Accounts Receivable & Payable Automation in 2025: How to Cut DSO by 33 Days and Triple Productivity

You closed a strong quarter. Sales are healthy. The pipeline looks promising. But when you check the cash position, the reality hits: millions are tied up in unpaid invoices. Your finance team is chasing down late payments while vendor bills stack up. The board’s asking why DSO keeps climbing.

This isn’t a “back-office” problem anymore. It’s a growth problem.

In 2025, accounts receivable (AR) and accounts payable (AP) have moved from quiet, behind-the-scenes functions to critical growth levers. As capital costs rise and customer acquisition becomes more expensive, how fast you turn revenue into cash can determine whether you hit your next growth milestone or stall out.

We've seen this transformation firsthand. Liquidity isn't just a foundational metric anymore. For growth-focused companies, it's a competitive advantage. In a world of rising capital costs and increasing customer acquisition pressures, faster cash collection is a growth lever.

But what exactly do we mean by AR/AP automation? At its core, it's the application of technology, particularly artificial intelligence and machine learning, to streamline and enhance the entire invoice-to-cash and procure-to-pay cycles. This includes:

• Automating invoice creation, delivery, and processing
• Streamlining approval workflows
• Predicting payment timing and customer behavior
• Enhancing cash flow forecasting and visibility
• Optimizing working capital management

This transformation isn't happening through incremental improvements to manual processes. It's being driven by a fundamental shift in how finance teams operate, seeing a 33-day reduction in Days Sales Outstanding (DSO) and a 50% reduction in 90-day aged accounts. These aren't minor efficiency gains; they represent a complete reimagining of financial operations.

The Hidden Costs of Manual AR/AP: Why Automation Matters

Before we explore how to implement AR/AP automation, it's important to understand why it's become so critical. Most finance leaders recognize the obvious inefficiencies of manual processes: time-consuming data entry, paper-based approvals, and manual reconciliation. But the hidden costs run much deeper and have far-reaching implications for your entire organization.

The Operational Burden

The sheer volume of transactions has exploded for most businesses, with some processing thousands of invoices monthly. This operational burden is compounded by:

• Global complexity: International payments introduce different methods, currencies, and compliance requirements
• Distributed teams: Remote work necessitates digital solutions for approvals and processing
• Error-prone processes: Our research shows that billing errors account for 60% of late payments, while 61% of invoices contain at least one error

These challenges create a significant time drain, with finance professionals spending up to 20 hours weekly on manual invoice processing. For growing companies, this often means adding headcount in direct proportion to transaction volume, which is an unsustainable scaling model.

The Financial Impact

The direct financial consequences of manual AR/AP processes are substantial and often underestimated:

• DSO inflation: Manual collections processes typically add 15-30 days to DSO, tying up working capital unnecessarily
• Processing costs: Handling invoices manually averages $10-$15 each, while automation can cut that down to roughly $2-$3 per invoice.
• Late payment penalties: Inefficient AP processes lead to missed early payment discounts and incurred late payment fees
• Bad debt exposure: Without predictive analytics, companies lack early warning systems for at-risk receivables

Our analysis of $80+ billion in receivables processed reveals that once an invoice crosses the 120-day mark, collection probability drops to just 20-30%. For a company with $10 million in annual revenue, even a 5% reduction in DSO can free up over $135,000 in working capital, something that could be invested in growth initiatives rather than sitting in aging receivables.

The Strategic Impact

Beyond operational inefficiency, manual AR/AP processes have profound strategic implications:

• Cash flow visibility: Without real-time insights, forecasting becomes guesswork rather than strategic planning
• Working capital constraints: Slow collections and inefficient payment processes tie up capital that could be invested in growth
• Strained relationships: Delayed vendor payments and customer collections communications damage important business relationships

These strategic limitations ultimately restrict a company's ability to make confident financial decisions. When finance teams are constantly reacting to cash flow surprises rather than proactively managing working capital, they're forced into defensive positions: delaying investments, limiting growth initiatives, and sometimes even seeking external funding unnecessarily. 

Benchmarking Your AR/AP Performance: Where Do You Stand?

Before implementing automation, it's essential to understand your current performance relative to industry benchmarks. This provides context for your transformation journey and helps identify the most significant opportunities for improvement.

