How to Use RPA in Accounts Receivable Management to Scale Your Business Faster

Introduction

Automation is a buzzword today and your business, irrespective of its scale or industry, cannot afford to stay on the sidelines. Every accounts receivable (AR) function within your business, including collections, credit, and cash reconciliation, need to be streamlined and made more efficient with automation tools. One such tool that is effective, easy to implement, and has great capabilities is robotic process automation (RPA).

Accounts receivable teams should invest in RPA to automate repetitive, rule-based tasks such as invoicing and cash reconciliation. RPA tools along with advanced technologies such as artificial intelligence (AI) and machine learning (ML) help businesses complete complex workflows with little to no human intervention.

Let’s look closely at RPA technology, its benefits, and costs. We will also look at a few popular use cases of RPA in accounts receivable management.

What is RPA and how does it work?

Robotic process automation is a software technology that helps execute rule-based business processes automatically. RPA tools mimic the actions that a human user takes to complete a task. The tool is then able to complete the steps in the workflow without any manual intervention.

RPA software solutions are used to execute high-volume repeatable tasks such as cash reconciliation and optical character recognition (OCR). Unlike traditional automation tools such as scripting and macros, RPA solutions can interact with multiple types of apps and perform more complicated steps.

5 use cases of RPA in accounts receivable management

The accounts receivable function involves many processes and tasks that need meticulous attention since they are often repetitive and high in volume. This makes it an attractive function for automation. RPA tools can help automate such AR functions and make finance teams more efficient.

In this section, we look at some key use cases of RPA in accounts receivables.

1. Cash Application

Your business will likely receive payments in multiple formats, including checks, e-payments, and cash. Often customers would pay online and send you the remittance details via email. You’ll then need to match the payments with the right invoice, enter the data in your systems (ERP or accounting software), apply cash, and close the invoice.

How is cash application done manually? Your analyst will need to go through the checks, enter the check numbers against the right invoice in the system, check the status of the check, and close the invoice. In other instances, the analyst would need to go through emails in the inbox, collect the remittance details, and enter them into the ERP system. Matching records manually like this is error-prone and takes a lot of time.

How does RPA help in cash application? Optical Character Recognition (OCR) tools use RPA technology to read the checks and extract relevant information such as check number, amount, etc. The tool then automatically populates the extracted details to the relevant system such as ERP or accounting software. OCR technology can also be used to extract text data from remittance documents in PDF or image formats. RPA tools help make cash reconciliation faster and more accurate. For cash application, RPA can be implemented to aggregate remittance details from multiple sources including emails, portals and EDI files. With predefined rules in the solution, the payment and invoice information can be easily matched and short-payments can be auto-coded. Moreover, automated correspondence can be sent to customers in cases of missing remittance.

RadiusOne AR Suite – Cash Reconciliation App features a Multi-OCR engine that auto-captures accurate remittance data from check stubs and ensures noise reduction. It also enables straight-through cash posting with automated invoice matching and short-payment identification. With Remote Deposit Capture (RDC), RadiusOne ensures faster reconciliation of cash by scanning checks and check-stubs through the scanner for remote deposit in banks.

2. Invoicing

Sending invoices immediately is a measure that many CFOs plan to take to improve cash flow, according to the report titled The State of CFO’s Office: A Mid-Market Perspective 2022.

Automating some or all parts of the invoicing process is crucial to be able to send invoices on time and boost cash flow.

How is invoicing done manually? Your billing team collects all purchase orders, copies the data from there to your invoice template, and sends them via post or email to the respective customers. The sheer number of steps makes it highly prone to errors. Your team might end up entering the wrong figure in the invoice or send the wrong invoice to the customer. Such mistakes will lead to poor customer experiences, eventually, requiring you to have a large billing team.

How does RPA help in invoice processing? RPA programs automatically capture details from the purchase orders and prepare the invoice. The program ensures that the invoices are complete and all calculations accurate. HighRadius’ RadiusOne eInvoicing App eliminates the hassle of manual invoice delivery. It also allows you to improve your analysts’ efficiency through automated scheduling of invoices via emails or web portals while keeping in sync with your existing accounting system. You can also support your customers in their preferred payment format, including ACH, credit card, and debit card.

3. Accounts receivable reporting

Accounts receivable management is a critical function that has a direct impact on cash flow and working capital management. Business leaders need to track AR metrics such as days sales outstanding (DSO), days deduction outstanding (DDO), collection effectiveness index (CEI), etc. regularly to ensure that the company has the necessary capital and cash for everyday operations and future investments. AR teams use several reports to keep track of all these key metrics.

How is A/R reporting done manually? Manual reporting involves your analyst collating data from multiple spreadsheets and paper records. They then put the data in separate spreadsheets to share with the respective stakeholders. It is time-consuming and doesn’t offer a real-time picture of your cash position.

How does RPA help in A/R reporting? Accounts receivable software with reporting and dashboard features use RPA technology to build standardized reports to track key metrics, such as DSO, bad debts, etc. These tools automatically pull data from multiple sources to prepare the A/R reports and allow you to set permissions on who can view and share them.

4. Collections management

Sometimes, customers do not make the full payment citing quality issues, late delivery, or other reasons. To ensure that you collect the full payment without hurting customer relationships, it is crucial to track and identify their collections status.

How is collections and dispute management done manually? Analysts go through individual customer accounts, invoices, and bank statements to identify the collections status, claims, and disputes. Then, they check the records and open communication channels with the customer to identify the reasons behind the claims or disputes.

