What is AR collection software?

To stay ahead of the competition, you need adequate cash flow to fund initiatives such as talent acquisition and retention, research and development, and technology adoption. But, if your accounts receivable (AR) collections process isn’t optimized, that’s just not possible. That’s where accounts receivable automation collections software comes into play. It gives you all the tools you need to generate revenue by eliminating inefficient processes, enhancing customer communication, and enabling you to predict payment trends. In this article, we’ll explain what AR collection software is, discuss its many benefits, provide tips on what to look for in automated collections software, and share best practices for the buying process.

AR collections software helps you manage the end-to-end AR process. With a focus on the collections process, it automates the process of collecting payments from customers who owe money to your business. It enables you to closely manage and track your outstanding invoices and payments due, and it streamlines the collection process by automating reminders and follow-ups with customers.

Automated AR collections software typically includes features such as invoice tracking, automatic payment reminders, customer communication tools, and analytics to help businesses optimize their collection efforts. It may also integrate with accounting software and other tools to provide a comprehensive view of a business's financial health.

Overall, accounts receivable collection software can help businesses improve their cash flow, reduce the manual labor involved in the accounts receivable process, and improve customer relationships by streamlining the payment experience.

Automating your AR collection processes can provide significant benefits for your business. Leading organizations are turning to automation for collections for the following reasons:

1. Predictable and accelerated cash flow: Automating AR collections processes eliminates the need for manual reminders and communication with customers, ensuring that payments are made on time. Customers can also pay directly from automated emails, which improves the predictability of cash flow. Real-time dashboards provide insights into accounting metrics.
2. Improved AR metrics: Automated AR solutions send invoices and related communications on schedule, process payments immediately, and provide a complete view of the customer's account. This enables businesses to improve their accounting metrics, such as days sales outstanding (DSO) and average days delinquent (ADD), resulting in healthier finances.
3. Reclaimed time: Automation frees up accountants from manual tasks, allowing them to focus on other important areas of operations, such as strategic planning and IT initiatives.
4. Increased productivity: Automation allows accountants to work faster and more effectively, resulting in increased productivity. By automating manual tasks, accountants can focus on developing stronger relationships with customers.

In today's competitive business landscape, automated AR solutions are essential for businesses seeking to remain competitive and grow predictably.

As you embark on your search for an automated accounts receivable collection solution, you'll quickly discover that there are numerous options to choose from. However, not all solutions are created equal. You can’t just invest in any old solution and expect to get best-in-class results. 

Here are some key features you need to look for to ensure the highest level of success:

• Automated collections workflow: An intelligent solution should automate as much of the AR workflow as possible. This allows your AR teams to make calls, take notes, and send emails directly from the program interface. It also enables you to create an automated cadence of email reminders with custom notifications to your customers. Smart solutions can prioritize activities and improve collection rates based on the actions of your team or customers.
• Cash predictability: Automated accounts receivable solutions use machine learning to study customer histories and payment trends, enabling you to gain a better understanding of your future cash flow. This information allows you to make more accurate forecasts and avoid being caught off guard by cash shortages.
• Real-time insights: Tracking your cash situation in real time is the easiest way to avoid cash flow problems. Real-time insights allow account managers to stay up to date on customer communications and changes in payment behaviors. This means that your business has the flexibility to respond immediately to specific customer situations or to adjust an ineffective process. This ensures more efficient workflows and eliminates awkward miscommunications.
• Fast and easy integration: Smart AR solutions should work with your existing applications, not force you to start from scratch. Look for an automated solution that allows you to easily integrate with your current accounting and financial systems. The best solutions offer options for pre-built integrations and provide open APIs so that you can build your own. The more integrations a system provides, the more robust data it gives your company, saving your team time and frustration hunting for information across numerous systems.
• Consolidated communications history: Leading AR automation solutions centralize all communications in one location, enabling multi-member teams to stay on top of all customer back-and-forth while avoiding duplicative efforts. Nobody has time to switch between several platforms to track down specific messages.
• Customer self-service portal: Your customers have their own businesses to run. Providing them with 24x7x365 access to their invoices, payment history, and other billing data with your company means they have the flexibility to manage their business on their time. This allows them to access information and have a variety of electronic payment options, resulting in higher customer satisfaction and a healthier business. A self-service portal that allows them to pay you immediately accelerates your cash flow.
• Expedited payment processing: Leading AR automation solutions make it easy for customers to submit payments via credit card or ACH in just a few clicks. Look for a system that offers Level 3 credit card processing to get your company the best rates possible, which could save you thousands of dollars over the course of a year.

