Control: Keep track of past and present financial numbers
Financial planning: Map development of resources, funds, and expenses as the business grows
Financing and cash management: Resource allocation to run a business efficiently
The CFO and their team have an overview of huge data repositories that provide a high-level view of the organization. This makes them responsible for not only keeping track of financial data but also influencing operational decision-making and strategy.
There are some challenges of managing finance functions the Gen-X way. Due to multiple data sources, the flow of information is interconnected and complicated. Finance teams who use manual processes spend most of their time collecting, cleaning, and analyzing heterogeneous data to create an accurate view of the businesses’ financial situation. Manual processes cannot proactively provide dynamic insights, taking away a lot of time from high-value strategic activities.
Apart from these, using primitive software imposes heavy dependence on spreadsheets, manual entry and re-keying, and a lack of dynamic reporting.
Finance teams seek to replace manual processes and existing legacy software to leverage value-added services such as reporting and insights. Faster tools optimize data capture and workflows. The goal is to automate as many functions as possible.
The goal of an optimized FinTech stack is to:
The role of a CFO has evolved over the past decade. A CFO’s functions and responsibilities are no longer transactional. Instead, they are a strategic business partner.
Consequently, mid-market CFOs must identify the major pain points in the cumbersome finance functions and invest in the right technology that will help them scale their business.
Accounts receivable (AR) represents the money owed to a business for its products and services. Improper AR management leads to sluggish collections, which negatively impacts the company’s cash flow.
Moreover, since AR facilitates payment collection, it is also pivotal to improve financial forecasting. Ineffective dispute resolution and manual billing systems make AR one of the most time-consuming finance functions. This puts AR management at the center of process improvement initiatives.
Managing AR comes with a set of challenges. Most AR professionals would agree that their jobs are tedious and time-consuming because most organizations still manage their AR processes manually, with primitive business systems.
Let’s look into the challenges in detail.
2.2.1 Cost Intensive Paper-Based Manual Processes
AR teams are busy with many activities. These include:
Every two weeks, AR professionals sort the data and download aging reports from their spreadsheets. These are primarily a list of unpaid customer invoices based
Every two weeks, AR professionals sort the data and download aging reports from their spreadsheets. These are primarily a list of unpaid customer invoices based on the duration of past dues such as 30, 60, 90, 120 days.
At this point, AR professionals consult a previous version of the spreadsheet for notes, copy and modify those notes to the new file, and then manually follow up on each outstanding receivable by sending payment reminders.
Depending on the duration of past dues, the language of the reminder gets increasingly strong. This requires different communication templates for each aging bucket. These are often stored locally, making them prone to inconsistencies.
AR professionals then manually enter account information into the dunning template. They need to reproduce the invoice or accompanying documents such as proof of delivery and attach them to the payment reminder. Especially in case of dispute, documents such as proof of delivery are crucial as the proof of a service or goods delivered.
Relying on outdated paper-based processes and manual intervention results in delays, high costs, errors, limited process visibility, and the inability to support a consistent brand to customers.
10-15% of invoices need payment reminders, and almost 50% of B2B invoices become overdue. According to comprehensive surveys conducted by Atradius, 7-15% of invoices are sent to the wrong person, and 10-20% of delayed payments are due to incorrect information in the invoices. The average time to collect on-credit sales or the Days Sales Outstanding (DSO) is 66 days. For B2B models, that average is more than 85 days.
2.2.2 Multiple Incompatible and Inflexible Systems
Typically an AR functional mix consists of the following software resources:
Important documents such as invoices and payment reminders rely on information that ERPs host. They form the backbone of the business. But ERPs do not support efficient workflows. They are difficult to operate and even harder to adapt to ever-
evolving business needs.
We discuss the limitations of ERP and related software, in detail, in Chapter 3.
Mid-sized businesses want to keep growing. At the same time, they also want to implement cost-effective solutions to optimize their business processes.
Therefore, the primary criterion for choosing any solution to manage their AR processes should be scalability (i.e., investment or cost remains constant, but the revenue grows).
But with the volume of transactions rapidly increasing, is the range of options available at the disposal of mid-sized businesses really scalable?
Let’s have a look.
As the volume of transactions rapidly increases in a growing business, the responsibility to manage AR falls on the limited number of employees in this subsection of the finance team. Therefore, it makes sense to hire more full-time employees dedicated to AR management. But even doing this is not scalable.
AR management teams need both inputs and context from various business stakeholders (both internal and external). As the volume of transactions increases, the number of vendors, customers, and stakeholders also increases.
The net output remains the same even after the team is strengthened as the AR team has to reach out to more people now.
Also, hiring more FTEs won’t solve the problem of cost-intensive paper-based manual processes. More employees will continue with repetitive tasks now instead of being involved in more strategic and critical business functions.
Often businesses will develop an in-house IT solution to eliminate cost-intensive paper-based manual processes. This approach is reasonable for enterprise-level businesses. They have an advanced IT department with dedicated resources, grow steadily, and focus on long-term ROI models. However, for rapidly growing mid-sized companies, this approach poses challenges, including:
ERPs provide a foundational tech stack for business processes, forming the backbone of a business.
