7 Fears of Accounts Receivable Automation Put to Rest Introduction
While automated accounts receivable management software is not a new business technology, it has become increasingly popular in recent years as more and more businesses realize the value of an optimized A/R management process. While many see the need for and benefits of process automation, they still have reservations about making the switch from the manual processes they’ve always known to an automated solution.
In the years since we developed Lockstep Collect A/R management software, we’ve talked with hundreds of CFOs, credit managers, controllers, collectors, and IT managers about their hesitation to automate, and we’ve found that all businesses typically share the same fears:
- That automation will be too drastic a change.
- That cloud based automation is not secure.
- That automation is too expensive for most businesses.
- That automation takes away control of the process.
- That automation is too difficult to use and implement.
Interestingly enough, we have also found that after getting those fears out in the open and doing a little research, businesses usually realize that there is nothing to fear about automation
at all. We think you’ll feel the same way after reading through this guide.
FEAR #1: AUTOMATION WILL CHANGE EVERYTHING
If you’re afraid that automating your accounts receivable management process will be a major change to your business, then you’re absolutely right- but it’s nothing to fear. You’ve already
recognized the need for a change, and that’s the hardest part. Yes, making the move from a manual process to an automated one will change everything, but not in the panic-inducing way
The actual process and procedures are going to remain exactly the same; you’ll still be sending invoices to customers and all of the steps involved in following up to ensure timely payment.
The difference is that with automation, the system is going to take care of much of it for you.
So if the process behind it all is going be the same, what will automation change?
A/R automation is not going to change the work you do, but it is going to change the way you go about getting it done. With accounts receivable automation you’ll no longer need to spend
countless hours updating spreadsheets and rekeying information, printing aging reports, digging through old emails, figuring out who to call, and bouncing from one system to the next. You’ll be able to stop worrying about the small stuff and put your time and energy into more important activities that directly impact your overall performance and cash flow.
FEAR #2: LOSS OF CONTROL
Many credit managers, controllers, CFO’s, and collection professionals fear that by putting an automated workflow engine behind the A/R process, they’ll be giving up control of how the process is handled. But that’s simply not the case.
Accounts receivable automation software is designed to leave room for both automation and human interaction, giving you complete control over what the system does and when it does it. In fact, many people find that they have more control with automation than without it.
If you think about it, how much control do you really have over your current manual processes? You may have a credit and collections policy and procedure manual in the office, but how do you know it’s being followed consistently? You really don’t. Especially when everything is paper-based and your collectors are working independently of each other, sending emails out of their individual accounts, and tracking invoices on their own spreadsheets. Even if collectors are really trying to follow procedure, it’s not easy when you have hundreds of invoices to
When you utilize accounts receivable automation software, you can actually build your preferred processes and procedures into the workflow and rules engine. With automation, collectors don’t even need to think about following procedure- it just happens! Automation is defined by credit class so you can create different workflow for various groups of customers. After all, some customers just need a little more TLC than others.
Let’s say your procedure manual states collectors are to send a reminder email to customers five days before an invoice is due, call on the day it becomes overdue, send a past due notice 10 days past due, call a second time 15 days past due, etc.
To track all of that information and schedule the appropriate actions for each and every invoice manually would be incredibly overwhelming when you consider all of the research, planning, organization, and spreadsheet manipulating involved. You could have the world’s greatest credit and collection policy, but when you’re doing it all manually, putting it into practice consistently is downright impossible.
With a system like Lockstep Collect, that allows you to build your policies and procedures into the system workflow, the system would send out the reminder email for you with a PDF copy of the invoice in question attached, schedule a call for the day the invoice is overdue and alert the assigned collector of the task, send the past due notice with a copy of the invoice at the 10 day mark, schedule the second call and alert the collector, etc.
Further, when your collector is assigned an activity, making an introductory call to a new customer for example, they’re also provided with steps on how to complete that activity based on the policies and procedures your company has defined in the system.
Communication schedules are not the only aspect of your policies and procedures you can build into the system. You can also automate:
- The creation and assignment of actions to collectors
- Closure of issues when the customer payment is received
- Escalation of credit issues for large past due balances or extended past due days
- Tracking of broken promises
- And more
We know that automating your accounts receivable can be a scary notion at first, but hopefully you see now that you’ll have complete control of every aspect of the automation and you can change the workflow at any time should you make any changes to your policies and procedures.
FEAR #3: DIFFICULT TO IMPLEMENT & USE
You don’t know much about accounts receivable software, you don’t know what it’s like to use, and you have likely never implemented it before. Luckily, we have and we will do all of the heavy lifting for you and make the transition as smooth as possible.
