A brief look into AR’s current challenges


In the always-evolving world of modern finance, navigating the complexities of accounts receivable (AR) demands more than just a cursory glance at traditional and modern methodologies. Despite the unrelenting march towards automation and the incorporation of state-of-the-art software technologies, businesses continue to grapple with the age-old dilemmas of payment timing and invoicing. These challenges aren’t mere obstacles; they’re critical issues requiring attention in order to ensure the optimization of an organization’s financial management and bottom line.

A recent podcast features Craig Jeffery of Strategic Treasurer and Bryan Way of Corcentric, discussing key findings from the Modernizing AR Processing Survey Report, which highlights both the challenges of today’s AR landscape and the thought process behind choosing automation. The takeaway? Businesses shouldn’t just be buying software solutions — they need to be buying results that streamline both the receivable process and accounts receivable management.

Here are some of the pain points discussed in the podcast:

A need for visibility

Transparency and clarity in financial operations are the compasses that guide an organization toward efficiency. A lack of readily available access to real-time data and analytics leads to an inability to accurately forecast cash flow which has ripple effects that are felt throughout an enterprise. It’s no wonder that in the Modernizing AR Processing Survey Report, respondents chose forecasting as one of the top AR issues. On top of that, the complexity of an organization’s structure and internal processes also has an impact on forecasting. Add in constantly changing external events and you have a maze of variables to consider. Regardless, visibility and forecasting help you prepare your organization for the future. Without them, the money trail is lost in the shadows, and businesses are left stumbling in the dark with no foresight to guide decision-making.

Manual vs. Automation: A delicate balance

While automated solutions have no doubt paved a smoother path toward AR management, the transition is still fraught with challenges. In certain situations, aspects of invoicing and payment processing remain trapped in time-consuming manual tasks, often leading to inefficiencies and general human error. Conversely, fully automated systems can sometimes miss the mark, failing to account for nuanced billing requirements and customer preferences. Striking the right equilibrium between the need for human intervention and machine precision is key for an efficient AR system that can keep up with complex business transactions while improving the collections process and offering more payment options.

The dilemma of disputes

Cash flow is vital for any business. However, the persistent issue of late payments continues to trouble finance teams, especially concerning invoice disputes caused by discrepancies. The days sales outstanding (DSO) metric acts as a gauge of how efficiently an organization handles credit, including managing invoice disputes with clients. Ideally, DSO is minimized to optimize cash flow, but the reality is often quite different. Invoice disputes are an inevitable part of the AR process, with aspects that can sometimes be totally out of your control, but making sure your invoicing system is as smooth and user-friendly as possible is in your control. Partnering with a managed service provider who can fix your DSO can also help ensure a healthy cash flow by ensuring timely payments — improving KPIs and overall financial health.

These are just some of the key issues discussed in the podcast, and tuning in will reveal crucial aspects of AR that may be your organization’s turning point toward greater growth. But when it comes to AR software solutions, there is one vital decision to make—to build or to buy?

Key considerations: Build vs. buy in AR solutions

When standing at the crossroads of implementing AR solutions, finance leaders often contemplate whether to build in-house capabilities or to buy into existing platforms. The decision is not a binary one, and several factors need careful consideration.

Scalability and customization

For rapidly expanding businesses, scalability is paramount. Building custom solutions can cater to specific needs but may fall short when the company outgrows the feature set. On the other side of the spectrum, buying into an established AR system offers scalable potential with the flexibility to tailor some aspects to unique business processes. However, depending on the stage of your organization, picking a costly system when your needs are still relatively basic leaves you to deal with the inevitable complexity and cost of the decision.

Navigating payment method diversity

Flexibility in payment methods responds to the growing demand for a positive customer experience, directly influencing customer relationships and, eventually, the bottom line. Accurate receivable process management ensures the correct application of payment terms, critical for enhancing cash flow and reducing the risk of delayed payments. Automation software supports the AR team by providing a comprehensive overview of due dates, payment options, and follow-up actions such as payment reminders, which is instrumental in managing the balance sheet and enhancing the customer payment experience.

Cost and resource allocation

Initial costs for building in-house solutions can be significant, intertwining development and opportunity costs with the amount of time needed to train staff on how to properly utilize the solution. Buying, on the other hand, often involves straightforward subscription fees, but choosing the right solution can be overwhelming in a market saturated with all types of software offerings. Additionally, resource allocation for maintaining and updating proprietary software should not be underestimated.

Speed to market and competitive edge

In the fast-moving financial domain, the first mover’s advantage can be a game-changer. In-house developments may lead to longer lead times, especially with troubleshooting, while purchasing ready-made solutions can expedite the deployment process. Bear in mind that both these options need to take into account the training of staff unless the ready-made solution comes with its own dedicated customer service team. Organizations must weigh the benefits of a unique, tailor-made solution against the competitive edge offered by a swift, bought solution.

Regulatory compliance and security

With data privacy and financial regulations becoming more stringent, and payment fraud more prevalent, any AR solution—built or bought—must not just be compliant, but also able to provide the assurance of the highest levels of security. It isn’t just about automating manual processes; the software you choose needs to meet the highest standards of data protection and regulatory adherence.

So, when it comes to finally choosing your software, don’t get distracted by the bells and whistles. You need a clear vision of where you want your company to be and what it needs to reach that goal.

Buy success not just software

In their pursuit of excellence, organizations sometimes fall into the trap of valuing shiny software over pragmatic results. An AR app can boast of an impressive feature list, but if it doesn’t translate into tangible business outcomes, it isn’t the one for you. As Corcentric’s Bryan says, “What they really need is to buy certainty, and they need to buy results,” and that’s exactly the mindset you need to have when you’re looking for automation software that’s going to benefit your company in the long term.

Results-driven deployments

Effective AR solutions are those that yield measurable results, such as reduced DSO, early payments, increased cash flow, and enhanced customer satisfaction. When evaluating prospective AR systems, finance professionals must focus on the eventuality of robust outcomes and tangible ROI, rather than the allure of features that might not align with the organization’s core needs and values.

The human element in AR

The complexities of the AR workflow are not merely a puzzle to be solved by software algorithms. You cannot simply subtract the need for human capabilities, especially when certain situations call for more nuanced thinking and adaptive problem-solving. A human-centred approach that incorporates technology can often be more effective than a purely tech-driven strategy.

A culture of continuous improvement

Success in AR is not static but dynamic, requiring a dedication to the effort of continuous improvement. The chosen AR strategy, whether built or bought, must enable iterative upgrades based on user feedback, market dynamics, and technological advancements. An adaptive solution will continue to deliver results long after its initial deployment.

We’ve gone through current issues in AR and taken a look at the considerations that impact how you choose AR automation. These insights aim to empower you as you navigate your way to improved operational excellence and financial robustness.

A step closer to success

In the finance function, AR plays a crucial and complex role. Avoiding automation isn’t the way to go but neither is a completely tech-focused approach. By addressing the key pain points of the function paired with an in-depth analysis of your organization’s current state, you’ll gain a clearer picture of how to ensure both automation and departmental autonomy can work together to benefit all parties.

The decision to build or buy an AR solution is not just a technical one; it is a strategic choice that can either empower or encumber an organization. Remember, it’s not about the software you use; rather it’s understanding that it’s a means to your success — success that comes from a clear understanding of the results that you want to see.

To gain an even clearer picture of the findings discussed in the podcast, listen here and if the concept of finding the right AR automation is getting overwhelming, we invite you to contact Corcentric. Our Managed AR solution promises guaranteed results through a combination of industry expertise, advisory services, and top-of-the-line technology that bring your profitability to where it needs to be.