To drive success in 2025 and beyond, AR strategies require a shift toward digitization, efficiency, and customer-centric approaches. The question is no longer if you’ll modernize your AR processes but how quickly you can adapt to the changing landscape.
In a recent webinar with IOFM and co-hosted by Mark Brousseau, we explored practical strategies to begin to tackle digital transformation.
The evolving AR landscape
When discussing AR maturity with AR departments, there are varying levels of automation. While the pandemic accelerated automation, progress remains uneven. Managing multiple stakeholders—customers, sales, and treasury— remains a big challenge. Balancing these competing priorities often slows change in the AR space.
Digital payments are becoming the norm
Luckily, one of the biggest tailwinds to maturing the AR function is the rapid digitalization of B2B payments. With 80% of U.S. B2B transactions projected to be digital in 2025, digital transformation in AR has become non-negotiable. With accounts payable (AP) departments transitioning to digital, AR teams must follow suit by offering digital payment options to align with customer needs and accelerate payment cycles.
Customer expectations are shifting
Businesses increasingly demand the same seamless and intuitive transactions they experience as consumers. Process visibility is a recurring issue, as inefficiencies like payment method restrictions or delayed responses can sour relationships. These experiences underscore the need to prioritize customer loyalty through smoother, more efficient interactions.
Eliminate manual processes
Over 60% of finance teams report that the majority of their invoices and payments are still processed through non-digital methods. Insights from our webinar poll reinforce this trend: 55% of attendees revealed their organizations primarily use manual AR workflows, while 33% reported partial automation, acknowledging there is still significant room for improvement. These outdated methods slow down cash flow, introduce errors, and hinder customer service. They also account for significant costs. For instance, manual processes can cost nearly $13 per invoice.
Focus on reducing days sales outstanding (DSO)
As organizations face higher interest rates and cheap debt lapses, many focus on managing interest expenses by reducing DSOs and ensuring timely payments. Take a moment to consider the value of just one day's float for your organization. Now multiply that by your DSO. These delayed payments have a huge impact on your organization's financial stability, making it challenging to reinvest in growth and operations.
Prioritize digital transformation
AR departments are under increasing pressure to transform operations and do more with less. Manual back-office tasks are being replaced by digital processes, freeing resources for R&D or customer-facing work. To meet demands, AR departments must adopt technologies that simplify workflows, reduce errors, and enable smarter decisions. This means digitizing everything from credit applications to collections while shifting from fragmented solutions to a more integrated, holistic approach.
Strategies for optimizing your AR processes
No matter where your organization is in its AR maturity, applying these three proven strategies will help tackle challenges and enhance efficiency:
1 - Improve cash flow and reduce DSO
Throughout the AR life cycle, there are numerous opportunities to find efficiencies and accelerate the working capital process. One key area for improvement lies in streamlining invoicing and payment processes. Make sure that invoices are sent electronically to the right recipients to speed up engagement and payments. Offer customers various payment options that suit their preferences, including virtual cards. Or adopt a proactive collections approach that will help reduce payment delays while maintaining strong customer relationships.
The impact of AR automation on DSO can be profound. Automation and technology provide AR organizations with tools to drive faster payments. They enhance the payment experience by meeting customers where, how, and with the methods they prefer, making it easier and quicker for them to pay. They allow business rules to enforce payment timelines, such as triggering actions if payments exceed set terms. These tools help manage DSOs and ensure timely payments.
2 - Automate - and elevate with AI
Automating tasks reduces manual workload by up to 70%. It isn’t surprising that McKinsey described AI as the next productivity frontier. Putting in place an automation policy can be extremely material, when implemented correctly. Combine automation with artificial intelligence (AI) and you’ve got a game-changer on your hands. AI and analytics provide a unique opportunity to automate many routine tasks, whether it’s reminders going out to thousands of buyers, simple screening work, or a credit facility that gets hundreds of applications a day.