THE IMPLEMENTATION PROCESS
Lockstep Collect includes a set of pre-defined actions that are ready to use out-of-the-box. These can be used as-is or modified but will streamline the implementation process significantly. Pre-defined actions provide alerts when a customer has any invoice that is due in the next 7 days and when any invoice is past due by 1-10 days; 11-20 days; 21-30 days; 31-45 days; or more than 45 days. By default, the system includes suggested email content for each action but emails are not set to automatically send so you can decide which actions to use and which ones to automate.
Implementing the system is far less painless than implementing other systems, such as ERP, and requires minimal involvement from your IT department. Plus we have direct integrations with numerous ERP accounting systems and email systems as well as simple CSV flat file interfaces for seamless integration.
If you’re worried about building your own workflow; you don’t need to be. If you have a credit policy or process you would like to follow, our team will build it into the system for you along with other A/R best practices to help you become even more effective. Once the workflow has been setup, we will teach you how to make small adjustments to the workflow yourself. Don’t worry, you can preview those changes before you publish the change in the system so you can make sure it’s what you want it to be, and our team is always here to help.
We are available to help you in many ways. Beyond the live training we also have embedded support within anytime collect, online ‘getting started’ video tutorials, best practice videos, live chat with our support team, and an online user group- all within the system.
- “Great product – versatile tool – easy to customize, Flexible, can adapt to your business process, quite intuitive, great visibility into customer accounts”-IT Manager
- “I was skeptical at first but this is one of the easiest systems I have ever installed. After initial implementation was taken care of, the system ran smoothly, support was
fantastic, and it has paid for itself time over time!”- IT Director
Using the system, while it will take some getting used to a training on your part, is easy. Especially when you compare it to the long and arduous manual processes you’re likely using now. For example, you can easily complete all actions for any given customer in just one screen; this includes scheduling customer communications, adding notes, assigning an account to a different user, accessing financial information, payment history, and much more.
We could talk until we are blue in the face about how easy we think the system is to install and use, but hearing right from real-users is what really matters. Here are what a few of our customers have to say on the topic:
- “Lockstep Collect works beautifully! It is very user friendly and can be sorted in any manner that you choose!”- Director of Credit and Collections
- “I am thrilled with the results we’ve seen and how easy the system is to use. I would highly recommend Lockstep Collect to anyone looking to improve their invoice collection process, and working with the e2b team has been incredible.”- Business Manager
- “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.” – Credit Manager
FEAR #4: CLOUD SECURITY
While more and more businesses are embracing cloud business software, others still fear the cloud. Sure, that fear may have been well justified when cloud computing first came onto the business software scene, but there really is no reason to fear it today. Let’s talk about some of the biggest fears businesses have about cloud accounts receivable software.
“Will my data be safe in the cloud?” this is the common concern. But the thing is, there are just as many examples of cloud security breaches as there are for premise based business systems being comprised. There are numerous conflicting reports and studies available with no definitive conclusion on which platform is the most secure or the most reliable. They key to safe data is choosing a reputable system and hosting provider which is why we chose Microsoft as our cloud platform partner. Microsoft has invested billions into its Azure cloud platform and security with an army of security experts whose sole jobs are to protect your data. It’s like having security guards patrolling your business data 24 hours a day, 7 days a week. Do you have this type of security in place for your business?
DATA LOSS AND CONTROL
Some businesses fear that cloud software providers will lock them into the software with no way to retrieve their data should they choose to leave for another solution. There are vendors out there who do that, but there are many others who do not. Nobody wants to be held hostage for their data or pay an exorbitantly large fee to get it back, so be sure to have this conversation early on as you evaluate your accounts receivable software options.
We’ve had companies express concern that if the internet goes down that they won’t have access to their software. That’s true, but most businesses don’t realize that internet outages are increasingly rare, and in most cases you’re more likely to experience a power outage which would affect your premise-based system than an internet outage that would impact your hosted system.
For example, think back to Hurricane Sandy. That storm affected more than 265,000 businesses in New York State alone, shutting millions of employees out of work for weeks due to power outages, making it impossible for them to access their business data.
“So how does this support the case for cloud software?” We’re glad you asked.
If your business system was available only on premise, how would you get your business back online if a disaster like Hurricane Sandy happened to you? If your business software was on the cloud, and it was hosted by a reputable company such as Microsoft with redundancy and automated backups on multiple servers located in different geographically dispersed data centers, you would be able to leave the area and work from another office location, a hotel, or Starbucks for that matter.
Your system would be operational and available to your employees, customers, and vendors outside the impacted area and you would be able to continue doing business. Maybe not business as usual, but you wouldn’t be dead in the water and reliant on utilities to restore power and internet services.
