Many accounting departments would love to use an accounts receivable software to help manage and automate the process, however many feel that it is simply out of reach. In the past, adding an accounts receivable automation application to your ERP system could cost thousands and thousands of dollars, an investment that many businesses simply weren’t willing to make.
With the advent of the cloud, accounts receivable software is much more affordable, even for small businesses. In fact, some accounts receivable automation systems pay for themselves rather quickly. In this whitepaper, we’re going to take a look at the most important accounts receivable software features that help keep costs down and look at how much money can be saved by investing in accounts receivable software.
ACCOUNTS RECEIVABLE SOFTWARE FEATURES
Usually when sending a collections email, you need to do some research before you can actually send it. The customer’s account information needs to be referred to, invoice and invoice number needs to be attached and all previous communications need to be considered. With automated email, virtually all of these steps can be skipped. Emails are sent out automatically to customers based on a rule setup. Not just collection emails can be automated, but also new customer welcome emails, reminders and past due notices. Supporting documents, such as bills of lading or purchase orders, are stored in the system and attached to invoices when necessary.
- CREDIT RISK MANAGEMENT
Every business should be practicing credit risk management. Before a potential customer is given access to a line of credit, they should be vetted through a business credit application process. Once they have become a customer, their credit scores should continually be checked on to ensure they are still in good standing. With an automated accounts receivable software, credit scores of customers can be easily accessed and stored in the system from any credit reporting bureau. Alerts can be set to notify you when customers are starting to slip on payments and are showing signs of cash flow issues. All of this better prepares the department to deal with a potentially risky customer.
- ONLINE BILL PAY
An online payment portal is one of the easiest ways to speed up payment. Instead of chasing down each individual customer to find out where the check is or to have them read off their credit card numbers over the phone, they can simply click a link and go make the payment themselves. For many businesses, this method is preferred because they never have to pick up the phone or write a check for the mail. They payment can be made at their own convenience.
Online bill pay with Anytime Collect automated accounts receivable software is PCI compliant. PCI compliant means the online bill pay system adheres to (and helps you to adhere to) the standards set forth by the Payment Card Industry, including how the information is stored and how it is shared with banks, processors and gateways. Credit card information is never stored in the system, but rather the customer portal is integrated with merchant providers who store customer credit card information in an encrypted vault. Transactions are processed within the merchant provider’s system and a confirmation is passed back to Anytime Collect and stored as a pending payment until it has been recognized within the ERP system.
- INVOICE DISPUTE MANAGEMENT
With invoice dispute management in accounts receivable software, the disputes can be dealt with more quickly. Not only can an alert be set to let you know when an invoice is in dispute, but they can also be automatically escalated to a credit manager or other supervisor position. Each invoice dispute is given a reason code, allowing the accounts receivable department to track which disputes are posing a problem and create a solution to eliminate them.
- PRIORITIZED ACTIONS
One of the most time consuming areas of accounts receivable is simply trying to figure out what you should do next. In automated accounts receivable software, a color coded home screen shows you exactly which invoices need to be followed up on, who is the furthest past due payments, who needs to called, what messages are available and more. Instead of spending ten minutes to gather information on what you should do next, it is available as soon as you log in.
ACCOUNTS RECEIVABLE ROI
There are several areas of the accounts receivable software which immediately show a return on investment. These are actual measurable indicators that allow you to see a comparable dollar between using and not using accounts receivable software. Below are some areas which we find the greatest ROI of using accounts receivable software.
GROW WITHOUT ADDITIONAL STAFF
Many worry that with the advent of technology, accounting and accounts receivable professional will be put out of a job. However, no matter how much technology exists, accounting and accounts receivable professionals will need to be there for decision making situations and as an analyzer. With automated accounts receivable software, the boring, mundane manual tasks are put on auto-pilot. This allows the accounts receivable clerk to spend more time on the phone with customers collecting past due accounts.
If the business begins to grow and gain more customers, the current accounts receivable staff will be able to continue their daily routine without adding additional staff. Consider the cost of adding a new employee. The average salary in the United States for a full-time Accounts Receivable Clerk is $34,770 (Glassdoor). However, the costs do not end there. Benefits are typically 20 percent of the employee’s salary, adding another $6,954. Taxes can cost around $2,590 for an accounts receivable clerk salary, however this can vary depending on your state. You’re now paying $44,314 annually for an additional accounts receivable employee to send emails, mail letters and print invoices. With these tasks automated by an accounts receivable software that costs around $100 a month, you can keep your current staff but add even more accounts. That’s a savings of $43,114.
