Businesses at Risk: The High Cost of Manual AR Processes and What to Do About It

The speed of business today demands agility, yet outdated accounts receivable (AR) processes remain a stubborn bottleneck for many organizations. Increasingly, the complexity and volume of invoices threaten to overwhelm manual systems, leaving businesses even more vulnerable to inefficiencies and lost revenue. In the face of these challenges, AR automation is no longer a luxury but a necessity. It provides a path to streamlined operations, clearer financial visibility and sustained growth. However, for many businesses concerned about complexity and disruption, the promise of AR automation hinges on solutions that are both powerful and intuitive. These solutions must act as a bridge to the future without disrupting the present.

The Invoice Avalanche: How Outdated AR Threatens Cash Flow

AR Automation Paralysis: What Is Really Holding Companies Back?

Alleviating Manual AR Headaches

Ditch the Paper Chase: The 5-Step Guide to Automating AR

The Invoice Avalanche: How Outdated AR Threatens Cash Flow

While Silicon Valley is racing to build the next artificial intelligence (AI) unicorn, many businesses are drowning in paper invoices. This mismatch is not just inefficient; it is a financial hazard waiting to detonate.

Firms are gambling with outdated AR as a tsunami of digital invoices approaches.

Given that invoice volumes are projected to surge by 46% in the next three years, businesses are staring down a looming AR crisis. This is largely due to the 35% of firms that have not automated their AR processes and the 24% of AR teams that continue to rely on outdated spreadsheets. This critical gap between operational needs and automation adoption foreshadows cascading inefficiencies as transaction volumes grow, potentially hobbling businesses unprepared for a digital-first economy.

59%

of U.S. businesses link poor cash flow and forecasting to outdated manual AR methods.

Manual AR leaves firms suffocating under the weight of payments backlog.

Manual AR processes pose an existential threat to businesses in the U.S. In a recent study, half of firms surveyed lament excessive time wasted on processing AR, and 44% struggle with delinquent payments collection. An alarming 43% of organizations report confronting too many late or delinquent payments, while 46% find it difficult to reduce days sales outstanding (DSO). This pattern of inefficient resource allocation and diminished productivity underscores the growing incompatibility of manual AR processes with the pace and complexity of modern business transactions. Consequently, many businesses face a competitive disadvantage in an increasingly digital economy.

Manual AR processes drain cash and threaten financial health.

Fifty-nine percent of businesses in the U.S. attribute poor cash flow and forecasting to outdated manual AR methods. In addition, 57% cite difficulties in managing credit risk. Even more troubling, 21% of AR teams relying on manual processes find it challenging to determine fundamental financial measures such as the credit-sales-to-AR ratio. The inability to use critical financial data creates a ripple effect that can distort strategic decision-making and severely limit business agility.

AR Automation Paralysis: What Is Really Holding Companies Back?

The AR automation train is leaving the station, and too many companies are still fumbling for their tickets. Countless businesses remain on the platform, paralyzed by a mix of budget constraints, tech trepidation and resistance to change. The costs compound daily.

Budget constraints leave firms in AR automation limbo.

96%

of mid-sized firms struggle with barriers to adopting AR automation.

PYMNTS Intelligence’s research reveals that an overwhelming 96% of mid-sized firms face barriers to adopting AR automation. Cost remains the primary roadblock, with nearly half halting automation plans due to the hefty price tag. Additionally, 37% of executives at these firms have paused or scrapped automation initiatives, fearing the time involved in bringing staff up to speed. This widespread hesitation threatens to leave companies in financial quicksand as competitors race ahead with automation. The longer businesses delay, the wider the efficiency gap grows.

Security and technology hurdles are stumbling some firms.

Security concerns loom nearly as large, with 47% of executives at mid-sized businesses identifying security as a critical barrier, second only to cost. The situation is similarly challenging for larger businesses. In a separate study, PYMNTS Intelligence found that 80% of CFOs at firms with annual revenues exceeding $250 million say the excessive complexity of automated AR workflows cripples their ability to reduce DSO. Equally frustrating for these CFOs is the lack of on-call advisory services, further impeding DSO reduction efforts. This combination of security fears and implementation hurdles acts to widen the gap between automation leaders and laggards.

