Payments delays are a perpetual nuisance in many industries, as they can result in downstream cash flow issues that harm accounts payable (AP), payroll and other departments.
Take, for example, one sector especially prone to feeling the squeeze from sluggish payments: construction. Tardy payments cost the industry $100 billion annually and stem from two major sources: the limitations of the physical infrastructure that transfers payments means and lateness in payments documentation, approval and communication.
These delays are gumming up the timelines for construction projects and ultimately costing construction firms and their clients tens of billions of dollars.
Prioritizing Timely and Accurate Cash Flows
These problems extend far beyond the construction industry. Cash flow considerations are not limited to one sector or business type. The “Working Capital Playbook,” a PYMNTS and YayPay collaboration, found that 82% of chief financial officers (CFOs) measure accounts receivable (AR) turnover to gauge their success in raising customers’ overall value.
Get the report: Working Capital Playbook
All companies must prioritize timely, accurate cash flows to ensure their money is where it needs to be when it needs to be there. Delays or errors in the process can have colossal ripple effects, as firms often lack the free capital to ensure timely payroll, vendor payments and a host of other necessities that could quickly spiral out of control.
The job of AR departments is to ensure customers’ payments arrive on time and with all the necessary information, lest their firms’ downstream cash flows be imperiled.
But that’s difficult in practice. Data entry errors and payment processing delays are the bane of any AR department, and these issues often are exacerbated by companies’ reliance on paper payments despite increased digitization.
Maximizing Efficiency and Lowering Costs
One potential answer to these AR challenges is automation, which reduces the potential for human error by implementing systems that rely on artificial intelligence (AI). These accelerate everyday processes, including collections and invoicing, by handling the complex calculations that often frustrate and bog down human analysts.
Automation of back-office functions, once the purview of larger firms, more recently has been filtering down to smaller companies. YayPay CEO Anthony Venus told PYMNTS that as larger buyers are streamlining and modernizing operations and moving to platforms, smaller suppliers will sign up.
Read more: Experts Say Supply Chain Challenges Spur New Digital Payments Innovations
AR automation can provide numerous benefits to corporate accounting teams, reducing payment errors and delays that can lead to big costs in terms of downstream cash flow issues. Automated solutions’ implementation is severely hindered by the persistence of paper-based payments, however, which are still commonplace in the business world despite the increasing prevalence of digital solutions.
Significant AR challenges remain across myriad sectors, but implementing automation and digital payments could save time and money that businesses can devote to other pursuits.
Digitization and AR automation could go a long way toward helping firms maximize their efficiency and lower costs. AR automation is working to close payments gaps like those seen in the construction industry, and it has seen widespread implementation within the business world.