However, the layout has no flexibility to create invoices with ERPs. It requires time and resources to make any changes. The option to combine an invoice with a related document is also limited.
In this scenario, an inflexible system becomes a challenge. The situation becomes further complicated when multiple such systems have to communicate with each other effectively. Process flexibility and visibility require information consolidation across entities.
For example, communication preferences are stored in a CRM system, and proof of delivery may be in another system altogether. The information resides in multiple systems. As a result, the systematic capture and follow-up of outstanding receivables become a daunting task.
While ERP and related software may resolve the issue of cost-intensive paper-based manual processes, it does not fully resolve the problem of multiple incompatible and inflexible systems
Challenges of using ERP can be summed up as follows:
Mid-sized businesses constantly seek dedicated technology to help reduce the burden of outstanding receivables while ensuring business scalability.
But many solutions used to deal with AR concerns in the mid-market space are built for large enterprises. The solutions are ‘torn down’ and modified to address similar problems related to AR.
While these solutions are inherently sophisticated, they pose some problems for mid-sized businesses, which include:
This is why even though enterprise-level businesses successfully transition to optimized AR with digitization and automation, there is an automation gap for mid-sized companies that need to be addressed.
As you can conclude, none of the above approaches can help mid-sized businesses scale.
AR processes are under constant pressure to:
B2C customers want an array of invoice delivery options and B2B buyers seek efficiency gains for their accounts payable (AP) process.
This can happen when the right solution is used to automate AR processes
CFOs need to define clear business objectives and analyze ROI when they select AR automation tools.
To maintain healthy cash flow and address AR needs, mid-market CFOs need to invest in:
At the same time, they need to harness the power of data and enhance finance functions and business growth. CFOs need to Invest in solutions that offer dynamic reporting and increased visibility into analytics.
These functionalities include:
Integrations are a great way to optimize your AR tech stack.
Most businesses already have a part of their financial stack established, such as the ERP software. So it is critical to find solutions that seamlessly integrate with your software and solve the current issues.
Leveraging plug-and-play solutions create added value.
Plug-and-play solutions fit into your existing software and enhance them exactly as you need.
At HighRadius, we understand the importance of outstanding receivables, especially when businesses want to scale and maintain a healthy cash flow.
We also understand the needs of a mid-sized business from a technological and a financial perspective. The goal is to close ‘the Automation Gap’ with cost-effective, ready-to-use solutions that provide stellar customer experience (CX) and impact all sub-sections of AR management for businesses operating with 1 ERP software and ~2-5 FTEs for O2C.
This is where the RadiusOne AR Suite comes in!
HighRadius RadiusOne AR Suite is a tailor-made solution built for mid-market CFOs:
RadiusOne fast-tracks key AR functions viz. e-Invoicing and Collections, Cash Reconciliation, and Credit Risk Management.
RadiusOne AR suite builds its functionalities on top of existing software. Its enterprise-grade CX is affordable and quick-to-deploy. It particularly automates the labor-intensive and time-consuming AR functions, allowing finance managers to focus on high-yield and business-critical decisions.
CFOs will maximize their working capital, achieve high ROI gains, and enable hard cost savings by putting the O2C on auto-pilot.
This makes RadiusOne a scalable AR solution for mid-sized businesses.
According to Harvard Business Review, one-third of the US private sector GDP (and employment) constitutes businesses targeting the mid-market space. Mid-sized businesses invest a chunk of their revenue back into R&D, and there has been a ton of innovation in the mid-market to deliver more products and services to the customers.
Ignoring back-office processes, however, can affect their revenue stream. As a result, most mid-sized organizations want to automate their AR functions.
Mid-market CFOs play a significant role in bringing about this digital transformation. They need to position themselves as strategic leaders and invest in scalable technology that can address the unique needs of their businesses.
HighRadius RadiusOne AR Suite is a tailor-made solution built for mid-market CFOs:
A company’s growth is synonymous with its increased functionality requirements in the O2C cycle. While the requirement curve may be linear, the features and cost of the solutions to address those requirements increase exponentially.
Most companies cannot keep up with constantly evolving business complexities and fail to find a scalable solution every step of the way.
This is where HighRadius comes in with its unique portfolio of autonomous software to manage AR (and more
Since AR solutions need constant reworking in terms of technology, features, and deployment methods with business growth, HighRadius has a tailor-made option for every step:
HighRadius’ solutions scale with your business growth!
Here is what some of our customers have to say.
The HighRadius RadiusOne AR Suite is a complete accounts receivable’s solution designed for mid-sized businesses to put their order-to-cash on auto-pilot with AI-powered solutions. It leverages automation to fast-track key accounts receivable functions including eInvoicing & Collections, Cash Reconciliation, and Credit Risk Management powered by RadiusOne AR Apps to improve productivity, maximize working capital, and enable faster cash conversion. Affordable, quick to deploy, and functionality-rich: it is pre-loaded with industry-specific best-practices and ready-to-plug with popular ERPs such as NetSuite and Sage Intacct. The HighRadius RadiusOne AR Suite is designed to automate labor-intensive processes while streamlining credit and collections activities for faster AR processing, better cash flow and improved profitability.
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