As more companies readjust their corporate vision around digital possibilities, reducing manual processing and related redundancies in accounts receivable (AR) is often first in the lineup.
According to The B2B Payments Innovation Readiness Playbook: The Impact Of Automated AR Processes On Collection Cycles, a PYMNTS and American Express collaboration, “A growing amount of data reveals that automating AR can have far-reaching positive impacts on firms’ collections processes. Recent PYMNTS research found that firms using automated AR technologies stand to observe a 23 percent improvement in prioritizing collections compared to those that use manual methods, for example. This, in turn, helps the firms improve their cash flows, which results in improved business relationships.”
Certain verticals are pulling ahead of others with this AR digital agenda, with promising results.
Per the Playbook, “adoption and use of automated AR tools vary across business sectors, but firms in the healthcare and construction spaces often have fewer automated processes in place, ultimately lengthening their collection cycles. This contrasts with energy and technology firms, which are typically more aggressive about implementing automation and thus experience more efficient collection processes and shorter DSO cycles.”
The current financial crisis in healthcare — ironically created by a global healthcare crisis — is being alleviated in part by the wave of AR transformation starting to envelope that sector. Similarly, construction firms are upgrading AR to move collections into the faster digital realm.
Noting that 52 percent of construction firms and 44 percent of those in the healthcare sector “prioritize their collections through manual methods, in turn creating inefficiencies that result in longer DSO cycles,” the B2B Payments Innovation Readiness Playbook offers contrasts, stating “business sectors that are further along in adopting technology … enjoy smoother collections environments. Case in point: Technology firms take 19 days to follow up on collections, whereas energy firms take 12 days and advertising businesses take only 11 days.”
By comparison, healthcare firms take 25 days to follow up on average, and construction firms take 22 days — 43 percent and 24 percent above average, respectively.
AR automation is having a profound impact on these delays and the problems they create.
Per the B2B Payments Innovation Readiness Playbook, “PYMNTS’ research found that 62 percent of the firms that adopted automated AR processes benefited from improved DSO and that 49 percent achieved lower delinquency rates. This is especially true for firms in the energy and advertising sectors that have invested in automation, as 88 percent and 87 percent of these businesses, respectively, recognize these as key benefits of AR automation.”
Additionally, 71 percent of advertising businesses and 69 percent of energy firms say automation has helped them reduce the delinquency rates of their receivables.
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