Manual AR Processes Aren’t Sustainable

The problem with manual processes is that you are at the mercy of month-end spikes, holidays, global pandemics, and a full quota of staff...

However, if you have an automated system that will process your incoming cash and correctly apply these to customer accounts—despite whatever else is going on—you are going to be ahead of the game and the competition.

In manufacturing, it is a fairly simple matter to understand the cost of errors by analyzing the situation and removing them. However, it’s a rare CFO who has thought about the cost of errors in their AR department.

AR is an incredibly manual process and it is inherently expensive to maintain. But there are a whole series of other hidden costs that go with an inefficient process.

Despite our best efforts, humans are prone to mistakes. And the pressures of work only compound the risk of errors. On the other hand, it’s likely that existing error-prone processes cause rework. Of course, for 99% of organizations that are reliant on a remittance to apply a payment, rework may seem inevitable when the remittance follows the payment.

It takes a second to make an error and an age to put it right.

Unapplying a payment, removing it from the wrong customer account, putting it on the right customer account, and then matching off isn’t a quick task.

But the bigger cost is what happens before the mistake comes to light—the customer tries to place another order but gets turned away because they are on credit stop, the calls to the salesman to put it right, the calls to AR to find out what happened, and the time spent investigating the issue.

Not only can you waste time and money putting errors right, but you can also lose customers because they simply can’t put up with calling every month to get their account amended.

And the same error could happen once again next month.

With Intelligent Automation, the system learns and prevents this error from happening again in the future.

You have two choices: hope that your automated system will spit out an exception warning or look at Intelligent Automation.

The quality of your automated accounts receivable system really dictates how many errors and exceptions you will get.

But at the end of the day, something that is just automated (via RPA for example) will always require a fairly high level of human intervention.
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Intelligent Automation:

• Is designed specifically to ensure that human intervention is needed as little as possible, leaving your staff to get on with their day
• Learns as it goes and develops an understanding of what needs to happen and when. And let’s be fair here… if you are processing your incoming payments manually, you will definitely have human errors in your accounts. 
• Has a 95% first-time hit rate with BlackLine, meaning that the less value-added, simple tasks get done with no assistance whatsoever
• Frees up staff for more important tasks such as customer relationship building, adding greater value for the business

Accounts Receivable manages the largest asset on the balance sheet: cash. With cash being at the heart of any business, making this a critical process in the finance function and optimizing processes is key.

AR touches so many aspects of the company—from cash flow to customer relationships to salesforce morale—so it is incredibly important that the department is working efficiently and accurately.

Imagine this scene: your company sends out 10,000 invoices a month. At the end of the month, your company receives between 5,000 to 10,000 payments, but these are all applied manually and don’t get done until week two of the following month.

It’s easy to understand why this is viewed as a difficult and time-consuming process.

Reconciling the payments received to the debts outstanding on the sales ledger allows the CFO to view the working capital position. Here, the CFO can see cash waiting to be released from debtors, pay current liabilities, and invest cash wisely into the business. Ultimately, the CFO wants to understand where the time and effort should be focused.

Your sales team are making sales, but these are getting held up because the customer accounts are showing that there are overdue invoices or balances that are over the account limit. Meanwhile, your credit control staff are wasting their time chasing debts that aren’t actually due because they were paid, possibly up to two weeks before.

So, you have annoyed customers and salespeople, and your CFO isn’t overly pleased either!

Now imagine a different scene: your customers make their payments as due, but this time, 95% get applied accurately on day one by the time people are coming back from their first coffee break! The management accounts look right, customers can place orders, and credit control are only chasing debts that are truly due.

When you are in charge of the company, you need to have the ability to accurately forecast your cash position.

In the past, finance departments and CFOs have had to rely upon a heady mix of experience, alchemy, and Excel to get anywhere close to being able to forecast cash.

With BlackLine, Excel jungles are a thing of the past.

By utilizing Intelligent Automation, BlackLine is able to look at debtor behavior together with current debt levels and accurately forecast the forward cash position.

CFOs can be sure that the AR position shown in their month-end accounts is accurate and can have confidence that the collection process is continuing efficiently.

The accuracy and consistency of BlackLine Cash Application means that reviewing a customer’s account limit is simple and you can be sure decisions are being made using accurate data.