The business landscape is ever-evolving. Organizations are constantly innovating in product development, supply chain optimization, and customer experience. This relentless pursuit of improvement is no longer just a trend; it’s the expected standard.
This drive for innovation is reshaping how companies operate, how they allocate capital, and how they strive for growth. To maintain a competitive edge in today’s market, businesses must adapt and adopt new strategies.
However, the fundamental principle of business remains unchanged: profitability and shareholder value. This core objective will always be paramount.
Therefore, effective accounts receivable management is crucial. Recovering revenue promptly and efficiently is essential to a company’s financial health. Neglecting receivables can create significant financial strain.
Despite its importance, Accounts Receivable (AR) processes have often lagged behind other areas in terms of technological advancement, particularly in the Indian B2B sector. The transition toward AR automation has been slower compared to other functions.
Traditional methods of collecting receivables in India often rely on manual processes, from invoice submission to collection follow-ups and reconciliations. This preference for manual intervention stems from the belief in the irreplaceable value of personal relationships and face-to-face interactions.
However, India’s increasing global prominence, the expansion of domestic companies into international markets, and government initiatives promoting digitization are rapidly changing this landscape. Initiatives are continually being introduced to reduce the cost of capital for organizations, with strong governmental support.
These initiatives include increased adoption of digitally signed invoices, shorter credit terms for Micro, Small, and Medium Enterprises (MSMEs), and the availability of diverse platforms for streamlined electronic payments.
Given these developments, embracing automation in accounts receivable strengthens the ecosystem designed to support businesses. This automation not only reduces the cost of capital but also ensures that organizations remain adaptable and competitive in a changing environment.
Before initiating automation, especially in accounts receivable—a function with significant potential impacts—it’s important to consider several key factors.
Things to mind:
What to Automate
Accounts receivable encompasses much more than just collections. It includes onboarding new customers, order receipt and verification, system entry, procurement coordination, sales team liaison for timelines and exceptions, accurate invoicing, document submission, collection follow-ups, receipt accounting, reconciliations, and balance confirmations.
Comprehensive automation may seem appealing but can be time-consuming, potentially disrupting the entire process. Significant delays in large-scale automation can hinder the initial goal of improving processes.
A more effective strategy is to prioritize automation in collection follow-ups and analytics, focusing on redundant and transactional activities. This approach demonstrates the impact of automation while minimizing potential disruptions.
Another area ripe for automation is collections accounting, which can yield significant savings with minimal disruption.
Therefore, clearly define the areas targeted for automation.
The ideal approach is to automate a process or activity that offers substantial value and is sufficiently redundant to be handled manually if needed due to initial challenges.
Timelines & Budget
Without clear timelines, automation projects can become open-ended, leading to budget overruns and eventual shelving due to perceived lack of value.
Establishing and adhering to a timeline is crucial. Consider a phased approach, building upon the successes of each phase. Focus on delivering tangible results rather than pursuing perfection from the outset.
Implement initial solutions quickly to demonstrate value and then expand to more complex objectives.
How to Automate – Insource vs. Outsource
The rapid advancements in Artificial Intelligence, Machine Learning, and Robotics can make process automation seem overwhelming. The sheer number of options can be daunting, potentially derailing the entire initiative.
Start with manageable steps, particularly for those new to process automation, and gradually build from there. For example, a simple automated dunning platform can significantly improve collection management and output. Avoid over-engineering solutions when simpler tools suffice.
An experienced partner can provide valuable guidance based on organizational objectives and process assessments.
While an external partner may initially lack the deep-rooted customer relationships of an in-house team, this knowledge gap can be addressed through effective onboarding and expectation management.
Outsourcing facilitates clear objective setting and planning. In-house development can be seamless, especially when interdepartmental coordination is essential. However, internal coordination often requires strong change management leadership from the top.
A significant advantage of outsourcing is the unbiased approach and balanced perspective that an external partner brings. In-house teams may inadvertently perpetuate existing knowledge or traditional methods, hindering the potential of automation.
Another benefit of outsourcing is access to timely updates and expertise. For an outsourced partner, continuous improvement is a key performance indicator, whereas in-house teams may prioritize updates based on convenience or reactively after issues arise. For example, the new RBI compliance regulations are best managed by an outsourcing partner who has in-depth knowledge of compliance regulations.
The Conclusion
In summary:
- Keep the project scope simple.
- Start with user-friendly technology.
- Find a reliable partner to guide your accounts receivable automation journey.
2025 Insight: As Robotic Process Automation (RPA) matures, consider its integration with your AR automation. RPA can handle repetitive tasks like data entry and invoice processing, freeing up your team for more strategic activities.
