How to Build a Strong Business Case for AR Automation

From startups to enterprises, accounts receivable (AR) plays a pivotal role in financial health for businesses of all sizes. Adopting AR automation tools is an effective strategy to improve your collections, enhance your customers’ payment experience, and save valuable time and resources – providing a massive AR ROI for your business.

‍

If you’re looking to pitch an AR business case to your boss, this blog is for you. This article will guide you through building a strong business case for AR automation software, aligning it with your business objectives, and ensuring stakeholder buy-in.

‍

Understanding the Basics of Accounts Receivable Automation

When presenting a business case for AR automation, it’s important to start by making sure your audience understands what it is. Begin by explaining that AR automation software automates the invoicing and collection process, in turn reducing manual data entry, minimizing errors, and speeding up your firm’s cash flow cycle.

‍

Make sure to highlight that the software also facilitates faster invoice processing, ensuring timely billing and improved customer satisfaction. Also explain how AR automation software's ability to track and manage receivables in real-time will allow your business to easily monitor outstanding invoices and follow up on late payments more effectively. This visibility into the accounts receivable process aids in better cash flow management and forecasting, enabling more informed financial decisions.

‍

Building the Best Business Case for AR Automation

In this section, we’ll walk through the 9 steps to building a stellar business case for AR automation. Let’s get started…

‍

1. Define Business Goals

The first step of building an AR automation business case is to articulate how AR automation will support your business’ highest priorities. Start by identifying your organization’s key strategic goals for the year ahead, then look for ways that you can connect the dots between those initiatives and key AR automation benefits.

‍

For example, if your company is looking to improve its cash flow then point out how AR automation accelerates payment processes. If your team wants to cut costs, then call out how AR automation reduces manual errors and maximizes operational efficiencies.

‍

2. Identify Pain Points

Next, highlight the challenges of your current AR process. Examine your team to see which challenges are the most evident in your current system, and explain how these issues impact your business as a whole. Here are a few examples to get started:

‍

Inefficiency and Time-Consuming Tasks

Raises Operational Costs: The labor-intensive nature of manual data entry and invoice processing increases operational costs.
Hinders Cash Flow: Delays in invoice processing and payment collection heavily impact your business’ cash flow. The longer it takes to create invoices and follow up with your customers, the longer it takes to get paid.

‍

Error-Prone Operations

Delays Payments: Human errors in data entry can lead to incorrect invoices and delayed payments.
Weakens Customer Relationships: Invoice mistakes and delays can strain relationships with customers. This may lead to disputes and impact your company’s reputation.

‍

Limited Visibility and Reporting

Limits Strategic Decision Making: The lack of real-time visibility into AR hinders your ability to make strategic decisions. Inaccurate or delayed reporting affects your business' capacity to protect its financial health.
Impairs Forecasting: Limited access to timely and accurate data impedes your ability to accurately forecast cash flow. Inaccurate cash flow forecast predictions quickly leads to bad financial planning. This can threaten the financial stability and growth of your business.

‍

3. Quantify the Problem

Now that you’ve identified the pain points of your current AR system, try pulling data to underscore the financial impact of these challenges. Calculate the cost implications of manual errors, the average duration for processing invoices, and how these factors contribute to an extended Days Sales Outstanding (DSO). These metrics provide a clear picture of your current system’s inefficiencies to stakeholders.

‍

4. Research and Select an Automation Solution

Take your list of pain points and overarching business goals, and use these to guide your search for an AR automation solution. The ideal solution should not only address your pain points but also integrate seamlessly with your existing financial systems. Include your research and suggested AR automation provider in your business case.

‍

5. Estimate Costs and ROI

Break down the costs associated with implementing your chosen AR automation solution. Utilize tools like Centime’s AR automation ROI calculator to estimate the return on investment, taking into account factors like time saved, reduction in errors, and improvements in cash flow.

