capabilities like artificial intelligence, robotic process automation, natural language processing, and connected workspaces as out-of-the-box features for the finance & accounting domain.

This suite of solutions automates all aspects of your accounts receivables process, including EIPP Cloud, Collections Cloud, Credit Cloud, Deductions Cloud, and Cash Application Software.

So if you’re ready to streamline your AR processes and improve your cash flow, connect with us today to understand how our solutions work and how we can help your business.

FAQs

1. What are the 5 KPIs for accounts receivable?

Five KPIs for accounts receivable are: 1) Days Sales Outstanding (DSO), 2) Accounts Receivable Turnover Ratio, 3) Collection Effectiveness Index (CEI), 4) Percentage of Receivables Over 90 Days, & 5) Bad Debt to Sales Ratio. These metrics assess efficiency and effectiveness in managing receivables.

2. How do you automate accounts receivable?

To automate accounts receivable, implement software that manages invoicing, payment tracking, and communication with customers. This includes automatic invoice generation, electronic payment processing, reminders for due payments, and real-time reporting for better cash flow management.

3. What is AP Automation vs AR automation?

AP automation involves streamlining the process of managing outgoing payments to vendors, including invoice processing and payment execution. AR automation focuses on optimizing incoming payments by automating invoicing, payment tracking, and customer communication with the help of accounts receivable management software.

4. What is the best way to track account receivables?

Use accounts receivable management software to automate invoicing, track payments, send reminders, and generate real-time reports, ensuring accuracy and efficiency in monitoring outstanding receivables.

5. How do you automate collections?

Automate collections by using accounts receivable management software to send scheduled payment reminders, manage recurring invoices, process payments, and update payment records automatically, reducing manual effort and improving cash flow.