REDUCED OFFICE SUPPLY COSTS
Office supplies have been around forever and they seem to magically restock themselves every week. If we’re not specifically the person purchasing and keeping track of the costs of all these office supplies, we often times don’t realize how much it truly costs. If you’re manually printing and mailing invoices to customers, the cost of these office supplies can add up quickly.
According to efficiency expert K.J. McCorry, author of Organize Your Work Day In No Time, the average employee uses about 10,000 sheets of paper a year. At the average prices for a pack of paper, each employee costs a business $80 a year in paper alone. If you have just 50 employees in your office, you’re spending $4,000 in paper. The invoice won’t print onto the expensive paper alone, however. According to Green Print Technologies, printer ink costs businesses about $10,000 a gallon. And that gallon will end up being used printing invoices. Finally, the average cost to send an invoice through the mail, including envelopes and postage costs about $7 per invoice. If your business is sending out just 500 invoices a month, you’re spending $42,000 a year to mail out invoices.
If you’re using automated email to send customers invoices, you’re completely eliminating these expenses. By auto-emailing invoices to customers, you’re saving your business around $42,000 a year. This is almost as much as it would cost to hire another accounts receivable employee.
When an email is being crafted manually, your task usually looks like this:
- Look up the customer’s account
- Find out if they have received any previous reminders or communications
- Find out how much the invoice is worth
- Look up the invoice number
- Look up the primary contact
- Write out the email
- Send the email
Writing an email this way can take about 5 minutes each. Although that doesn’t seem like much, when you have 100 or more of these to send it could take hours. In fact, just 100 manual emails would take you eight hours (an entire day of work) at 5 minutes each.
If you’re using automated email your task to send out email will look more like this:
- Pick a group of customers to send the email to, such as all customers 45 days past due
- Choose a pre-created email template
- Set the auto-email to go out at a certain day or time
In just a minute or two you have eliminated an entire day’s work.
Many of our customers have taken advantage of using automated email and have seen hundreds of extra hours open up during their work week, allowing them to pay more attention to their accounts. Our customer Polyportables, a manufacturer of sanitation products, saved 730 hours in one year. They sent a total of 8,770 automated emails to their customers. Instead of manually crafting every email, Polyportables now had the time to actually call those who were the latest in payment and were able to collect on more accounts. In fact, credit manager Ben Burford of Polyportables said ““This past year we were able to reduce our accounts receivable by over $1.5 million and a lot of that I attribute to this program, this software.”
Another customer, BEGA-US, a lighting manufacturer, saved 345 hours in one year. Instead of simply sending out reminder emails or collection letters using automated email, they now have the time to add a welcome email to all new customers. They have seen this additional email to their customers improve their customer relationships.
REDUCED FINANCING COSTS
Often times when a company isn’t able to collect on all their accounts, they struggle to make payments where it is needed and necessary. You can’t make payroll, you can’t pay your vendors, and you are forced to borrow cash and incur finance charges on high interest, short term loans. Companies using automated accounts receivable software typically get paid 20% faster, according to PayStream Advisors. Getting paid faster results in reduced financing costs. For $10 million dollars in revenue you’re incurring about $10,000 in finance charges (at 6% interest rates). By using an automated accounts recievable software, you are getting paid faster by 20%, translating into an elimination of about $20,000 in finance costs every year.
REDUCE BAD DEBT WRITE OFFS
Companies implementing automated accounts receivable systems typically reduce bad debt by 15-25% because the entire process is automated. An automated process allows collectors to send out more collection emails, get in touch with customers soon and identify and resolve disputes sooner, preventing them from aging to the point where they’re uncollectable. According to studies, you’ll only collect about 74% of invoices that age to three months; 30% of invoices that age to 6 months; and only 10% of invoices that age to 12 months or more. Let’s put this into perspective, a $10 million company is writing off $400,000 annually. A 20% reduction provides a savings of $80,000 annually. Companies operating on razor thin margins would have to increase sales dramatically to make up for that loss. However, using an automated accounts receivable software reduce, or even completely eliminates, bad debt write offs.
Using an automated accounts receivable software can save an upward of $80,000 to the company immediately by eliminating the need to hire additional staff and eliminating all office supplies. Using our collection software, Anytime Collect, a monthly subscription starts as low as $100 a month. The price difference is simply incomparable. Every year that you see those savings could go towards helping your business grow, whether that is maintaining customer relationships by taking them out for a nice event, increasing your marketing budget, creating a new product line or any other growth activity. Not only do you save money by implementing automated accounts receivable software, but you end up collecting more than you ever had.