These benchmarks show that leading industries collect payments 1.4 to 2.5 times faster than their lower-performing counterparts. The percentage of overdue AR in lagging industries is 2-3x higher than in leading sectors.

What separates the leaders from the laggards is in how they've embraced technology to transform their AR/AP processes. This brings us to the core technologies driving AR/AP automation today.

The Technology Powering AR/AP Automation

The most significant advancement in AR/AP management is the application of artificial intelligence and machine learning. These technologies are transforming every aspect of the invoice lifecycle, from creation to payment and reconciliation.

Intelligent Data Capture and Processing

Modern AR/AP platforms use AI to automate the most time-consuming aspects of invoice management:

• Intelligent data extraction: AI can automatically extract and validate invoice data with 90-95% accuracy, eliminating manual data entry
• Automated categorization: Machine learning algorithms can code invoices to the correct GL accounts based on historical patterns
• Anomaly detection: AI flags unusual patterns that might indicate errors or fraud, improving accuracy and control

This technology adoption is accelerating rapidly. According to Gartner, AI adoption in finance reached 58% in 2024, an increase of 21 percentage points over 2023. CFOs are directing it primarily toward AR/AP (36%), process automation (35%), and predictive analytics (33%).

Workflow Automation: Beyond Basic Digitization

While data capture is important, the real transformation happens through intelligent workflow automation:

• Intelligent routing: Send invoices directly to the right approvers based on factors like value, department, or vendor
• Mobile approvals: Managers can authorize invoices remotely, removing process delays
• Exception handling: Systems flag discrepancies between purchase orders and invoices for review
• Audit trails: Every action is documented, simplifying compliance and audits

These capabilities dramatically reduce processing time. In some cases, companies have cut invoice processing time from 15-20 minutes down to less than 3 minutes, which an improvement of about 80%.

Predictive Analytics: From Reactive to Proactive

The most powerful aspect of AI in AR/AP is the shift from reactive to proactive management:

• Payment prediction: AI models can forecast exactly when customers will pay based on historical patterns
• Risk identification: Systems can identify at-risk invoices before they become problematic
• Cash flow forecasting: Advanced analytics enable more accurate cash flow projections
• Strategic recommendations: AI can suggest optimal payment timing to balance cash flow needs

This predictive capability transforms how finance teams operate. Instead of reacting to aging receivables or scrambling to meet payment deadlines, they can proactively manage cash flow with unprecedented precision.

Now that we understand the technology, let's see how leading companies are putting it into practice.

AR/AP Automation in Action: Real-World Success Stories

The impact of AR/AP automation is being demonstrated daily by companies across industries. These stories illustrate how organizations are achieving remarkable results through technology-driven transformation.

Veeva Systems: Balancing Growth and Efficiency

Veeva Systems, a cloud software leader in the life sciences field with a client base of over 750 worldwide, was undergoing rapid growth. Their spreadsheet-driven collections process couldn't scale efficiently, and they needed to improve collections while maintaining positive customer relationships.

Following the rollout of an AR automation platform, the company experienced significant gains:

• 75% reduction in bad debt write-offs
• 50% reduction in 90-day aged accounts
• 2x improvement in collections team efficiency
• Lowered time spent on non-priority accounts from a quarter of the workweek to under two hours

What's particularly interesting about Veeva's approach is how they view collections as the critical last mile of the customer journey. By automating routine follow-ups and using AI to prioritize accounts, they've been able to focus their human touch on the relationships that matter most.

Couchbase: Transforming Cash Flow Management

Couchbase, creator of a powerful NoSQL database used by Fortune 500 companies like AT&T and Wells Fargo, faced a common challenge: their manual cash flow forecasts via spreadsheets required 10 days to complete, limiting timely decision-making.

After implementing a cash flow performance platform, they transformed their financial operations:

• Reduced DSO by 10 days
• Grew collections per analyst 2x in 2 years
• Reduced cash flow forecast preparation time from 10 days to only a few hours
• Maintained collections resources even as ARR grew by 100%

The most powerful outcome is that they haven't raised capital in three years because they've dramatically improved their cash flow performance. They can live off what they bring in, which is the ultimate financial freedom for a growth-stage company.