AI-driven analytics can help organizations move quickly by analyzing large datasets and identifying patterns, leading to better business decisions. AI empowers your organization to move at a pace that’s otherwise unthinkable.
3 - Enhance customer loyalty
AR processes often shape customers’ first impressions. To build loyalty, focus on creating a great customer experience. Here are just a few examples to improve customer satisfaction:
- Empower your buyers with the flexibility to engage on their terms—whether through portals, virtual cards, or other preferred channels.
- Ensure AR interactions are intuitive and aligned with your brand’s dedication to quality.
- Use customer data to provide personalized support and proactive communication, tailored to individual needs and past interactions.
A real-world example
Automating AR processes increases efficiency and drives significant improvements in financial performance and enhances customer satisfaction. For instance, Cooper Electric, a leading electrical distributor, faced significant challenges with the growing adoption of virtual card payments or single use emailed credit cards.
Cooper Electric partnered with Billtrust's Business Payment Network (BPN) to automate virtual card acceptance. BPN, the largest virtual card digital lockbox, connects AP providers with suppliers to process payments automatically. No manual entry is needed. Robotics parses the data, and transactions are handled in a secure PCI-compliant environment, solving efficiency challenges.
This transformation reduced Cooper Electric’s manual workload by 50%, saved $200,000 annually, and enabled them to handle increasing payment volumes without additional staff. By meeting customer payment preferences, they improved retention and enhanced operational effectiveness. As a bonus, they effectively managed credit card processing fees by leveraging level two and level three interchange rates.
Setting your AR strategy for 2025 and beyond
True AR optimization means creating a forward-thinking approach that supports your business goals while building stronger customer relationships and long-term growth.
Now is the perfect time to move away from manual processes and inefficiencies. The landscape has matured, making it simpler than ever to adopt automated AR functions. As both customers and employees become more comfortable with digital tools, streamlining workflows and improving efficiency is more achievable than ever.
What sets top-performing AR departments apart is their ability to adapt to changing conditions with flexible policies. For example, a focus on market growth and customer loyalty might shift to stricter credit management and reducing DSOs during challenging times. The key to success is maintaining the agility to adjust policies as needed while staying prepared for whatever changes arise.
Next steps:
- Assess your current AR maturity and identify areas for improvement.
- Invest in flexible technologies built to evolve with your processes, continually optimizing workflows and enhancing customer interactions.
- Ensure the solutions you adopt are implemented in a way that addresses your pain points and areas needing improvement.
- Measure results to ensure alignment with business goals. The AR process is directly connected to a company’s financials, allowing you to report metrics that demonstrate ROI and business benefits.
Change is inevitable. Embrace digital transformation, improve cash flow, and keep customers happy. It’s time to leave outdated methods behind and lead your AR processes into a more efficient, forward-thinking era.
Contact Billtrust for a consultation or to learn more about how optimizing your AR strategy can make a critical impact on your business.
FAQ
Optimizing accounts receivable (AR) is crucial for improving cash flow, reducing days sales outstanding (DSO), and enhancing overall financial health. Efficient AR processes ensure timely payments, minimize errors, and improve customer satisfaction.
Key strategies include automating invoicing and payment processes, leveraging AI for better accuracy, offering multiple payment options, and focusing on reducing DSO. These strategies help streamline workflows, reduce manual workload, and improve cash flow management.
Digital transformation in AR management leads to increased efficiency, reduced errors, and faster payment cycles. By adopting digital tools and automation, businesses can enhance customer experiences, improve cash flow, and stay competitive in the evolving market.
AI plays a significant role in AR optimization by automating routine tasks, analyzing large datasets, and providing actionable insights. AI-driven analytics help organizations make better business decisions, reduce manual workload, and improve overall efficiency.
Improving AR processes enhances customer loyalty by providing a seamless and efficient payment experience. Offering flexible payment options, ensuring accurate invoicing, and maintaining clear communication help build trust and satisfaction, leading to stronger customer relationships.