Untangling Accounts Receivable Processing

Thursday, February 09, 2012

Try mapping an organization's manual accounts receivable (AR) processes and the result will likely look like tangled strings of Christmas lights that were hastily stuffed into a Rubbermaid tote. And the combination of multiple billing, collections and AR systems, numerous handoffs between departments, and piecemeal reporting and interfaces can be just as maddening to deal with.

Companies that rely on manual AR processing suffer from unruly volumes of paper invoices and supplemental documents, high Days Sales Outstanding (DSO), weak capital management, time-consuming disputes, inconsistent customer service, and costly manual posting and cash application.

And the costs associated with these paper-driven AR processes add up fast. Gartner pegs the average cost to apply a paper check (including labor, equipment and overhead) between $5 and $10. Worse, the average cost to resolve an exception payment or invoice dispute weighs in at an eye-popping $25 to $100. Simply producing a paper invoice costs an average of more than $5, Gartner reports.


With reduced DSO, improved cash management, faster receivables turnaround, and increased efficiency topping the list of objectives that companies have for their AR departments (according to Aberdeen Group), it's no wonder that more businesses are automating their AR with e-invoicing.

E-invoicing allows suppliers to electronically deliver invoices in the format that their customers desire (EDI, XML, print file, etc.), virtually eliminating the manual intervention that costs so much time and money (it also will help ensure payment predictability as the United States Postal Service cuts back on deliveries). What's more, an e-invoicing portal provides tools for automating deduction management and tracking individual payments. Additionally, e-invoicing allows companies to offer customers self-service electronic payment options, as well as the ability to manage their own profile.

By using a SaaS-based e-invoicing solution, suppliers also avoid the hardware and software license fees associated with traditional AR systems, and they won't burden their strapped IT resources.

Together, these benefits not only make an AR department more efficient, they make a business more competitive. It's for these reasons that untangling AR with e-invoicing is gaining traction.

Now, about those Christmas lights…