These must-have features are the key to a smart AR platform that will increase productivity and employee satisfaction while accelerating your cash flow, creating predictability in your business, and ensuring customer loyalty.

Implementing a new AR system can be daunting. The process of upgrading affects not only your customers but also the financial core of your business. While some level of stress is inevitable, the extent of stress can be influenced by your choices. This is why it is essential to understand both the buying process and implementation process to ensure that you choose software that minimizes headaches and maximizes ROI. 

Here are some suggested best practices to help you proceed with minimal stress.

1.     Establish a business case

Deploying new accounting software starts with selling your colleagues on its importance. To do this, you’ll need to build a solid business case. 

Form a team of stakeholders to investigate available software options and take ownership of the process. Include someone from IT on the team and at least one AR specialist, as they will be invested in and directly affected by the solution.

Determine your current AR metrics and estimate the potential efficiency gains and other benefits you expect to achieve with the deployment of new software. Consult with IT regarding any security or implementation requirements necessary to comply with regulations such as GDPR, HIPAA, SOC 2, and PCI. 

These metrics will establish a baseline for your business and assist in evaluating potential ROI as you assess new tools. To create your business case, compare your current metrics against best-in-class benchmarks and highlight the differences. Incorporate any survey or other data that indicates where customer satisfaction or employee morale could benefit from improvements.

2.     Create a list of potential vendors and conduct research

After you have developed the business case, it’s time to research potential solutions. 

Consult industry experts to determine which solutions are most promising. Ask peers in your network about the solutions they are using to see if any are suitable for your organization. Look at online industry groups to see which systems are most frequently talked about. Conduct your own online vendor search to identify the company whose offering and thought leadership most closely align with your needs.

3.     Narrow the list and schedule demos

To reduce the number of potential solutions and schedule product demos, it's essential to narrow down the list of features required for your AR automation system. Create a primary list of must-have features and a secondary list of desirable ones. 

Focus on the three vendors that seem most appealing and arrange demos with them You’ll likely need to share your annual revenue, outstanding AR balance, number of invoices per month, number of employees managing AR, and what systems you need to integrate with at this stage. Ensure your team is aware and comfortable with the information you will share, as this is helpful for estimating your potential ROI. 

Here is a checklist of essential features that should be on your list:

• Automated collection workflow and communications 
• Quick and easy Integration and Implementation 
• Self-service portal 
• Consolidated communication history 
• Payment processing and flexibility 
• Real-time insights

Download the complete checklist.

4.     Understand how your customers will be impacted

The last thing you want to do is deploy a solution that’s a nuisance for your customers. The wrong choice will likely make your cash flow issues worse.

Determine how the new solution you choose will impact your consumers. Your goal is to offer features that benefit your customers by providing a seamless experience with flexible payment options and easy, regular engagement. Think about the potential behavioral changes that your consumers will experience with your new system, such as logging into a centralized portal, and make sure to create a communications plan to bring them along this journey with you. A dedicated digital optimization team can help with this step.

5.     Do your due diligence

It's crucial to be practical and strategic as you embark on this endeavor.  Take the time to gather quotes and speak with referrals.

While comparing features and functionality is important, it's essential to recognize that price isn't the sole determining factor. Value goes beyond price. Consider the overall value the solution will bring, such as return on investment (ROI), customer satisfaction, employee efficiency, and business insights. Whenever possible, quantify these elements with numbers. Will the solution result in an increased Net Promoter Score (NPS)? Can you expect a 20% boost in employee efficiency? What about a 3x or 4x ROI, and over what timeframe—perhaps a year or two?

Additionally, evaluate the cultural fit. Your chosen AR platform vendor will become a new partner for your business. How is their support model? Have your interactions with their teams during the discovery process been satisfactory? Remember that this is a long-term relationship, so the cultural fit and engagement with the vendor are significant factors to consider.

6.     Sign the contract

You have carefully examined your options, projected the potential outcomes, and considered the effects on your team and customers. Congratulations! You are now prepared to embrace a new future filled with improved cash flow, delighted customers, and a fantastic return on investment (ROI)!

Download our Definitive Guide to Buying and Automated Accounts Receivable Solution for more tips.

Businesses that rely on outdated AR systems can’t move as fast as their more modern peers. Inefficient workflows, unproductive employees, and communication issues with customers are some of the consequences of not modernizing AR practices. Late payments can also result, causing significant cash flow issues. By implementing a modern AR automation solution, businesses can streamline their AR processes, enhance productivity, expedite payments, and improve their cash flow. Consequently, their accounting department becomes more efficient and effective, providing a competitive advantage over their slower-moving rivals.