Mastering the accounts receivable process: Your complete guide

This post was originally published in Dec 2024 and was updated in May 2025 with additional information on top KPIs, traditional vs. automated accounts receivable, and more.

The accounts receivable process directly impacts an organization's ability to maintain healthy cash flow and sustain growth. As organizations increasingly rely on accounts receivable automation and digital solutions, understanding and optimizing this accounts receivable process cycle has become more critical than ever. As a finance leader, you must navigate a complex landscape of technologies, regulations, and customer expectations while ensuring their AR processes remain efficient and effective.

The accounts receivable process encompasses all activities involved in securing payment for goods and services, from initial credit assessment through final payment collection. This end-to-end cycle requires orchestration of multiple departments and systems, making it both a challenge and an opportunity for process improvement. According to Billtrust customers like Acushnet, modernizing this process can reduce cash application time by up to 20 hours daily..

The following sections will walk you through everything finance leaders need to know about optimizing the accounts receivable process. Whether you're just beginning your optimization journey or looking to enhance existing processes, you'll find actionable insights to help drive improvement in your organization and accelerate your cash flow.

Core components of the accounts receivable process

The modern accounts receivable process consists of several interconnected components that must work in harmony. Understanding these core elements helps you identify opportunities for improvement and prioritize transformation initiatives.

• Credit management: Managing credit is considered a core foundation of successful accounts receivable procedures. Modern credit departments leverage automated workflows and data-driven decision-making to evaluate customers, balancing growth opportunities with risk management. Billtrust customers like Carter Machinery achieve this balance while maintaining high customer satisfaction.
• Invoice generation and delivery: Directly impacts payment timing and customer experience. Effective solutions support multiple delivery channels - from traditional print to electronic delivery via email, customer portals, and AP networks. A packaged ice manufacturer achieved 67% electronic invoice presentment, significantly reducing costs and accelerating payments.
• Payment processing and acceptance: Your AR department must support various payment methods while maintaining efficient operations. This includes traditional modalities like checks and ACH, as well as digital options like credit cards and online payment portals. The key is providing payment flexibility while minimizing operational complexity.
• Cash application: Often the most time-consuming aspect of AR operations. Advanced automation solutions leverage AI, machine learning and optical character recognition to achieve high match rates and reduce manual intervention. Acushnet achieved a 99.5% match rate for ACH payments, saving 20 hours of daily processing time through automated cash application.
• Collections management: Strategic collections processes help accelerate cash flow while preserving customer relationships. Modern solutions use data-driven approaches to prioritize accounts and customize outreach strategies. Ossur enhanced their collections efficiency through improved visibility and automated workflows.
• Reporting and analytics: Comprehensive reporting and analytics capabilities provide visibility into AR performance and support strategic decision-making. AI-powered analytics tools offer predictive insights to guide process improvement and identify potential issues before they impact cash flow.

Download the guide → The ultimate guide to digital accounts receivable

Accounts receivable process steps

Understanding the complete accounts receivable process flow helps organizations identify bottlenecks and optimization opportunities. Each step in the process presents unique challenges and opportunities for improvement through automation and process refinement. When these steps work together, organizations can achieve significant improvements in efficiency and customer satisfaction.

• Order receipt and validation: The accounts receivable process begins with validating incoming orders against business rules and credit terms. This prevents downstream issues by ensuring orders align with customer agreements and credit limits. Modern systems automatically validate orders and flag exceptions, saving valuable time for your team.
• Credit approval process: Automated credit management systems accelerate decisions while maintaining appropriate controls. Billtrust's Credit solution provides configurable approval workflows that balance risk management with customer service objectives, enabling companies to onboard customers faster.
• Invoice generation and delivery methods: Adapt to diverse customer requirements while maintaining operational efficiency. Multiple delivery channels ensure invoices reach customers quickly and in their preferred communication channel and format. Carter Machinery achieved a 76% digital invoice rate, improving both speed and cost-effectiveness.
• Payment receipt and processing: Handle multiple payment methods while maintaining accuracy and security. Advanced systems support straight-through processing for electronic payments while streamlining manual payment handling.
• Reconciliation and cash application: AI, machine learning, and optical character recognition automate matching while providing tools for exception handling. Modern systems leverage AI and machine learning to automate matching while providing tools for efficient exception handling.
• Collections and dispute resolution: Balance effective recovery with customer relationship management. Modern systems provide workflow tools and personalized communications while helping collectors prioritize their efforts.

