If you know a thing or two about accounts receivable automation, you probably already know what many of its benefits are. Generating timely and accurate invoices, supporting electronic billing and online payment methods, automating communication with your clients, etc. 

AR automation’s best practices, many of them at least, are also its selling points. What the articles you’ve read in the past don’t say is that though AR platforms offer these features, you, the user, need to automate/adopt them into your existing ERP for the platform to be up to speed with how you do things at your business. In this article, we will discuss how you’ll do that.

There’s a good chance you’ve heard these suggestions before, but we’ll state them again for those who are new to the subject. For elementary users, there are four tips we suggest.

1.     Actually use your AR platform – with how long traditional accounts receivable processes have been in place, it will be tempting to go back to what’s familiar. You’ll need to be patient at first, but mastery will come fast. You can’t get the benefits of your AR platform if you don’t use it.

2.     Generate timely invoices – the faster your client receives the invoice, the faster they can pay it. It’s also important your invoices arrive at the time you said they would. If you aren’t prompt, why would you expect your clients to be?

3.     Use electronic billing – AR automation software can generate paper invoices, but you may want to consider transitioning to digital. Paper is easy to lose and can be damaged in the mail. Delivering paper is also slower than delivering an invoice electronically. 

4.     Give the client payment options – with integrated billing and payments, when the client views the bill online they are offered multiple payment methods (credit card, wire transfer, ACH, etc.) They are given multiple payment methods if you’ve automated these methods into the system.

5.     Automate account communications ­­– the manual process of follow-up up emails, reminders of upcoming invoices and/or late invoices, and thank you notes can be automated to unburden you from having to do it manually. Within these communications, we suggest you tailor your tone to sound like a human wrote it rather than a computer.

1.     Monitor collections – with the help of the AR software dashboards, you can keep an eye on outstanding and current invoices awaiting payment from your clients. Key information, such as payment terms or account conditions, give AR employees an estimation of periods when their cash flow will be leaner than usual.

2.     Create and track key performance indicators (KPIs) – KPIs are metrics of how your accounts receivable are doing from a business standpoint. There’s a good chance you already have a few KPIs in place; you probably already measure days sales outstanding (DSO), for instance, which is the average period of time it takes to receive payment after sending an invoice.Other KPI’s you might establish could include cash collected (weekly) or cash collected (monthly). Some others include invoice accuracy or credit overruns. 

3.     Outline clear billing procedures – talking about credit overruns, we highly suggest you make a formal policy for such things, as well. Establishing a formal policy will benefit your clients as well as your business. Your procedures or policy will include various invoicing standards and general housekeeping. Some of these standards may include:

• Standardised information on the invoices – Purchase order numbers, billing addresses, payment details, billing periods, or invoicing dates. Some information might be ERP-specific to your business, like including a spot for specific client notes.
• Record-keeping standards – there might be multiple employees handling one account. It’s best when vital information can be easily found when needed and, like a countertop bowl for shared car keys, ideally located in one place.
• Periodic assessments of AR processes – Murphy’s law: if something can go wrong, it probably will. Keeping a diligent eye on your collection process can reduce the chances of that happening.
• Establish a formal credit policy – chances are high your clients are going to want to pay their invoices on credit. You might also prefer your clients to pay on credit if doing so might mean more revenue. If you do decide to make credit payments available to your clients, we suggest you establish a credit approval policy.

A credit approval policy will protect your business from delinquency. This involves vetting the credit history of new clients. This doesn’t necessarily mean that clients with bad debt should be refused from paying with credit. Your business may alternatively choose to just reduce the client’s credit limit. It’s essentially the same thing banks do in standard credit card applications.

Your credit approval policy should also stipulate – should these measures become necessary – how and when to override a client’s credit limit or when to put their account on hold.

1.     Establish an invoice dispute process – this one is important because your clients will likely want to dispute an invoice at some point. It's best to have one employee handle this department (clients won’t enjoy repeating themselves to different people throughout the process). You might also consider including a page with frequently logged disputes or questions so that disputes can be triaged faster.

2.     Address customer grievances – similar to the practice mentioned above, but more general, establish a procedure for addressing client concerns, as well. Clients could be dissatisfied with an element of your product or service or with how they were treated by one of your colleagues. Having a formal procedure in place for this will show your clients that you’re reliable and consistent.

3.     Personalise your invoices – this might get your clients to pay their invoices faster. By using your company colours and/or design, your invoice will be distinguishable from the others, and clients will quickly recognise your business. By putting a face on your invoice your clients will be slightly less likely to ignore your invoice.

4.     Be prepared to reach out to clients who are delinquent – though you may have automated reminders in place for when invoices are past due, these reminders may not always do the trick. An email or phone call to graciously remind your client of their past due invoice might be needed from time to time.

Learning how to use your AR automation platform is like learning how to play guitar. Many people want to do it, they can see its benefits and appeal but then discover that mastering it will require some instruction and repetitive practice.

Don’t be discouraged. AR automation is much easier than guitar. With some instruction from your service provider, and a group effort to adapt and evolve with your new accounts receivable platform, you’ll become AR automation gurus in no time.