Getting paid for a job well done is satisfying. At the same time, chasing down late payments is one of the most frustrating things that firms face on a regular when managing their accounts receivable collections.
If it feels like your firm is always chasing after clients it might be a red flag that there’s something off in your accounts receivable (AR) processes. In the world of finance, understanding the ar meaning in business is crucial for maintaining a healthy cash flow.
But don’t despair! We’ve seen many firms face this realisation. Truly solving your accounts receivable invoice issues involves taking an honest look at what you’re doing currently and identifying areas where you can increase efficiency and be more cost-effective. And while getting paid on time has likely been a challenge for as long as money has existed, fortunately for us, we have modern accounts receivable automation software to help us solve these problems.
The true cost of inefficient processes There are many reasons why late payments hurt businesses. Late payments threaten cash flow and drain valuable time and resources..
Frequent late payments can cause tension in client relationships, are a financial and operational burden, and hurt morale for the employees tasked with chasing those payments. This is where an effective accounts receivable system can make a significant difference.
The hidden costs of manual processes Manual processes are slow, tedious, and error-prone, making them a silent killer in accounts receivable management. All that time spent manually chasing invoices adds up, as 31% of businesses spend 21 to 30 hours per month chasing overdue invoices –with 55% of those businesses seeing an increasing number of late payments.
Manual collections mean a higher risk of mistakes, lost productivity, and more stress but you don’t have to watch as your day sales outstanding (DSO) gets longer and longer. Implementing ar automation can significantly streamline your billing procedures and improve collection effectiveness.
So let’s explore how to improve your processes so you get paid within days instead of weeks or months, optimizing your cash flow and enhancing your revenue forecast.
4 ways to improve your process Here are some tips to turn your manual accounts receivable process into a well-oiled machine:
1. Automated reminders 🔔 Stop chasing after clients and sending endless manual follow-ups. With platforms like Adfin, an advanced AR software, you can automate your invoice and reminder workflows and cross those manual reminders off your to-do list permanently. This ar automation feature allows for customizable follow-ups, ensuring a consistent and professional approach to collections.
2. Incentives and penalties AKA the carrot and stick ✅❌ Enforcing prompt payment discounts and late penalties can be very effective tools to nudge payers in the right direction - but billers have traditionally been put off by the additional admin required to make sure everything reconciles in their accounting software. Some billers are also worried about harming client relationships if they enforce late penalties.
As long as you clearly state your payment terms on your original invoice, and stay within the law , you are quite within your rights to enforce late payment penalties. Having a third party like Adfin administer those fees can also help preserve your client relationships while improving your accounts receivable collections..
And prompt payment incentives are particularly beneficial for the clients who may forget to make manual transfers for weeks on end. This approach can significantly improve your invoice strategy and reduce credit risk.
Adfin brings sophisticated, compliant and automated implementation of incentives and penalties to you in one click, streamlining your entire accounts receivable process..
3. Flexible options 🧘 If you want to get paid faster, it makes sense to make paying as easy as possible for clients. That includes being flexible by providing different payment options such as credit cards, direct debit, and open banking. This approach to payment processing enhances the overall customer payment experience.
This is a great move because it’s more convenient, enhances the payment experience for clients, and it can even be a competitive advantage compared to less flexible firms. By offering various online payments options and payment portals, you're making it easier for clients to pay, which can significantly reduce your days sales outstanding.
4. Lower fees = lower costs 📉 Hidden fees and high fees are consistent challenges for many businesses–and the only thing worse is fees that are both! This is where efficient accounts receivable solutions can make a significant difference.
This year alone, the total value of B2B payment transactions in the UK is $2.8 trillion . Different payment platforms and merchants charge different fees, but even a 1% fee would equal $28 billion!
In the previous section, we talked about the importance of offering different payment options so it’s as easy as possible for clients to pay. But those different payment platforms and merchants all charge different types of fees. Some charge a flat fee per transaction while others charge a percentage (usually between 1 - 2.5%).
Managing these different payment options can be a headache: multiple sources of truth to reconcile and multiple vendors to manage, all with their own fee structures. This is where an integrated accounts receivable system can help streamline your processes and reduce costs.
Adfin to the rescue 🦸 So far, we’ve covered the damaging effect manual processes have on AR management, and you’ve gained some tips and best practices on how to streamline your AR processes. But we haven’t talked about Adfin yet!
Adfin is a smart, all-in-one payment platform that helps businesses quickly put those AR tips into action to get paid faster while reducing effort and costs. It's an advanced accounts receivable software that offers comprehensive solutions for businesses of all sizes.
Here’s how Adfin helps you achieve all of the above:
Automated workflows: Send ‘set-it-and-forget-it’ reminders via email, SMS, or WhatsApp, improving your collections process.One-click implementations: Easily implement prompt payment discounts and late penalty fees with just a click, enhancing your invoice strategy. Dynamic payment UI: Offer clients all the key payment options in one platformthat automatically retries failed payments, improving payment flexibility. All-in-one dashboard: Manage all your payments in a single, intuitive dashboard for better efficiency, visibility, and cost control, providing real-time insights into your accounts receivable.
AR shouldn’t be hard Many firms suffer unnecessarily from broken AR processes. But that was before Adfin . Now, you can eliminate so many of your biggest AR pain points with automation, flexible payment methods, and incentives. Our accounts receivable automation software is designed to streamline your entire AR process, from invoicing to payment collection.
We think it’s about time Accounts Receivable was on the receiving end of some much needed care and improvements, and if you’ve ever felt the same way, we’d love to help! Our AR software offers comprehensive solutions for efficient accounts receivable management, including electronic billing and advanced analytics for better cash flow optimization.
Book a slot with one of our payment experts today and discover how Adfin can transform your accounts receivable process, reduce bad debt, and improve your overall financial health.
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