Accounts receivable (AR) is a critical part of any business that deals with customers, regardless of whether they employ in-house teams or outsource the work to third-party accounting firms. This key process can be riddled with issues such as incorrect invoices, insufficient cash reserves and late payments from customers, however, and almost one-third of organizations say cash flow issues that stem from AR complications often prevent them from paying vendors.
Many are turning to automated solutions to reduce the risks of human error and delays, with a PYMNTS study finding that 83 percent of B2B firms have already shifted their AR processes since March 2020. Predictive analytics offers some of the most promising forms of automation, as it leverages artificial intelligence (AI), machine learning (ML), data mining, statistics and a host of other techniques to analyze current vendor data and make informed predictions about future activity. These systems can project which customers have the highest likelihood of being late, for example, allowing AR staff to be more hands-on with these clients and to take steps to make the transactions flow smoothly.
In the August Working Capital Playbook®, PYMNTS explores the latest in the world of AR, including the challenges that AR teams face during the normal course of business, how these challenges can result in downstream damages like missing payments, and how new technologies like automation and predictive analytics are changing the AR game.
Developments From Around The World Of Accounts Receivable
Unwieldy legacy payments technology is a key driver of late payments, according to a survey finding that 90 percent of merchants have experienced challenges with their payment systems. These frictions have resulted in more than just payment delays as 37 percent of merchants also reported losing sales opportunities and damaging their customers’ experiences. The average organization offered 4.7 payment methods, but 70 percent said they lack some payment methods requested by customers or vendors.
AR professionals could very well be overestimating their departments’ capabilities. A study found that 86 percent of AR teams believed their departments to be “very” or “somewhat” modernized, but digging deeper into their exact capabilities reveals that the extent of this modernization may be grossly overstated. More than 40 percent of AR departments do not have self-service capabilities, for example, while more than half do not have real-time integrations with their enterprise resource planning (ERP) systems.
Heightened digital expectations are quickly entering the corporate envir
onment, especially when it comes to AR and B2B payments. A study found that 90 percent of B2B buyers would switch to a competitor if a supplier’s digital options were insufficient, an increase from 88 percent last year. Eighty-seven percent said they would be willing to pay a premium for these enhanced experiences, up from 81 percent in 2020 and 74 percent in 2019.
For more on these and other working capital news items, download this month’s Playbook.
Advertise Purple On Reducing Late Payments And Inaccuracies In Accounts Receivable
Cash flow issues can result in payroll errors, credit reductions and other struggles, making the elimination of AR errors a top priority. Reducing these errors necessitates diligence and communication when dealing with clients, according to advertising agency Advertise Purple.
In this month’s Feature Story, PYMNTS spoke with Advertise Purple President Kyle Mitnick and Chief Financial Officer Jonathan Moisan about how the company works to avoid AR complications and anticipate future challenges.
Deep Dive: Improving AR Efficiencies Using Automation And Predictive Analytics
Late payments are endemic in the AR space, and they can have dramatic ripple effects in terms of vendor loyalty and companies’ financial well-being. Many of these late payments are due to old-fashioned manual processes and paper transactions, but businesses that have deployed automated solutions like predictive analytics have seen massive efficiency improvements.
This month’s Deep Dive explores how predictive analytics can improve AR processes by assessing vendor risk and allowing AR teams to work around potential payment issues.
About The Tracker
The Working Capital Playbook®, done in collaboration with YayPay, is your go-to monthly resource for updates on trends and changes in accounts receivable.
