What's The Best Way To Automate Your Accounts Receivable?
Optimising a company’s accounts receivable (AR) process makes good business sense — after all, uncollected sales mean lost revenue and profit. AR automation software is a game-changer when it comes to getting paid more quickly, and it also makes the AR process more accurate and more customer friendly. But not every software solution is right for every business, so choosing wisely is essential.
New clients and additional work are the lifeblood of your firm’s revenue stream. That stream can become a trickle when clients are slow to pay. There’s no magic bullet to get paid faster. But the following are accounts receivable strategies to improve your cash flow.
Best Way To Automate Your Accounts Receivable
Any AR automation project aims to improve the process so that cash comes in faster, customers feel better about doing business with the company, and fewer people do more work. However, how those objectives are met varies from company to company. That’s why it’s essential to have the right people from your company involved in the conversion to AR automation or the extension of an AR automation system.
The following best practices can help any company shape how it automates AR.
Let clients receive emailed invoices.
With just a few taps of the keyboard, you’re seconds away from getting the invoice into your clients' inboxes.
Include a click-to-pay link in your email invoicing to make it more effective. When clients are ready to pay their legal bill, they need to locate your email and click through to their online invoice and a secure payment portal.
Speed up the billing cycle.
Sending batches of bills is a surefire way to subtract from your A/R days. If you're sending bills twice a month, try increasing the frequency. Improve your communication and collaboration with partners and paralegals. You can ensure on-time billing by collaborating with these departments to establish procedures and deadlines. Then run a monthly report to track progress.
Allow clients to pay with credit cards.
Between 2015-16, credit card payments have increased by 10.2%, while debit card usage increased by 7.4%, according to the Federal Reserve Payments Study. Meanwhile, commercial paper check payments fell by 3% during that same period.
Clients prefer cards because they have more control over their payments and may be able to earn more reward points to redeem for travel and merchandise.
Ensure new AR tools integrate with existing technology.
More benefits can be achieved with an end-to-end AR automation solution that integrates with other systems, such as order management, general ledger, cash management and inventory management. Including representatives from IT on the team helps identify integration opportunities and challenges.
Make it convenient to make credit card payments.
Credit cards are no more convenient than paper checks without the convenience of online payments. A well-designed online payment solution should integrate with your billing system while making automated recurring billing and payments simple to set up. These two features alone can shorten your accounts receivable days.
Review accounts receivable regularly.
To stay on top of the status changes in your accounts receivables, it’s always a good idea to run a daily A/R report. After that, have someone from your firm review the data and determine which accounts require past-due emails, phone calls and letters, pre-collection notices, or to be escalated to collections. Keeping up with these changes will help you keep your collections under control.
Practice good record-keeping with delinquent ac. counts.
Maximise your billing software and log each contact with the client over past-due bills, when and how reminders were issued by your law firm, as well as the client’s response.
Set up dashboards.
AR dashboards are automated, graphical displays of summary information used to keep tabs on a company’s customer balances and receivable activity. A typical AR dashboard might include KPIs, summary customer ageing reports, top customer balances and department productivity measures.
Role-based AR dashboards can be configured to provide continuous information relevant to a person's job responsibilities. Because these dashboards are most valuable when they include real-time data and the ability to drill down for more information, they should be included in the AR automation plan from the start.
Offer the early-bird discount.
Try this experiment on these close-to-the-deadline clients to free up some fixed capital: Provide a discount for early payment. It can be a percentage of billable hours or a dollar amount deducted.
Establish collections policy and procedures.
If your company lacks a financial policy for clients (or is woefully out of date), it is time to create one. A financial policy allows a company to define its collection procedures and inform clients of what to expect. It also communicates that your company is serious about getting paid. Things that should be included in your financial policy:
Payment methods accepted
Due dates after invoicing
Early payment discounts (if applicable)
Billing appeals
How clients can initiate a payment plan
Past-due notifications
When the account is turned over to a collections partner
Build and maintain relationships with clients
Positive interactions can add to a client’s satisfaction with the quality of their legal services. Go the extra mile when you can, such as sending a brief thank-you for the payment and providing clear answers to questions about their legal costs. Simple acts of consideration can make a big difference in the eyes of clients.
Track those first invoices to catch glitches early.
Invoice problems or errors frequently lead to payment delays and awkward customer conversations. When implementing an AR automation solution, it is best to practise implementing quality control measures to ensure that the first invoices are sent correctly. Beyond that, consider employing KPIs that monitor the level of rework, such as tracking the number of revised invoices or customer disputes.
Seek client/customer feedback.
An automated AR system should improve customer relationships. It can reduce processing time and costs when done correctly because one company's AR is another's accounts payable. To ensure that the working relationship is improving, it’s a good practice to check in with customers on how their experience is changing. For example, automated emails should provide customers with a fast and easy way to ask questions, but the only way to know for sure is by seeking feedback.
Review AR regularly for inconsistencies.
It’s a best practice to review AR to ensure the automation plan works as intended. This may mean redeploying some AR resources to do more frequent AR reconciliations, including customer contact data as well as any unapplied cash AR dashboards can help with alerts that detect irregularities within predetermined tolerances.
Accounts receivable automation is frequently a game changer for better and faster credit sales invoices and collection. When you combine the gains in efficiency and analysis with faster cash collection, it's easy to see why so many businesses are implementing AR automation. The best practices for AR automation described above can assist businesses in achieving the best results when leaving manual processes behind. You can hire any BPO Company that provides accounts receivable automation services.
