One can think of ERP and AR accounting software as two halves of an iceberg. The larger part below water is the ERP; the main resources; the sales team, operations, the finance department, and customer service. The smaller part that’s above water is AR – the system that sends invoices, contacts clients, and manages financial risk.

Their size and scope may be different, but ERP and AR automation share quite a few similarities that are worth learning more about.

With the meteoric rise in technology in the 1990s, coupled with businesses developing more diverse functions, it became clear that a method of centralising data was a prudent move forward. They called it Enterprise Resource Planning.

When a business has developed an ERP, they have essentially unified each of their business functions. Departments such as sales, finance, operations, and customer service work on top of each other, like moving gears inside a watch.

Some departments may work independently, and some may work in tandem. In an ERP, they share the joint purpose of making the system work the best it can.

ERP, however, has been shown to have some flaws in its machinery. Not all of its systems are automated and has recently required programmatic intervention to fix its data sharing. If a financial tool struggles with data sharing in 2023, it will be toast.

Certain individual functions, such as collections and credit management, need to operate on a new modern system. Similar to clicking ‘Later’ on your iOS updates, the device is likely to slow and make more errors if you continue to avoid updating it.

To understand what AR automation is, you must first know what AR is. Accounts receivable is a department or team that’s responsible for the business’s cash flow management. Essentially, they’re bookkeepers. The business has delivered a good or service, and the AR team composes an invoice and sends it to the client.

AR processes involve more than just bookkeeping. AR manages a variety of cash and credit-related tasks. They also have to reach out to delinquent clients who haven’t paid their invoices on time. Clients need to have their credit scores vetted, invoice disputes need to be addressed, client data needs to be reported. The list goes on.

Someone eventually recognised that most of these manual processes could be completed by a computer much faster than by a human. Single invoices used to take multiple days to be drafted and delivered to the client; now that process takes seconds. 

AR found that with quicker invoicing, clients were statistically more likely pay their invoices on time, too. The job of AR staff had gone from laborious to easy, and AR’s principal target of generating cash flow had been improved in the process.

ERP is like a control board that monitors the business’s main departments. One of those departments is called Finance and Accounting. Inside this department is an extremely important team called accounts receivable.

Accounts receivable evolved into AR automation, and although ERP may technically be its father, AR automation is formidable enough to cause people to wonder which one is better. Truth is, they both have advantages and disadvantages.

AR automation is smaller in scope than ERP. It’s often been said that AR automation is best for managing the finance of small businesses for this reason. ERP software has a better track record for storing larger financial data, like the data of a corporation.

Although most larger scale companies prefer using ERP software, there are many reasons why they might be drawn to using AR automation for their accounting instead.

AR automation software has a more focused eye on the transactions going through the business. It also has the added benefits of point-of-sale (POS), payroll, and inventory. It extracts information from external systems and generates financial reports for auditing purposes. Some platforms even allow their users to file their sales taxes online.

Both platforms have their merits, but luckily, you don’t have to choose one; you can integrate AR automation with your current ERP software. For more on what’s involved in integrating AR automation with your ERP, continue reading.

AR automation can be seen as a subset of your business’s ERP system. The ERP system is designed to consolidate all your business operations in one place and manage the business more efficiently. Some operations, such as your business’s financials, need to be viewed close-up. That’s where having AR automation helps you out.

It isn’t uncommon for businesses to place their data on multiple platforms. Some people are hesitant to do so because the two platforms may be out of sync. Fortunately, certain platforms, such as Quadient AR by YayPay, feature two-way data synchronisation. The exact accounting on your ERP system will become available on your AR platform. 

So why would you integrate an AR platform into your existing ERP? The short answer is that it will enhance your finance and accounting department. Most beneficially, it will achieve this by speeding up the order to cash (OTC) cycle. 

1. Clearly define your objectives. By now you know the general advantages of integrating an AR platform into your ERP, but you should ask what your business will specifically need the most. 
2. Ensure company support. Unless everyone’s on board, problems will likely arise. Once you establish the benefits of an integration, and your business’s purpose(s) for doing so, allow for a democratic process. An AR platform is supposed to relieve you of problems, not create new ones.
3. Choose the right platform. As we already said, your business may have specific needs. There are various AR platforms available; we suggest you do some research to learn more about each. You can speak with sales representatives from the provider, as well.
4. Inventory your data sources and formats. This one might be done in tandem with the step of defining your objectives. As you organise the client data in your system, along with your current invoicing software, you will likely discover problems you didn’t know existed. Your objectives will naturally come into place from here.
5. Provide training to your staff. For a successful integration to be possible, you’ll need to provide training and support to your staff at the time of transition. They will need to fully understand how the two systems work in tandem with each other.
6. Observe how the transition is going. After the two systems are integrated with each other, we suggest you monitor their performance. Keep a close watch on data transfer, checking for subtle errors. You won’t always have to be so dutiful, but we suggest you exercise some diligence in the early phase of transition.

AR automation is ultimately designed to work around your ERP. It doesn’t intend to disrupt the market or ruffle any feathers. If ERP was a company, AR automation is basically just a new employee in the accounting department who’s doing the job better than the last person employed in the role. At the very least, you might as well hear what they have to say.