How to automate accounts receivable: From manual to modern AR

As organizations face increasing pressure to reduce costs and improve cash flow, automating accounts receivable (AR) has become essential for businesses seeking to optimize their cash flow and improve accounts receivable operations.

AR automation transforms accounts receivable services by digitizing workflows that were traditionally manual and time-consuming. This transformation encompasses everything from invoice generation to payment reconciliation, fundamentally changing how businesses manage their receivables and interact with customers. The following sections will guide you through the essential components of AR automation, providing a roadmap for modernizing your financial operations.

Read the tip sheet → 10 tips to automate and scale accounts receivable for your equipment company

Understanding AR automation foundations

The accounts receivable cycle consists of several interconnected processes that must work together. These include:

• Credit management and customer onboarding.
• Invoice creation and delivery.
• Payment processing and acceptance.
• Cash application and reconciliation.
• Collections management.
• Reporting and analytics capabilities.

Each of these processes has traditionally relied on manual, paper-based systems, making them prone to errors, delays, and inefficiencies that impact cash flow and customer satisfaction. Understanding how these components interact helps finance leaders identify opportunities for automation and improvement. Before implementing any automation solution, it's essential to examine your current processes, technical requirements, and potential ROI to ensure a successful transformation.

Step-by-step automation process

Transforming your accounts receivable processes requires more than just implementing new technology—it demands a strategic, well-planned approach. Finance leaders who successfully automate their AR operations understand that preparation and methodical execution are key to achieving optimal results. Before diving into implementation, it's essential to lay the groundwork with a plan that considers your organization's unique needs and objectives.

• Assessing current AR processes: The first step in any automation journey involves thoroughly documenting and analyzing existing workflows. This includes identifying pain points, bottlenecks, and areas where manual intervention is causing delays or errors. Organizations should gather detailed metrics about current processing times, error rates, and costs to establish a baseline for measuring improvement.
• Setting automation goals: Clear, measurable objectives are essential for successful automation initiatives. Organizations should establish specific targets for key metrics such as Days Sales Outstanding (DSO), processing costs, error rates, and customer satisfaction scores. These goals should align with broader organizational objectives and provide a framework for measuring success.
• Choosing automation solutions: The selection of appropriate automation tools requires careful consideration of various factors, including integration capabilities, scalability, security features, user experience, and total cost of ownership. Organizations should evaluate potential solutions based on their specific needs, industry requirements, and growth plans.
• Implementation timeline: A well-planned implementation timeline is critical for success. This should include phases for initial setup, testing, training, and rollout. Organizations should also build in adequate time for unexpected challenges and necessary adjustments to ensure a smooth transition to the new system.
• Change management strategies: Change management is essential for successful automation implementation. This includes developing communication plans, providing adequate training and support, and addressing concerns proactively. Organizations should focus on building buy-in at all levels and demonstrating the benefits of automation to encourage adoption.

Core areas of AR automation

Understanding core AR automation tools helps finance leaders make informed decisions about which automation solutions will deliver the greatest value for their organizations. By examining each component individually, you can better evaluate how they fit together to create an automation strategy that meets your specific business needs.

• Invoice automation: Modern invoice automation revolutionizes the billing process by enabling automated invoice generation from multiple sources, supporting multi-channel delivery options, providing digital invoice presentment capabilities, offering customer self-service portals, and implementing automated reminder systems. This approach significantly reduces processing time and improves accuracy while enhancing the customer experience.
• Payment processing automation: Well-rounded payment processing forms the backbone of modern AR operations, incorporating multiple payment channel support, automated payment acceptance mechanisms, real-time payment validation capabilities, integrated payment portals, and automated remittance processing. These features work together to accelerate cash flow and reduce processing costs while providing customers with flexible payment options.
• Cash application automation: Advanced cash application solutions leverage intelligent matching algorithms to automate the reconciliation process, capturing remittance information automatically, handling exceptions, integrating with banking systems, and providing automated reconciliation capabilities. This automation significantly reduces manual effort while improving accuracy and speed.
• Collections automation: Modern collections processes utilize sophisticated automation tools to implement risk-based collection strategies, automate dunning workflows, enable customer segmentation, facilitate digital communication, and provide performance analytics. This systematic approach helps organizations manage overdue accounts while maintaining positive customer relationships.
• Credit management automation: Automated credit management solutions streamline the credit application process, provide real-time risk assessment capabilities, enable ongoing credit monitoring, and facilitate automated credit decisions. This approach helps organizations manage credit risk while improving the customer onboarding experience.

