How Much Can Your Business Save With A/R Automation?

Cost Savings

In the dynamic landscape of modern business, the accounts receivable (A/R) process plays a pivotal role in shaping financial health. Yet, the traditional methodologies surrounding A/R management are filled with challenges that hinder business success. Not only are manual A/R processes cumbersome, they’re a drain on operational efficiency, preventing organizations from reaching optimum success.

Additionally, these manual processes — characterized by labor-intensive tasks, a propensity for human error, and sluggish follow-up procedures — not only impede the seamless flow of financial transactions but also exact a tangible toll on overall financial health. As businesses grapple with prolonged payment cycles and an increase in days sales outstanding (DSO), the urgency to overcome these challenges becomes increasingly important.

Below, we’ll delve into the transformative potential of A/R automation, highlighting how the approach not only addresses these challenges, but propels businesses toward a more efficient and financially prosperous future.

Breakdown of Savings

A/R automation software provides organizations with the ability to accept virtually any payment method from any payment channel on a single platform. This eliminates the need to manage multiple payment systems and dashboards to handle incoming payments. Additionally, A/R automation tools provide finance teams with complete visibility into all payments from a single interface, enabling them to streamline payment acceptance and processing.

These benefits ultimately result in major cost savings for organizations. We’ll review a few of the ways A/R automation tools save businesses money below.

  • Reduced Labor Costs

By automating manual tasks such as data entry and invoice processing, businesses can save significant man-hours. This not only leads to direct cost savings but also presents an opportunity to reallocate staff to more strategic roles, enhancing the business's overall value proposition.

  • Faster Payments and Improved Cash Flow

Automated reminders and streamlined payment methods can expedite client payments, positively impacting working capital and liquidity. Quicker access to funds enables businesses to invest in growth opportunities, reducing dependency on external financing.

  • Decrease in Errors

Manual errors in billing can be costly, leading to disputes, delayed payments, and loss of customer trust. A/R automation minimizes the risk of errors, ensuring accurate invoicing and reducing the time and resources required for dispute resolution.

  • Efficient Use of Resources

The shift to automation eliminates the need for extensive paperwork, printing, postage, and related overhead costs. Businesses can redirect these resources towards more strategic initiatives, contributing to overall cost-effectiveness.

  • Reduced Bad Debts

Automation helps with the early identification of delinquent accounts, enabling timely interventions and reducing the risk of bad debts. This proactive approach to collections can significantly impact a company's bottom line.

Enhanced Analytics and Reporting

A/R automation provides businesses with better access to data and analytics. This enhanced visibility allows for more informed decision-making, leading to strategic financial planning and, in the long run, significant cost savings.

A Simple Formula for ROI Calculation

Businesses can estimate their potential savings by adopting A/R automation using a simple formula:

ROI = Net income / Cost of investment x 100

For example, say an individual who invested $90 into a business venture. They also spent an additional $10 researching the potential venture, resulting in a total cost of $100. If the venture generated $300 in value but cost $100 in regulatory and personnel cost, the net profit would be $200.

Following the formula bove, the ROI would be $200 divided by $100 for a result of 2. With ROI typically being expressed as percentage, the answer would be multiplied by 100 resulting in a 200% ROI.

Calculating ROI with Tesorio’s A/R Automation

Now, you can explore the functionality of the Tesorio ROI calculator to gain a realistic understanding of the potential impact on your Accounts Receivable processes. The user-friendly tool allows you to input specific financial data, such as collection periods and outstanding invoices, providing an insightful projection of potential savings. Utilize the calculator as a neutral guide, offering a clear perspective on the efficiency and financial implications of integrating Tesorio Accounts Receivable into your operations.

How Real Companies Have Reduced Costs With A/R Automation

The cost savings realized by A/R automation tools vary by industry. While some see increased efficiency that enables them to meet ambitious revenue goals, others see cost savings through decreased errors or streamlined payments.

To highlight how different companies cut costs, let’s look at three use cases.

Technology Platform Improves DSO by 20%

Apptio, a financial technology platform, relied on Excel spreadsheets to track customer invoices and contract information. With multiple users making changes to customer information at once, it made it difficult for the organization to focus their time and efforts on building customer relationships. Additionally, the setup prevented executives from obtaining a cash forecast they could be confident in.

By integrating A/R automation tools featured in Tesorio, Apptio was provided with a single dashboard in which to track information and measure changes. This enabled individuals to prioritize and manage their workloads in favor of higher-paying invoices rather than smaller ones, improving their cash flow.

Additionally, A/R automation tools improved team productivity and communication. Teams can now easily share information around invoices, current collection efforts, payments, and more. Arguably, the biggest cost saving metric the company achieved was improving DSO by nearly 20%.

Growing Company Replaces Manual Invoicing

Seismic is an enablement cloud provider that relieves pain points in the accounting and finance department through automation tools. However, the team was relying on bulky, manual, and time-consuming processes that limited how many invoices could be processed. Additionally, this limited the amount of dunning emails that could be generated and sent to customers.

Because the company was experiencing rapid growth, Seismic needed a way to streamline their processes. Using Tesorio’s automation tools, the company was able to process significantly more invoices and dunning campaigns in a shorter amount of time. Additionally, the automation of manual processes freed up individuals’ time to focus on more value-adding tasks.

More Ways Automation Benefits Businesses

Beyond the direct and measurable cost savings, the adoption of A/R automation provides a number of intangible benefits that significantly enhance the overall operational landscape of businesses. Some of these include:

  • Improved customer satisfaction: Businesses utilizing A/R automation experience a notable increase in customer satisfaction levels by an average of 25%. The streamlined processes, faster query resolutions, and enhanced transparency contribute to a positive customer experience, fostering long-term relationships.

  • Enhanced customer reputation: According to one source, companies leveraging A/R automation are more likely to have an enhanced reputation in the market. Automation not only showcases a commitment to efficiency but also reflects positively on the organization's reliability and forward-thinking approach.

  • Reduced stress on A/R personnel: Automation eliminates the burden of repetitive manual tasks, allowing employees to focus on more strategic and fulfilling aspects of their roles, thereby improving overall job satisfaction. In fact, one source found that automation reduces employee stress levels by 72%.

  • Increase in employee productivity: McKinsey found that A/R automation contributes to a 15% increase in employee productivity within finance departments. With routine tasks automated, employees can redirect their efforts towards higher-value activities, fostering innovation and professional development.

  • Faster decision-making: According to HBR, 90% of employees who use automation tools feel the technologies help them make decisions faster. Access to real-time data and analytics empowers leadership teams to make informed decisions swiftly, positioning the company as agile and responsive in a competitive market.

Ultimately, the benefits of A/R automation extend far beyond the balance sheet. By improving customer relations, enhancing company reputation, and nurturing a positive work environment, businesses can create a foundation for sustained success in an increasingly competitive business landscape.

Navigating Financial Transformation Through A/R Automation

In today’s digital world, A/R automation is not just a way to streamline processes — it’s a strategic imperative for businesses looking to cut costs and achieve financial resilience. The potential savings and efficiencies unlocked through A/R automation are numerous, highlighting the critical need for organizations to implement these tools.

The best way to get started? Tesorio. Our portfolio of A/R automation tools enable organizations to streamline processes and cut costs dramatically. See just how much Tesorio can save your business by requesting a free demo today.