Your AR/AP Automation Roadmap: From Assessment to Implementation

Adopting AR/AP automation is an ongoing process rather than a single event. This roadmap will guide you through each step of the process, from assessing your current state to realizing the full benefits of automation.

Step 1: Assess Your Current State

Every effective transformation begins with a clear grasp of your current state. Begin by:

1. Charting existing processes: Outline each stage from invoice generation or receipt through to final payment
2. Locating process chokepoints: Identify where delays, errors, or inefficiencies tend to arise
3. Quantifying performance: Establish baseline metrics for processing time, costs, and accuracy
4. Benchmarking against peers: Compare your performance to industry standards using resources like our AR Benchmark Report

This assessment provides the foundation for your automation strategy and helps identify the highest-impact areas for improvement. It also establishes a baseline against which you can measure success.

Step 2: Define Your Objectives and Success Metrics

Defining clear goals helps ensure your AR/AP transformation supports the company’s overall business priorities. The most common ones to consider are:

1. Operational efficiency: Reduce processing time and costs
2. Working capital optimization: Improve DSO and DPO to free up cash
3. Strategic insight: Enhance cash flow forecasting and visibility
4. Scalability: Enable growth without proportional headcount increases
5. Risk reduction: Minimize errors, fraud, and compliance issues

For each objective, define specific, measurable success metrics. For example:

• Reduce invoice processing time by 50%
• Decrease DSO by 15 days
• Cut the share of receivables outstanding for over 120 days by 40%
• Improve cash flow forecast accuracy by 30%

These benchmarks will inform your rollout and make it easier to prove ROI.

Step 3: Select the Right Technology Solution

With clear milestones in place, you can evaluate automation solutions based on how well they address your specific needs. Some key factors include:

1. Integration capabilities: Ensure seamless connection with your ERP and other financial systems
2. AI and machine learning features: Look for intelligent data extraction, categorization, and predictive analytics
3. Workflow customization: The solution should adapt to your approval processes, not vice versa
4. User experience: Easy-to-navigate designs speed up adoption and minimize the need for extensive training
5. Security and compliance: Ensure strong safeguards are in place and that all activities meet applicable regulatory standards
6. Scalability: The solution should grow with your business without performance degradation

Request demos and trials to see how each solution handles your particular use cases. Pay attention to how the system handles exceptions and edge cases, as these often reveal the true capabilities of the platform.

Step 4: Implement Strategically

A successful implementation requires careful planning and execution. Follow these best practices:

1. Start with a pilot: Test the strategy in one department or workflow to fine-tune it before scaling
2. Invest in training: Comprehensive training ensures users can maximize the system's capabilities
3. Establish clear KPIs: Define success metrics to track improvement over time
4. Create standard operating procedures: Document new workflows for consistency
5. Appoint champions: Identify enthusiastic users who can support their colleagues
6. Plan for continuous improvement: Schedule regular reviews to optimize the system

Rolling out in phases helps limit disruptions and enables tweaks based on initial feedback. Early successes also help generate momentum, showing stakeholders the tangible benefits of the change.

Step 5: Measure, Optimize, and Expand

Implementation is just the beginning. To get the highest return from your AR/AP automation initiative:

1. Monitor KPIs: Consistently measure results against the targets you’ve established
2. Gather user feedback: Understand what's working well and what could be improved
3. Optimize workflows: Refine processes based on data and feedback
4. Expand functionality: Gradually implement additional features and capabilities
5. Share successes: Communicate wins to build support for continued investment

This continuous improvement approach ensures your AR/AP operations keep getting better, delivering increasing value over time.

Beyond Automation: The Future of AR/AP

While current AR/AP automation technologies deliver significant benefits, the future promises even more transformative capabilities. Understanding these emerging trends helps you prepare for the next wave of innovation.

Generative AI and Conversational Interfaces

The next evolution in AR/AP management centers on generative AI:

• Natural language queries: Finance teams can ask questions about cash flow, aging, or vendor status in plain language
• Automated reporting: AI can generate customized reports and insights without manual analysis
• Intelligent recommendations: Systems can suggest payment strategies to optimize cash flow
• Virtual financial assistants: AI assistants can handle routine tasks and answer common questions

McKinsey reports that adoption of generative AI rose from 33% in 2023 to 71% in 2024, spanning every major business function.