‍

6. Highlight AR Automation Benefits

Now it’s time to highlight the benefits of AR automation within your business case. It’s important to include both direct benefits (which impact the bottom line) as well as indirect benefits (which contribute to your company’s long-term financial health and competitive advantage).

‍

Here are examples of direct and indirect benefits of AR automation. Pick a few from the list below that will resonate best with your internal stakeholders:

‍

Direct Benefits of AR Automation

‍

Faster Payment Processing: AR automation enables faster payment cycles which then lead to better cash flows. The direct impact of this is a shorter day's sales outstanding (DSO) and better liquidity. If you’re looking to improve your liquidity, here are 10 top KPIs to improve cash management.
Reduced Errors: Minimizing errors in data entry not only improves your financial records, but also reduces the time and resources your company has to spend fixing mistakes.
Better Cost Savings: Businesses can significantly reduce direct costs and streamline operations by minimizing repetitive, manual tasks.
Stronger Cash Flow: Timely payments and better visibility into receivables directly impact cash flows. Improved cash flow allows businesses to invest in growth opportunities, delivering better returns.

‍

Indirect Benefits of AR Automation

‍

Better Customer Relationships: AR automation improves customer experiences by streamlining the payment process. This can increase customer loyalty and lead to repeat business. It also helps expedite payments because satisfied customers are more likely to make timely payments.
More Time Savings: AR automation affords employees more time for higher-value work by automating repetitive, manual tasks. While the direct impact is on labor efficiency and cost savings, it also indirectly benefits finance teams by developing a more skilled workforce.
Scalability: AR automation makes it easy for your finance org to adapt to changing needs and transaction volumes. As the business grows, the system can handle higher workloads without proportionately increasing costs, leading to long-term gains.
Sharper Competitive Advantage: Businesses with streamlined AR operations can attract and retain customers, indirectly increasing revenue and market share.
Better Data Insights: Reporting and analytics from an AR automation solution provide actionable insights for your business.

‍

7. Present a Timeline

Now that you’ve laid out the benefits of AR automation, your business leaders will likely want to know more about implementation logistics. Provide a realistic timeline for implementing the AR automation solution, along with pricing estimates. This should include key milestones such as software selection, integration, staff training, and full deployment.

‍

8. Demonstrate Scalability

For an added bonus, show how your recommended AR automation solution can grow with your business. It should be able to handle increasing transaction volumes and complexity without significant additional costs.

‍

9. Engage Stakeholders

Finally, involve key stakeholders in the decision-making process. This includes departments such as finance, IT, and operations. Address their concerns, gather their input, and demonstrate how the AR automation solution will benefit each department to secure their support and buy-in.

‍

Calculating the ROI of AR Automation

‍

Not sure how to calculate the ROI of AR automation? We’ve got you covered. Centime’s AR automation ROI calculator is a free tool that can estimate the ROI of implementing AR automation software. Here is a breakdown of how to use the tool:

‍

1. Visit Our Website

2. Enter Basic Information Including:

Estimated Trailing 12 Months AR
Average Payment Terms
Number of Collectors

3. Enter Aging Figures and Reduction Percentage for:

Current
1-30 days
31-60 days
61-90 days
90+ days

4. Calculate the ROI and Cash Flow Gain

‍

Let's consider an example of a business that uses Centime’s ROI tool to assess the potential benefits.

Enter Basic Information:

‍

Enter Aging Figures with Reduction Percentage:

‍

Calculate the annual ROI and Cash Flow Gain:

‍

In this example, AR automation results in an ROI of $73.5K and $490K in cash flow gain. This hypothetical scenario shows how businesses can use an ROI calculator to quantify the savings of AR automation.

‍

Addressing Concerns and Objections

In the world of business, no matter how big or small the project, it’s good to prepare for pushback from stakeholders. Let’s go over some common objections you might receive when presenting your AR automation business case and how to address them:

‍

Objection 1: Cost Concerns

If your leaders are worried about cost, highlight the long-term cost savings of AR automation. Show the reduction in manual labor costs, paper-related expenses, and the potential for fewer errors. This is a great opportunity to use Centime’s AR ROI calculator linked above.

