The 5 Most Effective Accounts Receivable Trends You Need to Know Now

Introduction

The world has changed, and so has accountancy. For an accounting professional at any experience level, keeping up with these changes is challenging. So, in this post, we analyze the five best accounts receivable trends in 2024 and beyond. 

Also, we will cover what accounting leaders can expect and which new AR trends will be the most effective in the coming years? Read on to learn about the best AR trends and how you can implement them in your business.

Account Receivable Trends – What’s the Need?

Receivable management trends are vital for businesses to adapt to evolving technology, deliver exceptional customer experiences, and improve cash flow management. They facilitate faster payment processing, reduce delays, and prioritize customer satisfaction, leading to a more efficient financial experience and mitigating risks related to delayed payments.

Top Accounts Receivable Trends to Know

With the emergence of new trends in account receivables, one thing is clear: automation is increasingly crucial. It plays a pivotal role in expediting repetitive tasks and enhancing the AR process. Additionally, by harnessing automation and customer-focused approaches, businesses are reshaping AR, ensuring a smoother, more secure financial experience.

1) Businesses will focus on enhancing customer payment experiences

Businesses are placing a high priority on perfecting payment experiences, seeking to streamline processes and ensure seamless transactions for customers. Within accounts receivable, teams focus on tasks like collecting payments, managing credit limits, resolving invoice disputes, and elevating overall customer satisfaction through diverse touchpoints.

Enhancing customer experience involves offering convenient payment options such as eChecks, cash, e-payments, credit/debit cards, etc. In addition to timely invoice deliveries and reminders, providing accurate payment information and accessible self-service customer portals further enriches the customer journey.

Approaching 2024, an increasing number of businesses are turning to automated accounts receivable processes, leveraging order-to-cash solutions to elevate customer experiences and enhance team productivity. 

These software encompasses features like payment processing, e-invoicing, dunning management, credit risk scoring, and automated cash application. AR solutions also facilitate user-friendly dispute resolution methods and maintain up-to-date invoice and payment data.

2) Accounts receivable automation to drive process optimization

Accounts receivable automation is poised to revolutionize the order-to-cash (O2C) landscape, emerging as a pivotal trend. By harnessing technology, businesses can streamline their AR processes, leading to heightened efficiency and optimized cash flow management.

Through AR automation, manual tasks like data entry and invoice processing are replaced by automated systems, reducing the likelihood of human error and allowing finance teams to redirect their focus toward strategic activities.

How does it work? AR automation involves electronically generating and processing invoices, utilizing AI-driven worklists to prioritize collections, seamless cash posting, and real-time credit risk management. This empowers employees to trim time spent on routine tasks, shifting attention to managing high-risk customer accounts and strategic initiatives, which significantly aids in customer relationship management.

Moreover, AR automation ensures the maintenance of updated master data, enhancing operational accuracy through continuous monitoring and automated corrections. This diminishes errors in data, reducing Days Sales Outstanding (DSO), and bolstering collector effectiveness by eradicating delays in invoice distribution, cash application, and invoice closure.

The rising adoption of AR automation solutions is propelled by accessible options offering advanced features such as AI-driven reconciliation, customizable invoicing templates, and integrated VoIP calling. These benefits drive the increasing adoption of AR automation solutions, making them more appealing to businesses.

For further insights into how AR automation benefits different stakeholders, explore our resource on ‘How AR Automation Helps Different Stakeholders”.

3) Data security and risk management are becoming a priority

Data security stands as a critical concern for Account Receivable (AR) teams, primarily due to their handling of customers’ payment information. As AR processes transition into digital realms, the vulnerability to hackers infiltrating networks and pilfering confidential invoices or client details amplifies significantly. According to a report, data breaches cost businesses an average of $4.35 million in 2022.

Consequently, businesses are increasingly probing software vendors regarding the security features integrated into AR solutions. Solutions aligning with PCI-DSS standards, providing robust data encryption, and complying with regulatory necessities like GDPR are gaining preference among businesses.

4) Businesses will transition from paper to e-invoicing

To foster an efficient organization, minimizing unnecessary expenses stands paramount. Embracing e-invoicing to overhaul your AP/AR process represents a pivotal stride toward this goal. As per PYMNTS, businesses incur an average annual cost of roughly $171,000 in processing paper invoices.

