AR Automation: Why It's So Essential for B2B Companies

  • November 27, 2023

The accounts receivable (AR) process dates to 2000 B.C. and The Code of Hammurabi, considered one of history’s most enduring legal documents. It is comprised of 282 laws, some of which relate to finance and contractual obligations. 

Much has changed since then – grain and silver are no longer sole forms of currency – but the AR process is just as integral. A company’s growth hinges on how quickly it gets paid, especially since delinquent payments cost the average business $300,000 per year. 

Given how beneficial it is to B2B companies, it’s no surprise the AR automation market continues to surge. Emergen Research expects the market size of AR automation companies to reach more than $8 billion by 2030 as AR automation continues to drive revenue and cut costs. 

Defining AR Automation

AR automation eliminates most of the manual labor from the (AR) process, automatically generating and delivering invoices, processing payments, and sending alerts and reminders out to customers. 

Implementing AR automation helps ensure companies get paid on time, resulting in increased cash flow and a clearer path toward long-term success. By completing time-consuming accounting tasks in minutes, AR automation reduces the manual process by up to 85 percent, according to Emergen Research, freeing up employees and enabling them to focus more time on creative and exciting projects. With built-in collaboration features, AR automation enhances communication between the buyer and seller. It also helps reduce costly errors – reports that 49 percent of disputes are because of invalid or incorrect purchase order information.

Buyers also reap the benefits of AR automation, which allows them to choose from a variety of different ways to pay bills including credit and debit cards, and digital transfers through Automated Clearing House (ACH). Rather than paper checks that can fall victim to fraud or get misplaced, payments made through AR automation are more secure and don’t need to be stashed in flimsy folders or bulky file cabinets.

According to PayStream Advisors (now Levvel Research), companies that manually process payment collections spend just 20 percent of their time communicating with customers. With collaboration tools built into AR automation software, B2B companies and their clients can quickly resolve any disagreements or confusion, ensuring prompt payments and strong, long-lasting relationships.  

Reducing DSO

A benefit of AR automation is its ability to reduce a company’s Days Sales Outstanding (DSO).

DSO is the average number of days it takes to receive payment from a sale. The higher a company’s DSO, the longer it takes to get paid. A high DSO can have a negative impact on cash flow and prevent a business from growing and reaching its full potential.

PYMNTS reports companies that automate more than half of the AR process experienced a 32 percent reduction of DSO, which is the equivalent of receiving payments 19 days quicker than before AR automation was implemented.

By reducing DSO and enabling faster payments, AR automation affords companies the opportunity to add staff, purchase new equipment, and ramp up marketing efforts as they drive toward profitability.

From Luxury to Necessity

Automated AR used to be something only a few companies were able to utilize. Going forward, it will likely become essential for all B2B companies looking to keep up with or eclipse the competition. 

In a recent report by PYMNTS, 90 percent of CFOs surveyed said they wanted to “widen the scope of automation” in their company’s AR process to reduce errors and receive payments faster. The report also found that 67 percent of CFOs said they needed more automation in their AR process.

If your company depends solely on manual labor for executing the AR process, you’re hindering your ability to expedite payments and lagging behind the competition.

Bill360 is purpose-built for the smaller companies in the B2B market, offering our unique data solutions and seamless payment flow in a single platform for ACH and card processing. Not only does Bill360 sync to programs like QuickBooks and Xero in a matter of minutes, but we also provide features that accounting systems and competitors don’t offer including buyer portals, fully integrated payments and AR support, and a secure buyer-managed payment wallet.

Schedule a demo and discover how Bill360 gives B2B companies the competitive edge they need to succeed.


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