As a finance leader, you need clear metrics to evaluate your accounts receivable process effectiveness. These key performance indicators (KPIs) provide visibility into your AR operation's health and highlight areas for improvement. Tracking these metrics helps you demonstrate the value of your AR investments to stakeholders.

• Days sales outstanding (DSO): The number of days an invoice goes unpaid after the payment due date—a critical indicator of your efficiency in collecting payments. Calculate it by dividing total accounts receivable by average daily credit sales. Lower DSO means faster cash conversion and improved working capital.
• Collections effectiveness index (CEI): This metric provides deeper insight into collection efforts than DSO alone by measuring what percentage of available receivables you've successfully collected over a specific time period. A CEI approaching 100% indicates highly effective collection operations. This metric helps you identify collection strategy opportunities that DSO might miss.
• Bad debt percentage: Tracks write-offs as a percentage of total receivables. Reducing this percentage directly impacts your bottom line. Automated credit management and proactive collections workflows can significantly reduce bad debt exposure and prevent future defaults and write-offs.
• Electronic adoption rates: Measures the percentage of customers using digital invoicing and electronic payment methods. Higher electronic adoption drives faster payments and reduces processing costs. Billtrust's eSolutions campaigns have helped customers achieve 67-80% electronic adoption rates.
• Cash application match rate: The percentage of payments automatically matched to open invoices without manual intervention. Higher match rates indicate more efficient operations and reduced labor costs. Leading organizations achieve 90%+ match rates through AI-powered automation.

By focusing on these metrics, you'll gain actionable insights to control costs, accelerate cash flow, and improve customer satisfaction—the three pillars of accounts receivable excellence.

Common accounts receivable process challenges

Every organization faces obstacles in optimizing their accounts receivable process. Understanding these common challenges helps finance leaders develop effective strategies for process improvement.

• Manual data entry errors: Manual processes introduce errors that impact both efficiency and customer satisfaction. Automation tools reduce these errors while freeing your team for higher-value activities that drive business growth.
• Delayed cash flow: Process inefficiencies and manual workflows often result in delayed cash flow, impacting working capital and business agility. Addressing these delays requires analyzing how different elements of your accounts receivable process interact.
• High days sales outstanding: Extended payment cycles create working capital challenges and increase collection risk. Reducing DSO requires both process improvements and strategic changes that address root causes.
• Payment application errors: Misapplied payments create downstream issues that impact both efficiency and customer satisfaction. AI-powered solutions like Billtrust Cash Application achieve match rates over 90%, dramatically reducing errors.
• Customer satisfaction issues: Poor accounts receivable process flows often lead to customer dissatisfaction through billing errors, communication gaps, and inflexible payment options. View your processes from the customer perspective to identify improvement opportunities. Success requires attention to both technical and human accounts receivable factors.

As you evaluate your current accounts receivable process, understanding the key differences between manual and automated approaches can help you identify opportunities for transformation. These contrasts highlight why leading finance organizations are increasingly investing in automation.

Invoice delivery

• Traditional approach: Manual generation and distribution through mail or email, creating delays and increasing costs.
• Automated approach: Multi-channel delivery with electronic options and AP portal connections that accelerate delivery and reduce expenses.
• Impact: Carter Machinery achieved 76% digital invoice presentment, reducing processing costs and accelerating payment cycles.

Payment processing

• Traditional approach: Manual receipt, entry, and reconciliation with significant lag time between payment and posting.
• Automated approach: Real-time processing with automated validation and straight-through processing for faster cash application.
• Impact: Acushnet reduced cash application time by 20 hours daily through automation, freeing staff for higher-value activities.

Collections management

• Traditional approach: Standardized outreach based on aging reports and standard dunning schedules with limited personalization and high manual effort.
• Automated approach: AI-driven prioritization with personalized, automated communications that increase response rates.
• Impact: Collections teams can focus on strategic accounts while automation handles routine follow-up, improving overall recovery rates.

Cash application

• Traditional approach: Manual matching of payments to invoices with high exception rates and delayed posting.
• Automated approach: AI-powered matching algorithms with high straight-through processing rates that reduce errors, eliminate manual processes, and accelerate posting.
• Impact: A packaged ice manufacturer achieved 85% average match rates for virtual credit cards via Billtrust lockbox and other electronic payments.

