The pain points that accounts receivable (AR) teams most commonly experience can be boiled down to three underlying and related problems: continued reliance on manual AR management practices, and the resulting lack of speed and high operating costs associated with managing receivables.
Reliance on manual processes has far-reaching effects. These legacy methods often reduce the speeds at which firms deliver invoices and follow up on overdue payments, as they are less efficient for prioritizing collections. These cumbersome processes often increase operational costs and pile up, thus resulting in delayed payments.
Businesses that rely on manual AR processes tend to have 30 percent longer average days sales outstanding (DSO) and take 67 percent longer to follow up on overdue payments, compared to firms that rely on medium or high levels of automation for collecting receivables. Adopting automation takes the hassle out of manually following up on overdue payments, therefore allowing firms to achieve shorter DSO.
These are some of the key findings in PYMNTS’ B2B Payments Innovation Readiness Report: How Automation Can Help Businesses Better Manage Their AR Processes, a collaboration with American Express, based on a survey of 460 businesses ranging from small to large and from numerous sectors including advertising, technology, construction, energy and healthcare. Our survey examined the degree to which these firms have automated their AR processes, the impact of the pandemic on their ability to manage AR, and their interest in adopting technological innovations in the future.
Challenges associated with managing AR processes have become even more troubling since the onset of the pandemic, as firms must now find alternative ways to perform functions that were traditionally handled manually in an office environment. Eighty-three percent of B2B firms have changed their AR processes since mid-March, in fact. The pandemic is also prompting a significant share of firms to change their payment terms and credit limits as well as adopt digital invoicing and payment methods. Firms that have implemented higher degrees of technology for managing AR seem to be more flexible at adapting to today’s changing market dynamics.
PYMNTS’ research reveals that 70 percent of businesses have plans to embrace technological solutions to improve their AR processes for faster processing, higher efficiency and lower costs. Firms that make the digital leap are finding themselves in better positions to more easily receive and process payments than they did prior to the pandemic.
These are only some of the findings from PYMNTS' research. To learn more about how technological innovations could benefit firms in their AR management, download the report.