How to Make the Business Case for Accounts Receivable Automation
If, like many of today’s accounting and finance leaders, you’re looking at modernizing your accounts receivable operations, you probably already realize that committing to and investing in that objective takes some buy-in from other stakeholders. One of the most important and toughest stakeholders is of course your own boss, whether she's a CFO, CEO or another position. Whatever role she occupies she’ll probably care a lot about ROI. But simply telling her that it’s a high ROI initiative won’t be enough—you’ve got to walk her to the bank.
Having been selected as an A/R automation system for more than 20,000 businesses of all industries and sizes, here’s what we see as the four most common pillars of the business case for accounts receivable automation:
We will get paid faster
One of the best ways to measure how fast you get paid is Days Sales Outstanding, also known as DSO. If you do a good job of automating billing and collections it follows that you will reduce your DSO and therefore improve the company’s cash flow. What CEO or CFO wouldn’t want that? To make the case for improved DSO, compare a snapshot of your current DSO with what you’d expect once you implement an automation system or overall process improvement initiative. We can’t speak for other vendors, but Invoiced, on average across our clients, reduces DSO by 14 days.
We will save time
CFOs and CEOs generally care about efficiency—so that usually means they also appreciate time savings. This involves being able to quantify how many invoices you send monthly or annually, how much time on average is spent by staff per invoice - including sending, chasing, accepting payments and applying cash. Once you know these basic factors you can then do research or speak with vendors about how you can expect task times to change both individually and in aggregate. You can then of course “dollarize” that time based on the cost of that difference in total task time. Invoiced offers a simple calculator (inclusive of collection improvement for bad debt) that gets you to a number very quickly—try the Savings Calculator.
We will get to higher impact work sooner
If the amount of time normally taken up by all those menial tasks can be reduced or even eliminated, finance and accounting teams will be able to work on tasks that aren’t automated. Hence, automation, in a broad sense, doesn’t necessarily obviate roles, but rather, it speeds up the rate at which the rest of that role’s work can be performed. Once you have a handle on how much time will be saved per above, you can intelligently estimate which otherwise unaddressed priorities or projects would be able to be worked on and/or completed. In other words, it could be valuable to express ROI in terms of accelerated completion dates for high priority projects. As an example, one Invoiced client recently told us that based on time saved on billing and collections, they freed up their 10-person finance team’s capacity such that they've reduced the time it takes to complete their quarterly closes from 14 days to 6 days - and they are still improving.
We will provide a better customer experience
In today’s digital business world, your company’s customers are probably not exactly jumping out of their seats to retrieve mail, open mail and put a check in the mail. The calls your company sometimes needs to make to find out about payment status can definitely be awkward - for both your team and the customer. Bill presentment, reminders and payment fully delivered through a modern digital experience is something that we see our customers’ customers happily embracing (and rewarding with faster payment). But is that improved experience important? According to data provided by SuperOffice:
86% of buyers would pay more for a great customer experience
73% of buyers say customer experience is an important factor in purchasing decisions
65% of buyers say a positive brand experience is more influential than great advertising
The customer experience improvement is clearly not as easy to express in dollar or time payback terms, but it is perhaps one of the most profound ways for a finance team to make a direct contribution to the mission and growth of the company. It’s hard to imagine a CEO or CFO who wouldn’t appreciate that idea.
For each of the four pillars we just laid out, it’s not always going to be easy or even possible to make a dollar-level comparison with the cost of an accounts receivable automation solution or initiative. But each of the pillars can be quantified enough to make strong economic arguments that would be well received by CFOs, CEOs and the boards who hold them accountable for making smart and timely business decisions.
Are you looking to drive this kind of change and innovation at your company? Get in touch with us to get even more material to make the best business case possible.