Accounts receivable software, also called AR software, is an indispensable tool for entrepreneurs, finance professionals and AR specialists. This article delves into the details of what AR software is, and its uses.
What is accounts receivable (AR) software?
Accounts receivable (AR) software helps a business keep track of money that is owed to it by its customers. Some AR softwares even provide automation of this process so that the business does not have to do it manually.
What does accounts receivables software do?
AR software can perform a range of tasks. In the broadest sense, they help businesses keep track of payments that are yet to be received from customers. Here are some of the functions and features that are provided by AR software:
- Creating and maintaining AR records: This helps keep track of every customer’s payment status and history in real time. As a result, we can know how much each one owes.
- Invoice creation: Accounts receivable software can be used to produce invoices for each transaction. The software then sends the invoice to the relevant customer. Prompt invoice production and mailing can speed up the payment process.
- Aging of accounts reports: This helps to sort payments based on how overdue they are or on any other criterion helpful to the business. As a result, the business has quick insight into how fast payments are reaching them.
- Maintaining a central database: Accounts receivable software maintain central databases of the customers who have had dealings with the business. With all data in one place, it can be effectively analyzed for the benefit of the business.
- Billing and collection: Both these vital parts of any business transaction can be integrated into an accounts receivable software. This helps streamline the whole procedure, keeping required details in one place.
- Automation: Many new AR software support automation of usually manual tasks. This includes functions like collection, reconciliation, and so forth. Businesses can save a lot of effort this way.
- Reminders: Some AR software can also send reminders to customers regarding payment. This can encourage them to pay on time, and help the business.
- Monitoring payment options: Accounts receivable software can adjust various payment options on a customer-to-customer basis. This increases personalization of the payment procedure. This includes providing early payment incentives and late payment deterrents.
- Dunning: While dunning falls under the category of debt collection, it can also be handled in part by accounts receivable software. The process involves sending regular reminders to the customers who are significantly overdue when it comes to payments.
- Customer credit management: AR software keeps track of the money owed by customers, and helps manage their credit. The business owners can analyse their customers’ payment history and choices to evaluate how creditworthy they are.
- Recurring billing support for customers: Accounts receivable software can help set up recurring billing for regular customers. This can simplify the steps involved for them.
- Escalating collection: When customers’ payments are significantly outstanding, it is necessary to escalate the process. AR software can help in that by increasing the frequency of reminders and and/or involve higher levels of the organization in the process.
- Customer statement integrity: Accounts receivable software can maintain integrity of customer statements by automating the entire process.
Benefits of using AR software
AR software provides many benefits to the companies that use it. Here we discuss some of them.
Control over cash flow
AR software automates the cash flow process to a great degree. As a result, the business is in a much more informed position about the income they receive over a business cycle. AR software can also help smoothen the cash flow and make sure payments are made on time. In the long run, this benefits the business’ financial health.
Reduced DSO
DSO (Days Sales Outstanding) is a measure of the average number of days a payment is outstanding. AR software can reduce this by helping the customers make more prompt payments. This is good for the business as a lesser DSO means that funds are available faster.
Quick invoicing
Because accounts receivable software can automate the process of generating invoices, it makes the whole process faster. This leads to benefits in the long run, as it simplifies further steps in the entire transaction. AR software can also be easily tuned to the preferences of each individual customer. As a result, the process is much more efficient.
Efficient processing
Accounts receivable software, when compared to human agency, is much more efficient, both cost-wise and in terms of time. Further, the chances of error are much lower. AR software can also lower the work that goes into following up on late payments, by automating the process. This is normally a considerable drain on time and resources when actual human employees are involved.
Predictive analytics
Accounts receivable software can be used to predict cash flows for a business cycle and so on. With the data obtained from previous transactions and payment history, the software suggests which customers are likely to be late. This helps make more informed business decisions in the future.
Improved customer relations
Using AR software makes consumer relations more professional. As the many stages of the transaction are performed by the AR automation software, the customer is less likely to experience difficulties. From the business perspective, accounts receivable software gives a concrete picture of each customer, driven by data. This can help personalize the relation between the business and the customer.
Lesser overhead costs
Overhead costs involved in traditional accounts receivable management can be significant. The delays involved also add up to effective expenditure. A firm can avoid the extra expenses by using AR software, as everything is digital and centrally managed.
Better credit management
AR software gives a business complete access to all customers’ payment history and trends. This can help them decide which customers are more regular on their payment than others. With this information, the business can offer appropriate credit terms to each customer. As an added bonus, this all happens with a centralized system instead of varying sources.
Faster payment cycles
Accounts receivable software speeds up payment processes. The result is that the payment cycle is shorter too. With the payments completed faster, the business has the opportunity to look ahead and plan. This helps the business stay up-to-date with trends too.
Who can use AR software?
AR software can be of use to businesses of all sizes. It leads to tangible benefits in the long run for the business. Here we see how AR software can help various kinds of businesses.