Technology infrastructure

When implementing AR automation, integration with your existing ERP system forms the foundation of success. Integration requires reliable API connectivity and real-time data synchronization between systems. This requires thorough error handling mechanisms and detailed audit trails to ensure data integrity. Most importantly, the integration should enable real-time updates, giving your team immediate access to critical financial information.

The choice between cloud-based and on-premise solutions represents another key decision in your automation journey. Cloud solutions offer distinct advantages:

• Lower initial investment and automatic updates.
• Enhanced scalability and remote access.
• Minimal IT overhead and maintenance.
• Automatic security patches and upgrades.
• Faster implementation timeframes.

However, on-premise solutions may be preferable for organizations requiring maximum control over their data and systems. These solutions offer greater configuration flexibility and direct system access, though they often demand more internal resources for maintenance and updates. Organizations must carefully weigh these factors against their specific needs and resources.

Security must remain a top priority throughout your automation implementation. Financial data requires protection through encryption, granular access controls, and sophisticated threat detection capabilities. Regular security assessments and detailed audit trails help ensure ongoing compliance with industry standards. Your chosen automation solution should demonstrate clear commitment to maintaining current security certifications and protecting sensitive financial information.

The data migration process demands careful attention during implementation. Success requires data mapping strategies and thorough validation procedures. Organizations should establish clear backup protocols and implement measures to maintain data integrity throughout the migration. While this phase may seem daunting, allocating adequate time and resources to data migration planning helps ensure a smooth transition to your new automated system. Testing and verification processes play a crucial role in confirming that all data has been transferred accurately and that systems are functioning as intended.

Successful AR automation requires more than just the right technology—it demands careful attention to implementation strategies and best practices that have proven effective across industries. While every organization's journey to automation is unique, certain fundamental approaches consistently lead to better outcomes and faster time-to-value. Finance leaders who prioritize these key success factors often find their automation initiatives deliver superior results and encounter fewer obstacles along the way.

• Setting KPIs: Establishing meaningful key performance indicators provides the foundation for measuring automation success. Organizations should track metrics related to processing, cost reduction, cash flow improvement, error rates, and customer satisfaction. These KPIs should align with organizational objectives and provide actionable insights for continuous improvement.
• Staff training requirements: Training programs ensure team members can utilize new automation tools. This includes developing role-specific training materials, providing hands-on practice opportunities, offering ongoing support resources, and establishing clear procedures for handling exceptions or issues that arise during daily operations.
• Customer communication strategies: Communication with customers is essential for successful automation implementation. Organizations should develop clear communication plans, provide adequate notice of changes, offer training and support resources, and maintain open channels for feedback and assistance throughout the transition process.
• Common implementation challenges: Organizations should prepare for common challenges such as resistance to change, integration issues, data quality problems, and initial productivity dips. Having strategies in place to address these challenges proactively helps ensure a smoother implementation process and better outcomes.
• Risk mitigation strategies: Risk management strategies help protect organizations during the automation transition. This includes implementing thorough testing procedures, maintaining backup systems, establishing clear escalation protocols, and developing contingency plans for potential system issues or disruptions.

Read the blog → Mitigating risk with accounts receivable automation

Tracking the right metrics provides essential insights into your automation initiative's effectiveness. A measurement strategy should monitor both productivity and financial impact. Key performance indicators should align with your organization's strategic goals while providing actionable insights for continuous improvement.

The foundation of meaningful measurement lies in tracking these essential metrics:

• Processing times and error rates.
• Cost per invoice and payment cycle times.
• Days Sales Outstanding (DSO).
• Customer satisfaction scores.
• Staff productivity measures.

Establishing a clear baseline before implementation is crucial for quantifying benefits. Keep detailed records of your current performance metrics, then regularly compare them against post-automation results. This comparison helps demonstrate ROI and identifies areas needing attention. Consider both direct benefits, such as reduced processing costs, and indirect benefits like improved customer satisfaction and staff morale.

Continuous improvement requires ongoing attention to system optimization and process refinement. Regular performance reviews, combined with user feedback and technology evaluations, help ensure your automation investment continues delivering maximum value. Make adjustments based on these insights to keep your system operating at its best.