Alleviating Manual AR Headaches

For businesses, automated AR unlocks a wealth of insights and efficiencies. In a landscape where cash flow is paramount, AR automation is not just an upgrade — it is the new table stakes for optimized cash flow.

AR automation rewires financial operations for digital-first success.

U.S. Bank launched a comprehensive AR platform that integrates invoicing, payments, cash application, collections and credit management for suppliers. Meanwhile, AI-driven solutions, such as Esker Cash Application, are pushing the envelope further, employing advanced remittance management and auto-matching for payment reconciliation. This is the promise of digital automation — financial control and greater business agility.

75%

of AR executives at middle-market firms report improved cash flow and savings after AR automation.

Cold, hard numbers are driving interest in AR automation.

Among adopters, AR automation is delivering a knockout punch to inefficiency, with 83% of AR executives reporting enhanced process efficiency and accuracy. Seventy-five percent also cite improved cash flow and increased savings, directly impacting business growth. These benefits extend beyond middle-market companies. More than one-third of smaller U.S. companies report improved cash position visibility, while nearly one-third are slashing AR processing times. These metrics underscore AR automation’s potential to generate improvements across the financial board.

AR automation fever shows no signs of breaking.

PYMNTS Intelligence research also found that 93% of AR executives anticipate further improvements from more comprehensive automation. For example, more than half expect improved data availability, a key factor for strategic decision-making. Perhaps the greatest warning to the holdouts, 82% of AR teams using automation report increased overall effectiveness. This signals a widening chasm between “the automated” and “the manual” in the race for optimized AR.

Ditch the Paper Chase: The 5-Step Guide to Automating AR

As invoices pile up and cash flow tightens, forward-thinking AR teams are discovering a powerful ally in AR automation. For others, however, the path forward feels uncertain. In this reluctance lies a hidden cost — one measured not only in dollars and cents but also in missed opportunities and stunted growth. The good news is that the tools to transform AR from a headache into a driver of efficiency and growth are within reach.

PYMNTS Intelligence prescribes the following actionable roadmap for businesses wrestling with manual AR.

Audit and analyze processes. Identify your firm’s most time-consuming and error-prone AR tasks and quantify their financial impact. This data-driven approach will make a compelling business case for AR automation, showcasing potential return on investment (ROI) to key stakeholders.

Find the right fit for the need. Explore AR automation solutions that align with your firm’s size, industry and growth goals. Consider factors such as scalability, integration capabilities and ease of use when evaluating potential provider partners. Prioritize solutions offering customizable dashboards and real-time reporting to improve financial visibility.

Consider AI an ally. Embrace AI-driven tools for tasks such as matching incoming payments to invoices (cash application) and processing remittance information. Look for AI solutions that can predict payment behavior and offer actionable insights, not only speeding up AR processing but also improving accuracy. Use these tools to free up your team for higher-value, strategic work, such as building stronger customer relationships and proactively managing credit risk.

Go for a strategic rollout, not a big bang. Start with a pilot implementation in a high-impact area such as invoicing or collections. This allows your AR team to test the waters, refine the application and build internal buy-in for a wider rollout. Develop clear success metrics for the pilot and use the results to fine-tune a full implementation strategy.

Seek AR partners, not just providers. Look for AR automation partners who understand your firm’s industry and business challenges. Collaborate with those also offering strategic guidance and ongoing support to ensure your AR team’s success in the long run.

In the machinery of digital-first business, manual AR is a hand-weaving tool amid power looms. Savvy firms use AR automation to reinforce the very fabric of their businesses with optimized cash flow management and operational efficiency.

As the responsibilities and priorities of the office of the CFO continue to expand, so too does the complementary role that AR teams play in helping to contain costs, reduce DSO and preserve customer relationships. Automation solutions — particularly those driven by AI technologies — are a key tool for achieving these goals by way of faster processes, improved decision-making and better business outcomes.”

Ari Widlansky
Managing Director and U.S. COO