As the Federal Reserve tightens interest rates at the highest level in over 20 years, it’s a good time to review your manual accounts receivable (AR) processes to seek out your unresolved cash traps. Even with rates on the rise, bank lending is accelerating faster than in recent years. When it comes to accounts receivable, it’s no surprise that rising interest rates are causing companies to evaluate their AR and cash position.

In their recent earnings report, Fifth-Third Bank indicated:

“Excluding PPP, average commercial loans increased 6% with C&I (Commercial and Industrial) loans, up 8%. Commercial loan production remains strong and in-line with our original expectations. Production was strongest in core middle market, which was well diversified geographically, which increased over 60% year-over-year.”

Using technology to gain efficiencies in accounts receivable is a great way to leverage your own cash over borrowing from banks when the credit lines are tightening, and interest rates are increasing.

Enter AR Automation

Through automation, AR teams can automate or simplify traditionally manual tasks like invoice and statement delivery, due date reminders, and past due collections communications.

One of the most common reasons teams receive for non-payment is that an invoice wasn’t received. Today, invoices need to be manually printed and sent through “snail mail,” by fax (yes, some companies still use faxes), or by downloading a document from your ERP, drafting an email, and then attaching (hopefully the correct) invoice to the email. By automating your invoice process, customers receive accurately generated information and documents on a regular schedule with minimal intervention from the AR team.

Much of the communication that is provided to late accounts is standard and could be automated based on a customer classification, amount owed, and days outstanding. With automation, teams don’t have to write the same email or letter to customers. Simplifying the process further, AR automation tools, like Lockstep Receivables, have built-in portals and self-service tools allowing customers to expedite their payment processes.

Who’s Doing What?

Facing continued supply chain challenges, a recent customer was looking for the best route to hedge their bets. Approaching their busy season, they’ve found themselves needing to order triple their usual supply to ensure that they have enough stock to serve customers throughout the Spring and Summer.

Because they’re having parts manufactured across vendors to meet customer demand, they’re utilizing business lines of credit to purchase more materials. Through AR automation, this customer is increasing their cash flow (more customers paying on time) and in turn, they aren’t relying on direct loans. This, of course, helps them significantly, leveraging cash to increase their product stock for easier distribution to their customers.

Interested in Getting Started?

Lockstep’s award-winning accounts receivables (AR) automation solution, Lockstep Receivables, helps clients increase cash flow, decrease DSO, and scale their accounting departments through digital transformation. 

Guest Blog by Ryan Waldo, Lockstep