‍

Objection 2: Resistance to Change

Many teams are hesitant to adopt new systems. If your department is wary of AR automation, you can ease their anxiety by explaining the ease of transition and the benefits of automating repetitive AR tasks like sending payment reminders and generating invoices. Look for AR automation case studies to share with them.

‍

Objection 3: Unclear ROI

If internal stakeholders aren’t convinced that AR automation is worth the investment then you should present an ROI analysis that includes potential cost savings, reduced errors, improved cash flows, and enhanced customer relationships. You can use Centime’s ROI calculator to support your ROI projections.‍

‍

Objection 4: Lack of Awareness

If your team is unfamiliar with AR automation, it’s up to you to educate them on its capabilities and benefits. Highlight how it aligns with industry trends and best practices.

‍

Conclusion

Advocating for AR automation software in your business should be a direct, strategic effort. Focus on how it aligns with your company's goals and tackles current inefficiencies. Make a strong case by highlighting the clear benefits: it saves costs, boosts cash flow, and improves customer satisfaction. Throughout this process, actively involve stakeholders. Their support is crucial for this investment to enhance your company’s financial and operational performance.

‍

Embedding an all-in-one cash management solution, like Centime, can take your invoicing and collections to the next level. Interested in getting started with an AR automation solution? Book a demo with one of our experts today.

‍

Sign up for our newsletter
to get finance insights and cash planning tips delivered straight to your inbox twice per week.

**Deposit placement through ICS is subject to the terms, conditions, and disclosures in the applicable agreements. Although deposits are placed in increments that do not exceed the FDIC standard maximum deposit insurance amount (“SMDIA”) at any one destination bank, a depositor’s balances at the institution that places deposits may exceed the SMDIA (e.g., before settlement for deposits or after settlement for withdrawals) or be uninsured (if the placing institution is not an insured bank). The depositor must make any necessary arrangements to protect such balances consistent with applicable law and must determine whether placement through ICS satisfies any restrictions on its deposits. A list identifying IntraFi network banks appears at https://www.intrafi.com/network-banks. The depositor may exclude banks from eligibility to receive its funds. IntraFi and ICS are registered service marks, and IntraFi Cash Service is a service mark, of IntraFi Network LLC.

^††3.5% Annual Percentage Yield (APY) as of 11/19/24. Deposit rate may adjust to current market rate and may change daily. Fees may reduce earnings.

*Centime is not a bank and is not authorized by any federal or state agency to engage directly in core banking activities.
‍
*All banking products and services available through Centime are provided by FNBO and are governed by the applicable agreements and related disclosures provided to you by FNBO. Member FDIC.
‍
‍*While Centime facilitates traditional banking activities (such as the acceptance of deposits or extensions of credit), these services are actually provided by our banking partner, FNBO.
‍
*Centime may provide support services to FNBO, as permitted by applicable law, to facilitate the delivery of its bank products and services.

**Deposit placement through ICS is subject to the terms, conditions, and disclosures in the applicable agreements. Although deposits are placed in increments that do not exceed the FDIC standard maximum deposit insurance amount (“SMDIA”) at any one destination bank, a depositor’s balances at the institution that places deposits may exceed the SMDIA (e.g., before settlement for deposits or after settlement for withdrawals) or be uninsured (if the placing institution is not an insured bank). The depositor must make any necessary arrangements to protect such balances consistent with applicable law and must determine whether placement through ICS satisfies any restrictions on its deposits. A list identifying IntraFi network bank

How to Build a Strong Business Case for AR Automation

You may also like

How to Improve AR Collections

Top 7 AR Challenges (And How to Fix Them)

Stop Leaving Cash on the Table: The CFO's Guide to Unlocking Cash with Smarter Accounts Receivable

Solutions

Features

Pricing

Integrations

Resources

Software Solutions

Company

Industries

Compare

Guides