Small businesses
Small businesses are usually run by a limited group of people. While they do not usually use accounts receivable software, they can significantly benefit from its usage. One significant benefit is the lowered burden on individuals working in the business. The automated AR software solves most of their issues by solving these issues. Manual methods of working are likely to be much slower.
Small businesses whose members are physically apart also benefit from the usage of AR software. The software helps keep everyone on the same page, regardless of physical distance. This assists in the smooth running of the business.
Medium-sized businesses
Medium-sized businesses stand to gain a lot from using accounts receivable software. They gain the insight they lacked previously regarding their cash flows. Many medium-sized businesses are formerly small businesses. Having AR software can make the process of dealing with larger cash flows easier.
AR software can also help with simplifying customer relations in the case of such businesses. It is impractical for all these customers to be manually serviced. By automating the procedure, accounts receivable software makes the job simpler for medium-sized businesses.
Another problem faced by medium-sized businesses is predicting cash flows. Matters are often difficult for them because they do not have the tools for the job of prediction. This can make planning for the future hard. AR software can bridge the gap.
Large businesses
Large businesses have a definite need for AR automation software. They are involved in large volumes of cash flows which essentiates the need for automation of receivable collection.
AR software helps large companies collect valuable information from the huge pool of data at their disposal. This can lead to better decisions financially for the company’s growth.
Accounts receivable software also streamlines customer relations and helps keep tabs on a large customer base. As a result of good customer relations, the company can experience positive growth.
Best accounts receivable software
Here we discuss some of the best accounts receivable software available on the market.
FetchMyPayments
FetchMyPayments is a versatile AR software that has strong predictive features. It automates large parts of the collection cycle, from invoicing and billing to payment reconciliation. This helps shorten the payment cycles, and DSO, significantly.
Automatic collection and dunning also reduces the need for manual attention. This means that messages and payment reminders are sent at a regular basis to customers to help ensure they pay on time. Further, customers who are late in paying are given more frequent reminders. This is done on any platform of choice, such as WhatsApp, email, or SMS.
Its automatic reconciliation feature solves the major issue of ensuring that the payments are matched by the banking system, in real time. This reduces the need for manually confirming with the banking system whether the payment is completed or not. It further avoids the difficulties associated with mistaken payments and wrong crediting of money.
Importantly, its AI can predict the customer payment trends and suggest which of them are likely to pay on time, and which are not. Analysis of this data is a useful indicator of future cash flow too. These valuable insights can help in the efficient running of a business, as well as plan better for the future decisions.
YayPay
YayPay provides a range of accounts receivable data analytics. It enables automating a large part of the process, reducing the human effort involved. YayPay also supports predictive analysis of future payment trends of customers. It helps customer relation management by keeping track of communication.
Freshbooks
Freshbooks is a cloud-based AR software aimed at small businesses. Quick, efficient invoicing is one of its strong points. It also helps streamlining the process in between invoice generation to collection. Keeping track of expenses along the way is another good feature of it. It is flexible with support to multiple payment methods.
Acumatica ERP
Acumatica is an enterprise resource planning (ERP) software, not just an AR management software. However, it has an AR handling system as part of its financial handling module. It can be hosted internally, or used as an SaaS offering by Acumatica itself. Either way, it is cloud-based. Its primary customers are in the small- and medium-sized business sector.
Quickbooks Pro
Quickbooks Pro is accounting software that has AR management features too. It has other features that enable one to keep track of shipping and payment for customers. Unified payment is also supported by a single payment link. It also supports a range of analytic features based on data collected from users. It can also be used to keep track of profit and loss calculations.
CreditPoint Software
CreditPoint software helps manage customer credit and collection. It enables the whole collection process to be personalised for each customer. Some features in it help analyze the functioning of the business at a large as well as small scale. It enables credit risk management too.
Zoho Books
Zoho Books is a relatively low-expense option. It is aimed at small businesses. It provides a range of features supported by the other softwares in this list. It has a very user-friendly UI and takes a visual approach. It contains several key analytical tools to measure performance. It supports collaboration too,
Sage Intacct
Sage Intacct is an SaaS accounting management software. It is web-based and caters to small and medium businesses. It includes a variety of functionalities in addition to accounts receivable management. Sage Intacct is one of the earliest pieces of software in the industry. It has a good extent of multi-platform support.
Xero
Xero is a startup-oriented accounting software that supports accounts receivable management. It provides a range of features for analysing cash flow trends. It also has a range of add-ons that can be used to further tweak performance. As an added bonus, it has a free trial period too.
Invoiced A/R Cloud
Invoiced is an AR automation software that has a significant customer base amongst medium-businesses. It has a range of billing and collection automation features. Omni-channel payment collection is supported by it. It enables a smooth customer payment experience with its interface.
Wrap Up
This information can come in useful for choosing a suitable AR automation software for the purposes of business. There are a range of softwares that are aimed at different user categories and business sizes. The business owners must consider their priorities, as well as the expenditure they are willing to undertake, before deciding on a piece of software.
