62% of Firms That Automated Accounts Receivable Report DSO Improvement

Managing accounts receivable (AR) struggles in a remote working environment is not without its challenges, as many companies have learned during the pandemic, but automation has helped companies blunt the impact and keep their cash flow steady.

In fact, 62% of firms that deployed AR automation reported that their days sales outstanding (DSO) improved, according to the October 2021 Working Capital Playbook done by PYMNTS in collaboration with YayPay.

That’s significant because nearly three-quarters of companies in the United States with annual revenues between $25 million and $100 million have said that late payments have gotten worse since the pandemic began, and 60% of small and medium-sized businesses (SMBs) have reported an increase in their DSO.

“Automation is making a significant impact in accounts receivable,” YayPay CEO Anthony Venus told PYMNTS. “This finance process has historically been extremely manual and inefficient, and today, companies are leveraging automation to complete tasks within the [order-to-cash] cycle quickly and accurately.”

Accelerating the Payment Process

He added that these tasks include credit assessment and approval, invoice delivery, customer communication strategies (dunning), identifying follow-up tasks, dispute management and payment processing.

“Traditionally, these tasks have been siloed and, in some cases, overlooked due to a lack of visibility into the actions required to accelerate the payment process,” Venus said.

Automating routine AR processes can be a critical step in addressing the accounting hurdles that come from that lack of visibility and from the lack of in-person collaboration when people are working remotely.

In fact, more than 87% of firms that deployed AR automation reported faster processing speeds, 79% said it improved AR teams’ efficiency and 75% said it resulted in better customer experiences. Most firms also discovered that AR automation saved on operational costs and reduced their DSO.

Before a company can accomplish automation, it must perform digitization, and many companies see digitizing their accounting processes as a worthy investment and a steppingstone to automation. A recent PYMNTS study found that 43% of chief financial officers were digitizing AR processes as a precursor to automation, and 70% said that digitizing AR functions is vital to building lifetime customer value. In addition, 40% said that digitization of accounting operations has resulted in fewer paper checks, and 61% reported digitizing customer or vendor invoices.

Enhancing the Experience for Companies, AR Teams and Customers

This digitization and automation of accounting processes could be essential to getting companies and AR teams on the same page and providing more satisfying work experiences for both. Remote work has become a clear favorite among employees, and their job loyalty could take a nosedive if employers do not share this inclination due to daunting AR processes, so it’s important to accommodate that by automating AR processes.

“Through automation, the ‘busy work’ done by AR teams is removed, which allows them to focus on value-added tasks,” Venus said. “Teams are now able [to] home-in on the exceptions, where true risk exists, which has positively impacted the length of the payment cycle, increased working capital, contained costs and enhanced the customer experience.”