Future-proofing your AR automation

Staying ahead in today's rapidly evolving financial technology landscape requires a forward-thinking approach to AR automation. Organizations must balance current needs with future capabilities, ensuring their automation solutions can adapt to changing business requirements and technological advances. Emerging technologies like artificial intelligence, machine learning, and predictive analytics continue reshaping the AR landscape, offering new opportunities for insight.

Scalability stands as a critical consideration for future-ready AR systems. Your automation solution should handle growing transaction volumes without performance degradation while supporting expansion into new markets and territories. This includes managing multiple currencies, languages, and regional requirements without compromising process consistency or control.

Regulatory compliance demands particular attention in an increasingly complex global business environment. Your automation solution must adapt to evolving regulations while maintaining operations. This includes staying current with e-invoicing requirements, data privacy regulations, and industry-specific compliance standards across different jurisdictions.

Preparing for international growth requires careful consideration of global capabilities. Beyond basic language and currency support, your system should accommodate varying payment methods, tax requirements, and business practices across different regions. Maintaining consistent processes while adapting to local needs helps ensure successful global operations.

While AR automation principles remain consistent across businesses, each industry brings its own unique set of challenges and requirements to the automation journey. Finance leaders must understand how their sector's specific needs influence the selection and implementation of AR automation solutions. By examining industry-specific considerations, organizations can better evaluate which automation features and capabilities will prove most valuable for their particular business model.

• Manufacturing considerations: Manufacturing organizations face unique challenges in AR automation, including high-volume transaction processing requirements, complex pricing structures, multiple delivery locations, sophisticated trade credit management needs, and intricate supply chain integration requirements. Automation solutions must address these specific needs while maintaining accuracy.
• Distributors: Distribution businesses require automation solutions that can handle complex ordering patterns, manage multiple shipping locations, process high transaction volumes, support various payment terms, and integrate with logistics systems. These requirements demand specialized automation capabilities and careful attention to integration needs.
• Medical: Healthcare organizations face unique challenges including complex billing requirements, insurance processing needs, patient payment handling, service-based billing complexities, and strict compliance requirements. Automation solutions must address these specific needs while maintaining patient privacy and regulatory compliance.
• Technology considerations: Technology companies often require automation solutions that can handle subscription billing, usage-based pricing, complex revenue recognition rules, and integration with various platforms and services. These requirements demand sophisticated automation capabilities and flexible integration options.

Successful AR automation implementation follows a predictable path, but requires careful planning and realistic expectations. Most organizations move through several distinct phases:

• Discovery and initial planning.
• System configuration and integration.
• User training and pilot testing.
• Full deployment rollout.
• Post-implementation support and optimization.

Building a realistic timeline requires understanding these phases while maintaining flexibility for unexpected challenges. Each phase demands different resources and attention, and rushing through any stage can lead to issues later. This makes resource allocation a critical factor in implementation success.

Your project needs both the right people and the right budget to succeed. The team should blend technical expertise, financial knowledge, and change management skills. Consider both internal and external resources needed for project management, technical integration, training programs, and ongoing support. Building the right team early helps ensure proper knowledge transfer and system adoption.

Budget planning supports your resource strategy. Beyond initial software licensing and integration expenses, account for training programs, potential hardware upgrades, and ongoing support needs. Including a contingency fund helps manage unexpected challenges without disrupting your implementation timeline. These financial considerations should align with your broader implementation strategy.

Tying everything together requires clear governance and team structure. Define roles and responsibilities early, establishing reporting relationships and escalation procedures. Create clear communication channels between technical teams, finance staff, and project leadership. This organizational framework ensures your carefully planned resources and budget translate into successful implementation and sustained results.

Remember that AR automation is not a one-size-fits-all solution. Your organization's specific needs, industry requirements, and growth objectives should guide your automation strategy. By partnering with an experienced provider who understands these nuances, you can develop a customized approach that delivers meaningful results for your business.

Ready to transform your accounts receivable process? Contact us today to learn how we can help you achieve your automation goals.

For over 20 years, Billtrust has helped organizations transform their accounts receivable operations through innovative automation solutions. As the leading provider of unified AR automation technology, we combine deep industry expertise with advanced AI capabilities to help businesses control costs, accelerate cash flow, and improve customer satisfaction.

Our platform addresses every aspect of the order-to-cash cycle, from credit management to collections. We serve over 2,400 customers across 40+ industries, processing more than $1T in invoice dollars annually. Whether you're a mid-market business or a global enterprise, our scalable solutions adapt to your unique needs while maintaining the highest standards of security and compliance.