How does RPA help in collections and dispute management? When introduced in collections management, RPA can generate prioritized worklists. With RPA, RadiusOne AR Suite – Collections App maximizes your productivity with a prioritized collections worklist based on industry-specific best practices. RPA allows you to predefine business rules and strategies based on several factors such as the customer’s payment history. Based on these rules, it can take auto-recommended account level actions. RPA also standardizes customer collaboration using templates and correspondence packages. Moreover, RPA simplifies the reconciliation of invoice payment and approval statuses from customer portals and third-party websites for collections.

5. Credit management

When you onboard a new customer, you have to conduct credit management to minimize your financial risks and ensure to get paid for the products or services you provide. The process involves gathering credit information from different credit agencies, credit groups, public financials, and credit insurance bureaus, followed by capturing credit application data from online or offline forms. Once that is done, you have to conduct credit scoring and risk assessment before onboarding customers and setting up credit limits.

How is credit management done manually? Credit analysts manually perform credit checks by looking at the customer’s references, financial statements, and credit history. They assess the risk of working with the customer and determine if they can extend credit. Once they determine the creditworthiness of the customer, they manually set payment terms as per their risk level.

How does RPA help in credit risk management? Robotic Process Automation can be leveraged in credit management to capture credit application data by defining business rules and enabling template-based credit applications. RadiusOne Credit Risk Application offers accurate credit decisioning with an inbuilt credit database. It automates your credit decisioning based on the best-in-class credit strategy in your industry. RPA could also provide the functionality of auto-retrieval of credit reports from various sources. RadiusOne further automates emailing to the bank and trade contacts submitted by your new customer to collect the reference details digitally. Further, it contributes to better collaboration for credit approvals, periodic reviews, blocked order release, and customer correspondence by setting up ready-to-use online credit application templates and predefined system responses for credit acceptance or denial.

What are the benefits of using RPA technology in AR?

In this section, we look at some of the key benefits of using RPA for automating AR processes:

Saves time

It is estimated that RPA helps finance departments save up to 25,000 work-hours by reducing errors, as per Gartner. RPA solutions speed up AR management by making data transfer from invoices and receipts 3x-4x faster.

Improves productivity

RPA bots improve the productivity and efficiency of your team. It helps you to increase your team’s capacity by 35% – 50% without adding employee count and boost the speed of workflow completion by 30% – 50% (TechFunnel). RPA solutions are also able to complete tasks immediately, irrespective of the time or the day, thus improving productivity and customer experience.

Reduces Errors

RPA bots are rule-based automation tools, and they help complete repetitive tasks without errors. RPA boosts financial data accuracy by 95% (opinov8).

Enables quick implementation

Unlike the long implementation timelines for technologies such as ERP and AI, RPA tools can be implemented quite fast. Simple workflows can be automated with RPA solutions in 2 weeks while complex processes may take 2-3 months, as per Capacity.

Saves costs

Companies can save between $5 trillion – $7 trillion by 2025 by using RPA, according to researchers at Hadoop. Automating accounts receivables processes with RPA helps save costs by reducing labor costs through automated data entry and invoicing, improving invoice and payment processing times, reducing errors in manual A/R functions, and ensuring compliance with regulations and internal policies, thus, helping avoid costly penalties and fines.

What is the cost of implementing RPA technology for AR?

Finance leaders are often worried about the cost of investments and the returns they yield. Our recent survey revealed that cost optimization is the biggest priority for CFOs in 2022.

RPA tools can support finance leaders in their cost optimization initiatives. Since these solutions are priced much lower than other technologies, the savings they help generate are manifold.

The cost of RPA solutions can be divided into three categories – development costs, maintenance costs, and infrastructure costs. Many RPA solution providers offer platforms wherein you can develop your own RPA bots with minimal coding efforts. This helps further reduce the costs of RPA solutions.

Below we look at the cost of implementing RPA technology for various workflows.

Should you use RPA technology to streamline your AR processes?

If you are still confused about whether to invest in RPA solutions for AR automation:

RPA solutions are cost-effective and help you streamline your AR functions by automating repetitive, mundane tasks. It enables you to reduce time spent on manual workflows such as cash reconciliation and focus on strategic initiatives such as building customer relationships, risk management, and cash forecasting.

Most RPA solutions are priced at a few thousand dollars, making them easily affordable. They also deliver ROI between 30% – 200% in their first year of implementation (Source: Sunflower Lab). Power users of RPA technologies are even able to achieve 4x ROI, as per a study by Everest Group.

RPA tools are thus attractive for both small and mid-size businesses as well as enterprise organizations. These are a must-have in your AR automation tech stack and can become the first step toward using more advanced automation mechanisms such as artificial intelligence (AI), the internet of things (IoT), and predictive analytics.

Next Steps: Choose AR automation solution with RPA technology

When looking for an automation solution, consider key factors such as identifying the fundamental need of technology, finding a complete solution, setting definite timelines, ensuring flexibility, and seamless integration. The right technology stack from the right vendor can bring a steady, scalable, and effective change to your organization. In today’s economy, AI and RPA features can help transform the order-to-cash processes and bring superpowers to the A/R domain. Developing your own tech stack and maintaining it in-house can be an extensive and costly affair for you. Today, you needn’t develop your own RPA bots for automating A/R processes. Many A/R automation solutions come built-in with RPA technology to help you manage invoicing, deductions, cash application, and other workflows. HighRadius is a proven leader in the invoice-to-cash automation space, recognized by not one, but three research and advisory leaders – Gartner, Forrester, and IDC, offering solutions with RPA and AI to streamline invoicing, collections, credit risk, and e-invoicing, among other finance functions.

With RadiusOne, you can improve customer satisfaction by simplifying collaboration, minimizing touch-points, and providing self-service portals. This can help boost sales and revenue. RadiusOne is a plug-and-play solution that can easily integrate with your ERP to maximize working capital, achieve high ROI gains, and save costs. Now, you can focus on high-value A/R functions and critical business decisions, by automating labor-intensive and time-consuming tasks.