Late payments are a perpetual nuisance in many industries because they can lead to downstream cash flow issues that hurt accounts payable (AP), payroll, and other departments.
Take, for example, one sector that is particularly susceptible to the effects of slow payments: construction. Payment delays cost the industry $100 billion a year and come from two main sources: limitations in the physical infrastructure that transfers means of payment, and delays in documenting, approving and communicating payments. .
These delays delay construction project timelines and ultimately cost construction companies and their customers tens of billions of dollars.
Prioritize timely and accurate cash flow
These problems extend far beyond the construction industry. Cash flow considerations are not limited to one industry or type of business. The “Working Capital Playbook”, a PYMNTS and Yay Pay collaboration, found that 82% of chief financial officers (CFOs) measure accounts receivable (AR) revenue to assess their ability to increase overall customer value.
Get the report: Working capital book
All businesses must prioritize accurate and timely cash flow to ensure their money is where it needs to be when it needs to be there. Delays or errors in the process can have colossal ripple effects, as businesses often lack the free capital to ensure timely payroll, vendor payments, and a host of other necessities that could quickly spiral out of control.
The job of AR departments is to ensure that customer payments arrive on time and with all the necessary information, lest the downstream cash flow of their businesses be put at risk.
But it is difficult in practice. Data entry errors and payment processing delays are the bane of any AR service, and these issues are often exacerbated by businesses’ reliance on paper-based payments despite increased digitization.
Maximize efficiency and reduce costs
A potential answer to these AR challenges is automation, which reduces the risk of human error by implementing systems that rely on artificial intelligence (AI). These speed up day-to-day processes, including collections and invoicing, by handling complex calculations that often frustrate and bog down human analysts.
The automation of back-office functions, once the preserve of large enterprises, has recently extended to small businesses. CEO of Yay Pay Anthony Venus told PYMNTS that as large buyers streamline and modernize their operations and move to platforms, smaller suppliers will sign up.
Read more: Supply chain challenges are driving new innovations in digital payments, say experts
Automating AR can provide many benefits to corporate accounting teams, reducing payment errors and delays that can lead to significant costs in terms of downstream cash flow issues. The implementation of automated solutions is, however, greatly hampered by the persistence of paper-based payments, which are still commonplace in the business world despite the growing prevalence of digital solutions.
Significant AR challenges remain across a myriad of industries, but implementing automation and digital payments could save time and money that businesses could spend on other activities.
The digitization and automation of AR could greatly help companies maximize efficiency and reduce costs. AR automation strives to close payment gaps like those seen in the construction industry, and it has been widely implemented in the business world.