Moreover, rectifying an error in paper-based invoices costs companies about $53, impacting costs and straining customer relationships. To curb expenses and enhance efficiency, businesses are progressively phasing out paper-based invoices in favor of e-invoicing solutions.

The burgeoning e-invoicing market, expected to grow at a robust CAGR of 20.4%, anticipates reaching approximately USD 24,726 Million by 2027. Preference is shifting towards e-invoicing solutions offering customizable templates, integrated pay-now buttons within invoices, and automated matching capabilities.

5) Leveraging predictive analytics for enhanced accounts receivable forecasting

Improving forecasting capabilities through predictive analytics stands as a pivotal trend in AR management. Forecasting cash flows plays a vital role in managing financial liquidity, predicting the inflow of funds into a business over a specified period. Accurate estimation of a company’s future cash situation mitigates the risk of liquidity constraints and diminishes dependence on short-term external financing.

Elevated accounts receivable forecasting not only augments a business’s agility but also enhances the efficient utilization of cash. Furthermore, it facilitates more precise predictions of revenues and profits.

Employing predictive analytics to forecast future cash flow outcomes grants businesses a competitive edge over their peers. It empowers them to anticipate and strategize effectively for future financial scenarios.

Receivables Management Techniques to Stay on Top of the AR Trends

Implementing effective receivables management techniques to leverage AR trends involves a series of straightforward steps:

1. Identify AR process challenges

Begin by conducting a thorough evaluation of your internal AR processes. Identify the specific challenges and areas that require improvement. This initial step is crucial to understanding the current state of your receivables management.

2. Set clear FY 2024 goals

Develop a comprehensive plan to address the identified gaps in your O2C cycle. This plan should include clear and measurable goals, ideally set for the fiscal year 2024. For instance, consider setting goals such as reducing bad debt by 15% by the end of FY 2024. Defining these objectives provides a roadmap for improvement.

3. Improve tech proficiency

To optimize AR efficiency and reduce costs, invest in upskilling your workforce. Improving their technological proficiency is vital in today’s digital landscape. Equipping your employees with the necessary skills ensures they can effectively utilize the tools and systems that drive AR management.

4. Investigate automation and analytics

Explore the realm of automation and analytics solutions available in the market. This step involves researching various options and tailoring them to suit your specific business needs. Automation can streamline repetitive tasks, while analytics provide valuable insights for informed decision-making.

5. Review digital transformation success

Evaluate potential solution providers meticulously. Consider factors such as their industry reputation, the features of their solutions, and their track record in successful digital transformations. A provider’s credibility and the alignment of their offerings with your requirements are critical in selecting the right partner.

The Future of Accounts Receivable in 2024

The future of AR is set for significant changes powered by technology. Emerging trends point to increased automation, using AI, machine learning, and RPA to simplify AR tasks. Businesses are moving towards digital methods to make managing receivables quicker and more accurate.

In the coming years, AR will focus more on making payments easier for customers, aiming to enhance their experience. Additionally, tools like data analytics will be crucial for predicting money flow and improving how companies collect payments.

Overall, the future of AR looks promising with technology and customer-centered approaches working together to boost efficiency and better financial management.

Here’s How HighRadius Can Help

HighRadius offers an array of solutions within its order to cash solutions. Utilizing HighRadius, you can automate every step of your AR process, spanning invoice distribution, tracking, prioritizing collections, predicting payments, and projecting cash flow.

Driven by AI and RPA-powered tools, HighRadius’ solutions are designed to minimize manual tasks and errors, enhancing efficiency and bolstering cash flow.

FAQs

1. What is a trend analysis for accounts receivable?

Trend analysis observes AR changes over time, reflecting improvements or declines in financial performance.

2. What is a good accounts receivable turnover ratio?

A high turnover ratio s8uggests quick collections, which positively impacts a company’s liquidity and efficiency.

3. What are the future accounts receivable?

Future AR emphasizes improved customer experiences and the utilization of advanced payment technologies for streamlined transactions.

4. What are the 5 KPIs for accounts receivable?

AR’s essential KPIs encompass Days Sales Outstanding (DSO), aging of receivables, bad debt ratio, collection effectiveness, and tracking customer payment trends.