We work with businesses every day that tell us they won’t use cloud accounts receivable software that puts their financial data ‘at risk’ on the cloud. Meanwhile, these same businesses:
- Use cloud-based CRM systems where they store confidential customer lists, proprietary documents, confidential pricing, and other sensitive information.
- Use online collaboration platforms like BaseCamp to manage proprietary and confidential research and development projects with suppliers and external business partners.
- Bank online and transmit confidential credit card information from their ecommerce or point of sale software.
- Share confidential files using cloud storage providers like Dropbox.
- Transmit thousands of invoices to customers via electronic data interchange (EDI).
Think about it, if the cloud was really something to fear, why are cloud-based business software vendors growing faster than their premise-based counterparts? Why are Salesforce.com one of the fastest-growing CRM solutions on the market today? And why is every major ERP and CRM vendor moving from the desktop to the cloud?
If you’re truly still afraid of the cloud, there are vendors out there like us who do offer both premise and cloud accounts receivable software systems. Contact us to learn more about your deployment options.
FEAR #5: IT’S TOO EXPENSIVE
If you’ve identified improving cash flow as one of your business goals, it only makes sense that you’re wary of making a software investment to automate accounts receivable. We’re not here to tell you that implementing the system will be free or cheap, but you’ll be shocked at how affordable these systems can be. The key is finding a vendor who offers different versions of their software at different prince points so you have options based on your needs and your budget. Here are a few things to keep in mind as you evaluate your options and think about your budget.
Most small businesses don’t need automation software until they are managing about 100 customers or 100 invoices monthly, and these typically only require a single user. Most entry level accounts receivable management systems are available as hosted solutions for subscription pricing of under $100/month.
This is especially good news for QuickBooks users who are struggling with the basic capabilities of their QB system when it comes to managing invoices. An A/R automation system meant for small businesses usually allows for reminders to be sent out to customers and for notes to be made about collection calls and stored within the system, but there are a few systems that cater to small business with more advanced features.
Lockstep Collect Express Edition is available for as little as $100 a month with the ability to send out automated emails, customizable email templates, prioritized actions and call lists, and more. Learn more about Express Edition here.
Companies using ERP systems like Sage, Microsoft, Epicor, or others who are managing between $10 million to $500 million in credit sales, with an average of 5-10 full time credit users, are usually a good fit for a mid-market accounts receivable software application.
Prices typically range from $100 to $300 monthly for subscriptions or generally around $1,000 to $3,000 per user for a perpetual license purchase. This means businesses have a lot of flexibility when it comes to price, depending on how many users you require, the type of user, and deployment choices. Most midmarket companies typically have 3-5 full credit users and several inquiry users that can be used by sales managers or executives to access the system. Learn more about our standard edition for mid-market companies here.
Enterprise sized organizations, those who are typically on SAP, Oracle, or other larger systems typically have access to more robust A/R modules within their ERP system, but those modules can be overly complicated for smaller divisions of the corporation and have long implementation times. For this reason, many companies will use a mid-market solution or purchase the enterprise version of Lockstep Collect to use in corporate HQ. Our Enterprise customers range from smaller divisions of global enterprises with few users to Global companies with hundreds of users. Learn more about the enterprise edition here.
As with all systems, prices range when it comes to Enterprise accounts receivable management systems and can range from $5,000 to $15,000 per credit user, and implementations typically take a few weeks to a month for system configuration, setup, and user training.
ADDITIONAL BUDGET CONSIDERATIONS
Other than affordability of the software itself, you have to remember to consider the many ways the software will help you save money. For example:
Decreased financing costs: Companies using systems like Lockstep Collect typically get paid 20% faster. What does that mean to your bottom line? For $10 million dollars in revenue you’re incurring about $10,000 in finance charges (at 6% interest rates). Getting paid 20% faster eliminates about $20,000 in finance costs every year.
Reduced bad debt write-offs: Many studies suggest that companies write-off 4% of accounts receivable annually to bad debt. Companies implementing systems like Lockstep Collect typically reduce bad debt by 15-25% according to Paystream Advisors, because they identify and resolve disputes sooner, preventing them from aging to the point where they’re uncollectable. 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.
Reduced staffing costs: Many companies find that with automation, they no longer need to hire that new part-time or full-time employee they were considering. With the system automating most of the process, you can get more done with your current staff, eliminating the overhead you would have incurred by hiring on another person.
Reduced materials costs: Another cost and labor concern to think about is this- how much time and money do you waste manually printing, preparing invoices and sending invoices, reminder letters, and other communications that could be automatically delivered? It’s probably much more than you think.