Customer experience

• Traditional approach: Inconsistent service with limited self-service options and minimal flexibility in payment methods.
• Automated approach: 24/7 access to account information and multiple payment options through branded portals.
• Impact: Improved customer satisfaction and faster payments, with one Billtrust customer seeing a 530% YOY increase in customer portal payments.

Analytics & visibility

• Traditional approach: Backward-looking reports with limited actionable insights and delayed information.
• Automated approach: Real-time dashboards with predictive analytics for proactive management of your receivables.
• Impact: Finance leaders gain visibility into cash flow trends and can identify optimization opportunities before they impact the business.

The contrast is clear: automated accounts receivable processes deliver measurable improvements in efficiency, cost control, and customer experience. More importantly, automation frees your team from manual tasks so they can focus on strategic activities that add greater value to your organization.

Modern accounts receivable process technologies

Today's finance leaders have access to powerful technologies that can transform and manage accounts receivable operations. Understanding these technologies helps you make informed investment decisions for your accounts receivable process optimization.

• AI and machine learning applications: Artificial intelligence and machine learning power everything from intelligent document processing to predictive analytics for collections prioritization. These systems learn from historical data to continuously improve performance and accuracy, driving better business outcomes.
• Automated cash application: Modern cash application systems achieve unprecedented match rates through sophisticated algorithms and machine learning. These systems can handle complex scenarios involving partial payments, multiple invoices, and varying remittance formats. Billtrust's Cash Application solution helped Acushnet achieve a 99.5% match rate for ACH payments.
• Electronic invoicing systems: Digital invoice delivery systems have evolved beyond simple email delivery to support complex customer requirements and regulatory compliance. Modern systems automatically adapt invoice formats and delivery methods based on customer preferences and ensure compliance with evolving e-invoicing regulations worldwide.
• Digital payment platforms: Modern payment platforms support diverse payment methods while maintaining security and efficiency. These systems automatically process multiple payment types while providing real-time visibility into payment status, helping you accelerate cash flow.
• Business payment networks: B2B payment networks streamline transactions between trading partners while supporting various payment methods and data formats. Billtrust's Business Payments Network (BPN) helped Ambu save 865 hours of manual processing time while improving visibility and control.
• Predictive analytics tools: Advanced analytics provide insights into customer payment behavior and process optimization opportunities. These tools help organizations identify potential issues before they impact cash flow and optimize collection strategies. AI-powered solutions combine historical data analysis with real-time monitoring to deliver actionable intelligence.

Best practices for accounts receivable process optimization

Implementing successful accounts receivable procedures requires an approach that combines technology, process improvements, and change management. Organizations should consider both technical and human factors when designing their optimization strategy.

• Implementing automation strategically: Evaluate both technical capabilities and process requirements to ensure successful implementation. Change management plays a crucial role in driving AI acceptance, achieving desired results, and maximizing ROI on your technology investments.
• Standardizing procedures: Well-documented procedures and standardized workflows improve consistency. Balance standardization with the need for flexibility to handle unique customer requirements. Regular review and updates ensure your accounts receivable process remains current and effective.
• Setting clear credit policies: Effective credit policies help balance growth opportunities with risk management. These policies must be clear, consistently applied, and regularly reviewed to ensure they remain appropriate. Success requires both well-designed policies and effective implementation procedures that align with your business objectives.
• Optimizing invoice delivery: Multi-channel invoice delivery strategies improve customer satisfaction while accelerating payment cycles. Consider both customer preferences and operational efficiency when designing delivery strategies to maximize electronic adoption.

Ready to begin optimizing your accounts receivable processes? Start by evaluating your current operations against the best practices we've discussed. Identify your biggest pain points and opportunities for improvement. Then, consider how modern AR automation solutions could help transform your operations, accelerate cash flow, and improve your customer experience.

Read the blog → Accelerating financial operations: The power of AR automation

Leading the future of AR automation

For over two decades, Billtrust has led the transformation of accounts receivable, helping organizations accelerate cash flow, reduce costs, and improve customer satisfaction. As the leading provider of order-to-cash solutions, we combine deep industry expertise with innovative technology to move finance forward.

Our unified platform approach sets us apart in the industry. Billtrust provides an integrated suite of tools that spans the entire order-to-cash cycle. From credit applications to collections management, our AI-powered solutions streamline every step of the accounts receivable process.

As businesses face increasingly complex financial challenges, Billtrust continues to innovate and expand our capabilities. We remain committed to our mission of moving finance forward, helping organizations transform their accounts receivable operations for the digital age.

Join us in shaping the future of finance.