Cost Concerns Spur A/R Innovations

Streamlining processes the most popular strategy, study shows.

Cost pressures are pushing companies to improve their order-to-cash processes, according to a recent Aberdeen Group study, which found that companies are streamlining processes in accounts receivable as well as adopting automation.

Aberdeen’s study of 140 companies shows that 67% say they are making improvements in order-to-cash to cut overall costs, far more than the 29% who cite the risk of customers’ not paying and another 29% who say they are responding to customers’ requests for better service.

Aberdeen divided the companies into best-of-class, middle and laggard, based on the percentage of past-due receivables, the portion of invoices that require manual intervention and the amount of time it takes payments to clear.

Streamlining administrative processes is the most popular approach to improve the order-to-cash area, cited by 69% of best-in-class companies and 60% of all other companies, according to the study.”

“That’s far and away the most often cited strategy for how they’re going to improve things,” says Scott Pezza, author of the study and a senior research associate for financial management and GRC at Aberdeen. “They’re looking at the process side first.”

The survey shows that 48% of best-in-class companies are increasing their use of electronic invoicing, vs. 28% of other companies, while 34% of best-in-class are automating their accounts receivable processes, along with 35% of all other companies.

The size of the company plays a role in adopting technologies. For example, small businesses are more likely to automate AR processes, at 41%, while midsize companies are boosting their use of e-invoicing, at 43%.

“Those who are doing the best have also made the most strides in moving toward electronic transactions,” Pezza says, adding that a key benefit is that the data the technology provides can help in making more informed credit decisions or putting together better credit strategies. “That’s why the electronic transactions are so important, it’s about the accessibility of the data.”

The report makes the point that the accounts receivable area is still mired in paper. The study shows that 49% of invoices are sent electronically, while 45% of incoming payments are in electronic format.

 

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