Your Startup for Industry 4.0
In today’s intricate financial landscape, managing business finances is an enduring challenge, which comprises collecting cash efficiently and swiftly. These complexities of managing cash flow and improving accounts receivable (AR) collections are crucial to address for business startups to maintain the financial health of their business. Existing SMEs are inclined towards accounts receivable automation solutions as an operational necessity to navigate the inefficiencies of manual systems and improve their cash collection processes. Relying on manual processes for startups and new businesses can drain resources, as these methods are slow and prone to errors. This will also make it challenging to handle a surge of new clients with manual methods. Implementing efficient processes early on can help your company grow without the worry of cash flow issues. In this essence, we will delve into understanding AR automation solutions, and their benefits for small businesses, and explore whether they can help startups propel.
Understanding Accounts Receivable
Accounts receivable or AR is referred to the money customers owe to businesses for credit purchases. In the financial statements, AR is recorded in the assets section as it is part of the revenue that the company generates from the credit sales. When a business allows customers to purchase products now and pay later, those outstanding invoices are recorded as accounts receivable. As long as the outstanding invoices or customer payments remain unpaid, a business cannot get hands-on cash, which can bottleneck its cash flow.
Understanding Accounts Receivable Automation
When you use technology to employ an intelligent solution to collect accounts receivables, it can make your workflows efficient while also improving customer experience in numerous ways. From auto-sending invoices to invoice follow-ups, and sending dunning messages, you can reduce the burden on the AR team to manually chasing payments from customers. For startups, employing an AR automation solution can improve their invoice-to-cash process which is crucial to get paid faster so they can unlock their cash flow. Thanks to the machine learning algorithms of some intelligible software, you can leverage data analytics features to project financial budgets, cash flow, and the financial health of your company.
Benefits of AR Automation for Startups to Foster Growth
Out of the numerous benefits that accounts receivable automation solution possesses to support, manage, and track cash flow activities, here are some of the benefits they can provide to business startups.
1. Invoice generation and distribution is one of the fundamental activities for businesses dealing with credit sales. It can help startups automate this process which can reduce the manual efforts of the AR team. By sending invoices electronically, the cost of manual invoicing which otherwise includes printing and mailing would be reduced.
2. Payment tracking and reconciliation are also streamlined which means your financial statements remain consistent. When your ledger is up to date, it will be easier to determine the performance metrics of your business and download transaction details in a few clicks. This can save startups from waiting for their payments because they gain transparency in tracking payments using an intelligent solution.
3. Options to pay invoices can boost payments from the customer’s end as AR automation solution facilitates customers to pay in their preferred payment method. This way, businesses can accept ACH payments and credit card payments from customers which allows them to make payments at their convenience. The outcome of this is faster collection of AR from the customers, and reducing the payment delays.
4. Payment reminders help businesses remind customers to pay their invoices. When this process is automated, customers get payment reminders on time which prompts payments. This reduces the risk of overdue invoices which otherwise can affect the cash flow of new businesses. With streamlined payment reminders, startups can get quick cash in hand to fund their routine business activities.
5. Reporting and analytics features of the AR platforms empower businesses to monitor the status of receivables and track reports to determine customer’s payment behavior. With real-time data analytics, businesses can create payment terms and outreach strategies for efficient AR collections. Additionally, it helps businesses make informed decisions using analytics for credit management, including assessing risk when offering credit terms to new or existing customers.
6. Compliance and recordkeeping help startups comply with industry regulations and accounting standards while adhering to the stringent reporting requirements of the industry. With an AR software platform, recordkeeping and compliance become easier for startups, saving the manual hassle.
7. The integration ability of the AR platform helps startups connect the automation platform with their existing ERP or accounting software. Some platforms work standalone, others require integration to improve efficiency in multiple business functions and workflows while ensuring data consistency and effective financial management of accounting functions.
The Bottom Line
Business startups have to compete with existing companies in the market and employing efficient solutions like AR automation software can help boost growth opportunities. This can improve efficiency, reduce the need for manual admin, and minimize the operational expenses required to manage financial functions. By streamlining workflows, startups can improve their invoice-to-cash solutions and can make effective decisions leveraging the accurate analytical insights provided by the AR platform.
Also Read: From Startup to Stability: Financial Planning for New Entrepreneurs
