Raise the bar with accounts receivable automation to release cash

Thanks to pioneering technology, there is now a golden opportunity for financial controllers to free enormous sums of tied-up working capital. This will empower employees and enable them to drive value and strategy, writes Kevin Kimber, Managing Director, Global AR, BlackLine

The coronavirus crisis has prompted most organisations worldwide to spend big on automating their financial services – but only a tiny fraction have upgraded their accounts receivable processes. Today, with the advanced technology and pioneering tools available, those who fail to automate their AR processes miss a golden opportunity to empower the finance teams and unlock the cash held hostage.

In November 2019, months before the pandemic hit Europe, PricewaterhouseCoopers calculated that a staggering $1.2 trillion of excess working capital was tied up on global balance sheets. While there is clearly a latent opportunity to free this enormous amount of cash, ahead of the coronavirus crisis automating AR operations was not a priority for businesses.

Back then, the reluctance to focus on upgrading AR processes for the digital age was, to an extent, understandable, given the ease of borrowing for businesses. Now, though, organisations realise that optimising these processes has never been more critical. A recent Institute of Finance and Management survey suggests 55% of finance leaders are less than satisfied with how their company’s AR procedures have performed during the recession. And over half (52%) say that too many manual processes are the biggest weakness.

The combination of the lines of credit being significantly compressed and the increased demand to have cash more readily available – to drive innovation, boost agility and strengthen resilience – has elevated the need to embrace AR automation.

Historically, solution vendors possibly didn’t know how best to position the value and business benefits of automating AR processes. It’s so easy to pigeonhole AR automation as a single process primarily about headcount reduction and driving efficiencies. While these points are valid, there is so much more from which to benefit. 

Articulating the benefits of automating the AR process

Presenting the point that “if you deploy a technology like ours, you can reduce your headcount from, say, 16 to five people” does not go far enough – there are so many additional advantages now. However, if we reframe the case for AR automation, it becomes so much more compelling.

For example, a large, global B2B manufacturer with a high volume of low-value invoices might offer 30-day payment terms. Each day is worth $150 million, so customers paying 63 days late means $9.5bn late and at risk.

Not only is this woefully inefficient, but there is also friction generated between the increasingly frustrated finance team and the customers whom they are chasing for payment.

Deploying technology like BlackLine enables that cash to be collected and applied much faster, giving access to cash quicker, reducing the need to borrow to cover working capital exposure and tightening customer relationships. Ultimately, through artificial intelligence and machine learning, automating that process will enable businesses to unlock the cash held hostage.

More than that, investment in AR solutions starts a virtuous circle: the business becomes more agile, innovative, and resilient – all essential elements for organisations seeking to thrive in the coming months and years – because the cash is available. 

Looking at the broader picture, it’s a fallacy that robots are taking our jobs. On the contrary, they are enhancing and improving them. Humans are empowered to make smarter, data-driven decisions. And at BlackLine, we are transforming the relationship finance teams have with technology.

According to Adobe’s Future of Time study, published in late August, UK business employees waste more than a day a week on low-value tasks that should be automated. So much so that almost two-thirds (59%) of respondents are seeking new jobs with better technology to reclaim work-life balance.

Automation propels finance teams from the back office to driving strategy 

Indeed, the reduction of repetitive manual tasks transforms finance departments to be more human and less robotic – they become enablers rather than blockers. Automating the AR process means that risk is easier to manage. 

For instance, BlackLine AR Automation solutions put key information at the fingertips of organisations – from live payment data to debtor performance – so teams can quickly identify customer trends and maximise cash and debtor performance metrics.

It also helps to optimise relationships with customers. Access to and analysis of the data provides a markedly better understanding of customer behaviours, allowing the finance team to be more proactive, and helpful, when engaging. For example, how and when are they paying? What levels of credit are they on? With managing existing customers and looking for new customers crucial for growth, deepening these relationships is vital. 

Further, when supported by automation and data-hungry AI algorithms, finance teams are propelled from the “back office” to the heart of the business, driving both value and strategy.

Automated solutions, such as BlackLine’s, instantly improve a business’s cash flow, better protect revenue, and boost working capital and customer-centricity. We know what customers need to thrive in the digital age. Armed with our expert help and pioneering tools, they can unlock the cash held hostage while empowering their finance teams. Organisations that prioritise automating AR processes today will win tomorrow.

Small steps to accounts receivable automation – but large rewards

1. Understand that business outcomes are being challenged, unnecessarily. In 2019 PricewaterhouseCoopers estimated that $1.2 trillion of excess working capital was tied up on global balance sheets. A more recent IOFM survey suggests days sales outstanding (DSO) has increased by 59%. Additionally, PYMNTS’s B2B Payments Innovation Readiness Playbook shows businesses that rely on manual AR processes often have a 30% longer average DSO.

2. Most AR processes are not fit for purpose – so say finance leaders. The IOFM survey finds that 55% of respondents are less than satisfied with their AR operation. Over half (52%) report that too many manual processes are the biggest weakness. Further, only 23% have utilised some kind of cash application automation. Notably, the lowest number of days taken to collect debt for those businesses using AR automation is 12.

3. Realise the potential of automating AR processes. Organisations that have upgraded to BlackLine’s AR automation solutions all report huge – and immediate – benefits. “You can reduce your costs by at least 75%,” says the head of credit, Atkins Group. Meanwhile, Veolia’s UK credit manager says the solution “has allowed the credit controllers to focus on collecting cash and managing risk”.

4. BlackLine AR Intelligence delivers real-time insight into customer financial behaviour to mitigate financial risks and improve cash flow and working capital performance. With cash flow vital to every business, AR automation is a future-proofed solution.

This article first appeared in BlackLine’s special report, Optimising the accounts receivable department, published by Raconteur in November 2021

Published by

Oliver Pickup

Multi-award-winning writer, content editor, ghostwriter, and TV and radio commentator (and occasional illustrator), specialising in technology, blockchain, startups, business, sport and culture. Founder of Pickup Media Limited. Interviewer of death row prisoners, legendary athletes, influential leaders, tech trendsetters, and cultural pioneers. By-lined in every English newspaper. Contributor to dozens of multinational publications.

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