AI Rides To Rescue Of Analog Accounting Processes

The problems are analog. The paper check, the paper invoice, slow accounts receivable (AR) processes and collecting on aging receivables can be difficult for even the most seasoned AR professionals.

But digital-era help is on the way. Michael Shields, business line executive at FIS, told PYMNTS in a recent interview that artificial intelligence (AI) can streamline and modernize the order-to-cash process and improve collections on outstanding invoices, freeing up resources for innovation and improving relationships between buyers and suppliers.

Shields noted that accurately predicting anticipated invoice payment dates can have ripple effects throughout an organization.

“No company is really immune to the administrative burden surrounding all those processes that are involved with collections and credit,” he said.

But at a high level, he added, firms that have already invested in AI, which can help predict those payment dates, have been able to recognize significant improvements in their collections processes — and, as a result, cash flows improve, too.

To get a sense of the inefficiencies inherent in traditional collections activities, Shields said that collections departments would typically “call all their customers in the portfolio, usually only looking at the past-due amounts, which helps them prioritize and figure out who they should be calling first.”

The sheer magnitude of the job means companies will have to deploy increasing staff and time levels as they seek to keep their AR activity healthy.

But with advanced technologies in place, the guesswork — and constant touchpoints — can be significantly reduced, where expectations are calibrated on a per-customer basis. He noted that for some collections, an “acceptable timeframe” may be within terms; for others, it may be terms plus 10 days (hypothetically speaking).

AI has changed the order-to-cash (OTC) landscape, allowing teams across the various processes to be much more efficient while driving continuous improvement of those processes.

“It’s not going to completely replace the human factor that’s needed for all the functions across the OTC space, but it will certainly add a layer of sophistication that I think will be needed to maximize the customer experience,” Shields predicted.

Improving Cash Flows

Using advanced analytics in the service of cash flow can be a significant aid as treasury operations and AR operations are converging at a rapid clip, Shields noted — which means treasury officials can make better decisions about working capital and how cash needs may be changing within a company (optimizing ongoing operations). Within the B2B space, especially, technology can improve payments processes that are time-consuming and error-prone. Yet the reluctance to embrace new payment technologies is palpable, said Shields.

“One of the many challenges faced by companies and corporations is the automation of the processing and application of payments,” he told PYMNTS. Remittance information and payments may travel across separate channels, while other companies still run on older enterprise resource planning (ERP) solutions.

All too often, he said, bringing automated payments processes and reconciliation, as well as improved cash collections, are not viewed as offering significant enough returns on investment.

“The process overall is typically overlooked as a necessary evil, and it’s not usually viewed as an opportunity,” Shields explained. Companies may push back on the cost of new tech deployments but eventually can begin to ramp up the transition (conversion, really) to electronic payment methods from lockboxes and checks.

“The cost should not be a factor anymore, as B2B firms realize the savings they can achieve through the automation and the transition to electronic payments,” he said. “They can instead look to the future of real-time payments.”

As companies seek to optimize B2B transactions, said Shields, virtual cards are proving to be more attractive to AP teams because they can turn cost centers into revenue generators.

“Issuing those payments regardless of paper versus electronic methods comes at a cost,” maintained Shields. “Not only are B2B firms paying the value of the invoice, but they’re also footing the costs of those payments. And while one payment might not seem too expensive, when you look at firms that are issuing thousands or hundreds of thousands of payments each year, the cost can add up.”

With virtual cards, he said, a portion of that interchange rate gets shared with the payer. When taking that same percentage for thousands of payments over a calendar year, significant revenue streams can build up over time. On the flip side, AR departments receive payments more quickly.

“By leveraging this kind of intelligence, staff can be optimized,” Shields said of AI and other technologies. He noted that AR professionals “can spend more time contacting those high-risk accounts in a more personal way, perhaps by phone, to help build those relationships that make a difference. They can prevent a delinquency from happening and ultimately train those customers on the ways the company wants them to pay in the future.”