Accounts receivable. Accountant looks through magnifying glass on a paper.

Addressing Typical AR Challenges CFOs Face through Automation

In the business landscape, chief financial officers (CFOs) make financial decisions. The decisions are based on financial data and insights to thrive accounts receivable (AR) management and prevent bad debt. Without automation, it is challenging for the AR to make financial decisions because there is no accurate data or limited information to make a decision. However, automation has revolutionized the role of the CFOs to manage decisions and AR collection practices. Still, only 27% of smaller businesses have adopted automation to manage their AR operations in the B2B domain.

1. Invoicing Errors

One common problem CFOs encounter is that their AR team makes errors in the invoicing process. When the AR team creates invoices manually, matching invoices with order numbers on separate systems is time-consuming. The complexities multiply when there are recurring invoices and a higher number of customers. Invoicing errors include a wrong amount, inaccurate details or an invoice sent to the incorrect address. This leads to payment delays and client dissatisfaction while damaging the client-merchant relationship.

Solution: Automation replaces manual paper-based invoices with electronic invoices. This improves the speed of creating and sending invoices and resolves CFO’s concerns. Electronic invoicing is error-free, avoiding delays and disputes with customers. When the invoicing process is automated, your customers get paid faster, improving your cash flow. 

2. Payment Processing Issues

Delay in invoice payment is caused by limited payment options available to the customer to pay invoices or manual payment processing practices. CFOs struggle to address this issue without automation because it can be due to the wrong amount or disagreements regarding the authenticity of the credit notes. Such disputes create client frustration, and the worst scenario is client attrition. Payment-related issues bottleneck cash flows, increase days sales outstanding (DSO), and also affect the organization’s financial health, which is a severe pain for the CFO and the AR team.

Solution: When you implement the B2B payments automation solution, you offer more payment options to customers to pay their invoices. This helps you get paid faster. Attaching credit notes to the invoices is more manageable with automated AR software. This also improves the payment processing speed, reduces the DSO, and unleashes cash flow. Not only does this resolve the payment-related issues faced by CFOs, but it also saves time and retains positive customer relationships.

3. Late-Paying Customers

In B2B relationships, customers often delay payments, and there are various reasons for delay. Cash is the blood that runs the organizational operations, and sometimes, businesses run out of cash to pay their invoices. As a result, your cash flow is affected. Several companies that rely on manual AR procedures may overlook invoices in their email inbox, necessitating follow-up emails to prompt payment. Regardless of the reason, late payments have a ripple effect on the AR, including an increase in DSO, impeding cash flow, and increased cost of collections.

Solution: Automation software saves your cash flow and manages late-paying customers with electronic invoicing and payment methods. This sends the invoices and accepts customer’s payments electronically, saving time to process payments and collecting cash.

4. Disparate Data

Accessing data on silos and disjointed systems is inaccurate and tedious for the AR teams to proceed invoicing processes. Disparate data on an independent system is also an enormous challenge for the CFO to process and make financial decisions. The lack of unified data reduces the inefficiency of processing information due to manual processes. To keep the books consistent, CFOs need relevant and accurate data that helps with auditing and decision-making.

Solution: Centralization of data is possible by implementing the B2B accounts receivable automation software, offering a single source of truth to CFOs for decision making. This also helps the AR team to match invoices seamlessly, increasing the productivity and efficiency of the AR processes. With accurate information, CFOs can forecast and make informed decisions, securing the financial health of the organization.

5. Cyber-security and Fraud

This issue is prevalent among many organizations with outdated systems and processes. According to a survey by Pymnts, businesses using traditional AR processes encounter 32% of check fraud and other chances of fraudulent activities. Lack of automation and reliable systems lead to higher security risks, causing loss of business, cash, and other forms of loss. CFOs are under heat with vulnerable systems that need to be addressed.

Solution: AR automation is a cloud-based system that saves you from fraudulent activities through electronic invoicing and payment. It enhances security and control over your AR processes, shielding you from fraud and unauthorized access.

6. General Disputes  

On several occasions, CFOs encounter disputes due to errors in invoices, wrong payment amounts, or missing credit notes in the invoices. This refers to the manual accounts receivable management practices prone to human error. You need to get in touch with the customer to resolve the dispute, and the AR team has to revise the invoices. Your AR remains captive all this time, and you cannot collect due to disputes. These scenarios lead to significant challenges for both AR teams and CFOs, demanding substantial time and effort to resolve the issues and strive to save customer relationships.

Solution: Embracing automation enables you with a dispute resolution feature, unleashing your cash flow and resolving conflict. The automation solution keeps the processes transparent, avoiding disputes in the first place. By gaining enhanced transparency into invoicing, payments, and various functions, you can instill trust among your customers, reducing the likelihood of disputes and preserving a positive customer experience.

7. Creating and Following Policy

Manually handling the AR processes delays invoicing and payments from customers. Even though you push your clients to pay, imposing your policies and setting penalties on late-paying customers is challenging. Enforcing your policies on customers can make your customers discouraged, affecting your B2B relationships. Ensuring customers settle their invoices without compromising their satisfaction presents a significant challenge for your CFO to address.

Solution: Automation allows rules-based invoicing flows, allowing CFOs to create policies to penalize late-paying customers. The automation software can compute the late-payment interest for customers to pay. This will make customers pay on time to avoid penalties. In addition, you can also reward early-paying customers with discounts or other forms of rewards to encourage them to settle in time.

To Sum Up

Lack of automation reduces the productivity and efficiency of the AR team and also bottlenecks the organization’s cash flow. Manually handling the AR processes also limits CFOs from accessing reliable data, overcoming invoicing disputes, managing late-paying customers, and addressing payment-related concerns. Embracing automation streamlines all aspects of the accounts receivable processes, including invoicing, payments, collections, and reporting. Automation solutions equip businesses with a single source of truth platform to track payments and invoices and help CFOs make decisions. It also resolves the CFOs concerns related to the vulnerability of systems, managing late-paying customers, and securing positive B2B customer relationships.