Ecosystem Integration

The future of AR/AP extends beyond individual organizations to entire business ecosystems:

• Supplier networks: Integrated platforms connecting buyers and suppliers for seamless transactions
• Industry standards: Common data formats and protocols to facilitate interoperability
• Financial marketplaces: Platforms offering financing options based on verified AR/AP data
• Collaborative forecasting: Shared visibility into payment timing across supply chains

These ecosystem approaches promise to reduce friction not just within organizations but across entire supply chains and business networks.

Transforming Financial Operations Through AR/AP Automation

We began this guide by exploring how accounts receivable and payable have evolved from back-office functions to strategic assets. We've examined the hidden costs of manual processes, the technologies driving automation, real-world success stories, and a step-by-step implementation roadmap.

The transformation of AR/AP operations represents one of the most significant opportunities in modern finance. By embracing automation and AI, finance teams can unlock working capital, improve efficiency, and gain the insights needed to drive strategic decision-making.

The data is clear: companies that automate AR/AP processes see dramatic improvements in DSO, productivity, and cash flow visibility. From 75% reductions in bad debt write-offs to doubling collections productivity while maintaining headcount, the benefits extend far beyond operational efficiency.

Throughout 2025, the divide between high performers and those falling behind is set to grow even more. Organizations that embrace these technologies now will build a competitive advantage through greater financial agility, improved customer and vendor relationships, and more strategic use of working capital. It's about creating financial self-sufficiency that gives you the freedom to grow on your own terms.

In a world of rising capital costs and increasing customer acquisition pressures, that kind of financial self-sufficiency isn't just desirable but a competitive necessity. The question isn't whether to automate AR/AP processes, but how quickly you can implement these transformative technologies to stay ahead in an increasingly competitive landscape.

Take the Next Step in Your AR/AP Transformation Journey

Ready to transform your financial operations? Here's how to get started:

1. Calculate your potential ROI with our interactive calculator to quantify the impact of automation on your DSO, working capital, and operational efficiency.
2. Schedule a personalized demo to see how Tesorio's AI-powered platform can address your specific AR/AP challenges and help you achieve results like those featured in our case studies.
3. Explore customer success stories to see detailed examples of how companies like yours have transformed their financial operations with us.

Don't let manual processes hold your finance team back any longer. Join the growing community of forward-thinking finance leaders who are transforming AR/AP from cost centers to strategic assets.

Frequently Asked Questions

What sets accounts receivable automation apart from accounts payable automation?

Accounts receivable automation speeds up customer payment collection from invoice creation to follow-up, while accounts payable automation streamlines vendor payments, approvals, and reconciliation. Both use AI and workflow automation to cut errors, save time, and improve cash flow.

What ROI can companies expect from AR/AP automation?

Companies typically see ROI in multiple areas: reduced DSO (average 33 days), increased productivity (3x improvement in collections efficiency), reduced processing costs (up to 90% reduction in AP processing time), and improved cash flow visibility. 

How long does it take to implement AR/AP automation?

The time needed for implementation depends on the system’s complexity and the level of integration required. Cloud-based solutions can be implemented in as little as 4-6 weeks, while more complex enterprise implementations may take 3-6 months. A phased approach starting with the highest-impact processes can accelerate time-to-value.

How does AR/AP automation improve compliance and reduce fraud?

Automation improves compliance through consistent application of policies, comprehensive audit trails, and automated controls. Fraud reduction comes from segregation of duties, automated three-way matching, anomaly detection, and approval workflows. We've seen customers implement three-level verification systems with automated duplicate detection that significantly enhanced their fraud prevention capabilities.

Do we need to replace our existing ERP system to implement AR/AP automation?

No, most modern AR/AP automation solutions are designed to integrate with your existing ERP system rather than replace it. These solutions act as an intelligent layer that enhances your ERP's capabilities through API connections. Top providers, such as Tesorio, come with ready-made integrations for widely used ERPs like NetSuite, Sage Intacct, Oracle, SAP, and QuickBooks. This approach allows you to leverage your existing investment while gaining advanced automation capabilities without disruptive system changes.