Deep Dive: Accelerating Accounts Receivable With Automated Technologies

B2B payments are anything but instant in the U.S., where a collective $3 trillion is tied up in businesses’ outstanding accounts receivable (AR). The average SMB has 24 percent of its monthly revenue held up in AR, terms or trade credit. One major culprit slowing repayment may be the large share of B2B payments conducted through checks – 42 percent, according to a recent survey. 

Merchants that rely on manual AR processes can quickly find their growth restrained. Traditional B2B AR methods can involve preparing and mailing invoices, depositing those checks and waiting for funds to settle. The resulting slow payment timeline causes cash flow headaches – not to mention poor payment status visibility and employee time drain. 

Manual invoice efforts also consume time and introduce opportunities for human errors, which can come back to bite when customers dispute invoices or when companies analyze inaccurate details. 

Modern AR tools can alleviate those administrative burdens while providing faster, more secure collections procedures. This month’s Deep Dive examines the pros and cons of digitized AR approaches as well as the role that technologies such as AI can play in minimizing B2B pains. 

Virtual Terminals and AI 

B2B vendors can use a variety of tools to process AR. Virtual terminals enable merchants to onboard clients and then automatically invoice and collect payments. These offerings simplify recurring billing relationships, spare employees from administrative work and allow clients to use fast, secure payment methods like credit cards. Vendors could additionally use the virtual terminal software as a point-of-sale (POS) solution and accept business representatives’ payments through computers, smartphones or tablets during trade shows and other events. 

Some companies that wish to further reduce required human labor and net deeper insights about their AR processes are going beyond virtual terminals and turning to AI-powered supports. AI can be applied throughout AR processes to help sort payment processing and reconciliation data, alert humans to cases that risk late payments and distinguish legitimate claims from fraud attempts. 

Specialists designate significant efforts to matching incoming payments with corresponding customer data, a process known as “cash application” that can be especially tricky for humans if customers pay multiple invoices at once. AI solutions can help by analyzing invoice data and tapping into capabilities like  ML, natural language processing (NLP) and optical character recognition to capture customer communications. The AI-enabled software extracts email and attachment details, electronic data interchange (EDI) files, check stub photos and buyer web portals, and it can then match that payment data to open invoices, enabling straight-through processing and saving time. 

Collections and Deduction Management 

AR departments also struggle when customers pay late or claim discounts, but AI tools can help alleviate both situations. Representatives of the department often only reach out to customers when payments are due, yet powerful analytical tools can assess a customer’s payment habits – alongside details like the total open invoice amount – to determine the likelihood that an obligation may not be paid on time. The software can then warn specialists, prompting these teams to proactively reach out to the at-risk customer to remind them of due dates, discuss payment options and potentially offer incentives to encourage more responsible payments. 

Even customers who pay on time can complicate AR teams’ operations. Customers may dispute invoices or argue that they were promised deductions, and workers facing such situations must assess those claims’ validity. Deduction analysts reportedly spend 60 percent of their time classifying deductions and sorting through backups to evaluate the arguments. Automation tools can help process proof of delivery records and cash deduction versus invoice deduction details, and can dispute histories to determine which deductions need further investigation. The technology can also automatically resolve payments it deems valid or provide them to specialists for a brief review. 

AR is a complicated yet vital part of B2B companies that have been riddled with slow, labor-intensive payment and invoicing processes. Firms are increasingly turning to powerful new technologies to ease and accelerate their AR processes, handling payment collection complexities and resolving disputes.