Accounts receivable software offers features to allow you to save money by eliminating the need to print and mail invoice and reminders. With automation you can enable electronic invoice presentment and payment, email statements, and utilize an online customer portal.
If you have an accounts receivable problem, don’t let your fear of the price tag get in the way of you taking back control over your receivables, increasing cash flow, and growing your business. You have options and we have resources to help you make the right choice:
- Accounts Receivable ROI: Find out how much accounts receivable software really costs and get real numbers of how much you can save.
- Accounts receivable buyer’s guide and RFP template: we’ve put together a guide to help financial and business executives to understand the current market for automation software. This guide presents an overview of business software available to manage various aspects of the financial supply chain along with a sample request for proposal (RFP) template with a list of more than 320 features available in some of the more popular business applications available today to help you with the evaluation process.
FEAR #6: NEGATIVE REACTIONS
Rocking the boat is scary, and with any change there is bound to be a reaction. Here are the top two areas where companies worry the most and why you really don’t need to.
LOW USER ADOPTION
There is nothing worse than going through a software implementation only to see low adoption rates; that translates to you having wasted your time, money, and effort. It makes sense that you’d be wary of end-user reaction to such a large change. While we cannot guarantee that collectors in your company will utilize the system, we can give you a few tips on how to increase user adoption.
The number one thing you can do to increase adoption of the system is to make sure end-users understand why the change is happening, how it impacts their daily activities, and how it will benefit them as individuals. How will it make their work easier? How will it make them more productive? What pains is it solving for them? If you frame the conversation like that, your collectors will see that this is not something that is happening to them, but for them to increase their overall success. For example, automation can help address the pain points such as:
- Constantly re-keying data
- Having to spend too much time working in spreadsheets
- Sifting through pages and pages of aging reports to find overdue invoices
- Having to jump in and out of various screens and applications to find information
- Being unable to keep up with consistent communications with customers
- Being unable to quickly access customer and invoice data
It’s important to remember that the point of accounts receivable automation software is not to replace human involvement, but to enhance it and allow users to work better, faster, and smarter to yield the best possible results.
Another important factor in end-user adoption is training; do not skip this very important step. If you’re users do not know how to use the system, they either will not use it or they will not use it correctly. Be sure your software provider has training options and documentation available for the initial install as well as ongoing training and support.
Many companies fear that their customers will be put-off if they automate what can be a sensitive topic, but you’d be surprised at how automation can actually improve customer satisfaction. For example, the automated email reminders will ensure they do not forget to pay you; something a majority of your customers don’t want to do—but it happens. With so many other vendors to keep track of and invoices to pay, a friendly reminder can be very helpful.
Furthermore, the consistent communications granted via automated email helps keep the conversation going, giving your customer a fast and easy to ask questions or bring up concerns about an invoice. Not only does this give you the opportunity to provide stellar customer service, but it makes working with you much easier for the customer.
“I found that we got immediate feedback from customers who would shoot back a question or comments on invoices as soon as the statement was received in their inbox. This really opened up our lines of communication with our customers, resulting in much quicker payments and improved our customer service capabilities.”- Business Manager
FEAR #7: IT WON’T WORK
“What if I go through all of this and it doesn’t help me solve my problems?” I’m sure the thought has crossed your mind, and while it may be a valid question there are many, many studies and experiences out there that can quell this worry. We’ve helped numerous companies put their accounts receivable on auto-pilot, and they’ve seen some truly amazing results, such as:
- mspark decreased DSO by 26% and reduced past due invoices by a whopping 88% achieving significant reductions in accounts receivable labor and staffing costs. (full story)
- Polyportables saved 600 hours of time by using automated email and reduced their average days late from 477 to 4 (full story)
Outside of the results our customers have seen, Industry Analysts Paystream Advisors found that companies who utilize accounts receivable management software recognize benefits such as:
- 20 percent reduction in DSO
- 25 percent reduction in past due receivables
- 15 to 25 percent reduction in bad debt reserves
- ROI in as little as two months
A business that doesn’t change is a business that doesn’t grow. And the adoption of accounts receivable automation is definitely the result of growth and change. But it’s a change for the better.
Adopting an accounts receivable system to help automate your collections is a sign that your business is growing. It’s evidence that you’re collecting too much money to keep track of by using your old ways and methods. So, if you get to this point in the development of your business were you need a better way to manage your collections, embrace it, learn from it, but don’t recoil because it’s foreign territory.
Hopefully this white paper was able to curb some of your apprehensions toward adopting an accounts receivable system. We covered a lot of ground here, but the important thing to walk away with is the realization that A/R automation is the most effective way to manage your growth.