AI and automation in receivables: A game-changer for Finance Teams

In today's fast-paced world, AI is transforming industries across the board, in fact 77% of companies are either already using, or exploring the use of AI in their processes. Finance is no exception to this fast-growing transformation.

I recently had the pleasure of presenting at Accountex, showcasing how AI and automation are revolutionizing accounts receivables with my colleague Charlotte Gill, Chaser's Head of Product. The session highlighted the game-changing potential of these technologies in streamlining payment collections and enhancing financial management for businesses. Here are some key takeaways from that session, along with some additional insights and next steps you can take to incorporate AI into your finance team's operations, and improve your receivables management.

Thanks to AI and automation, when it comes to debtor management, 'doing the work' simply doesn't exist anymore.

The persistent problem of late payments

Despite businesses' best efforts, late payments remain a stubborn issue, especially for small and medium enterprises (SMEs) operating on tight cash flows. A staggering 87% of UK SMEs report that their invoices are usually paid late, resulting in an average of $300,000 in outstanding payments at any given time. This issue isn't just a minor inconvenience; it's a significant drain on resources, stifling growth, limiting reinvestment opportunities, and in severe cases, leading to business closure. According to the Federation of Small Businesses (FSB), late payments cause 50,000 UK SMEs to close annually due to cash-flow problems.

Furthermore, it appears to be commonplace for businesses to accept these late payments as simply part of 'business as usual', and delay proactively dealing with late payments until they become bad debts. On average, businesses right now are writing 8% of their revenue off as bad debts every single year (Hilton Baird). That is revenue sacrificed that could be reinvested in business growth, or protecting your cash flow.

Why current approaches fall short

Conventional methods of managing accounts receivable often fail to effectively address late payments. 87% of SME's say they are already using an automation software to manage their accounts receivables. But what 'accounts receivable software are they using? NetSuite, Business Central, Xero, QuickBooks, or Sage...

You may have noticed, these tools are accounting and ERP systems, not accounts receivables automation tools. Businesses are settling for softwares that are primarily designed for general financial management and accounting tasks rather than specialized receivables management. These tools can automate payment reminders, but they lack the sophistication needed to tackle the root causes of late payments.

For instance, recipients may ignore automated generic emails. Also, the lack of personalized follow-ups means that businesses spend around four hours per week managing receivables tasks, with limited success in accelerating payments. This approach not only drains valuable time and resources but also fails to address the underlying issues that lead to late payments, and proactively prevent them.

Inadequate credit checks

• Insufficient initial assessments: Many businesses fail to conduct thorough credit checks before offering credit to new customers, resulting in extending credit to high-risk customers who are more likely to delay payments.
• Lack of ongoing monitoring: Creditworthiness can change over time due to various factors such as economic conditions or changes in the customer's business. Without ongoing credit monitoring, businesses might not be aware of increased risks associated with existing customers, leading to unexpected payment delays.
• Standardized credit policies: Rigid credit policies that fail to account for individual customer circumstances can also contribute to late payments. Customizing credit terms based on a detailed understanding of each customer's financial health can mitigate risks.

Poor communication

• Generic payment reminders: Recipients may ignore generic payment reminders sent by automated systems. These impersonal communications lack the personal touch that can prompt quicker responses.
• Infrequent follow-ups: Irregular follow-up communications can lead to invoices being forgotten or deprioritized by customers. Consistent and timely follow-ups are essential to keep payment obligations top of mind.
• Unclear payment terms: If payment terms are not clearly communicated at the outset, customers may not understand their obligations, leading to delays. Clear, concise, and well-communicated terms can reduce misunderstandings and promote timely payments.

Lack of proactive engagement

• Reactive rather than proactive approach: Many businesses wait until payments are overdue before taking action. Proactive engagement, such as sending reminders before the due date and maintaining regular communication, can prevent late payments.
• Absence of relationship management: Building and maintaining strong relationships with customers can encourage timely payments. Businesses that focus on relationship management are often more successful in securing prompt payments, as customers are more likely to prioritize payments to partners they value and trust.
• Failure to offer flexible payment options: Inflexibility in payment options can also contribute to delays. Offering customers multiple ways to pay (e.g., online payment options or installment plans) can facilitate faster payments and improve cash flow.

Addressing these underlying issues requires a strategic approach that goes beyond the automation of basic tasks. Implementing robust credit checks, improving communication, and engaging proactively with customers are critical steps in transforming the accounts receivables process and ensuring timely payments.

The impact of late payments on businesses

Late payments can have devastating effects on businesses. Beyond the immediate cash-flow issues, they can lead to a cascade of negative outcomes. Businesses may struggle to meet their own financial obligations, leading to a cycle of late payments that can damage their creditworthiness. This situation can result in higher borrowing costs and reduced access to financing. Moreover, the constant strain of managing late payments diverts attention from growth-focused activities, stifling innovation and expansion.

The economic impact is also significant. If small businesses were consistently paid on time, it would boost the UK economy by an estimated £2.5 billion annually. This figure highlights the broader implications of the late payment crisis, underscoring the importance of finding effective solutions.

The impact of implementing AI and automation in your receivables management process

By adopting a proactive approach to prevent late payments using automation and AI, your business is three times more likely to be paid before the invoice due date.

The return on investment from taking this step is huge, for example:

• SAS Accountants: During the COVID-19 pandemic, SAS Accountants managed to reduce their medical technology client's days sales outstanding (DSO) by 75% by leveraging AI-driven AR solutions. The company achieved this significant improvement even as they navigated the challenges of supplying to stretched clients like the NHS.
• LoveBrands: This wholesale supplier saved over 15 hours each week on manual processes by adopting automation and AI. This time savings allowed their team to focus on more strategic tasks, enhancing overall productivity and customer satisfaction.
• Huttie Group: By using AI and automation, Huttie Group recovered £15,000 in old debt that they would have otherwise written off. This recovery improved their cash flow and demonstrated the potential of technology to solve seemingly insurmountable problems.

These success stories highlight the tangible benefits of AI and automation, showing that with the right tools, businesses can achieve significant improvements in their AR processes.

You can see exactly what your business' return on investment would be from using a tool like Chaser to protect and bring your revenue in faster. Go to the ROI calculator here, plug in yours or your clients credentials, and you can instantly see your yearly time and cost savings - as well as the monthly cost of delaying using AI and automation. 

What does AI and automation look like in accounts receivables

So, what's the solution to this relentless problem? The answer lies in leveraging AI and automation to transform how businesses handle accounts receivables. By adopting a proactive, tech-forward approach, businesses can shift from reacting to late payments to preventing them altogether.

You can see the entire credit management process in the image above. Chaser has automated every element of this process, excluding your credit decisions. Chaser's automation capabilities cover everything from predicting how likely a debtor is to pay late, to phoning your debtors, posting letters, and managing debt collections. The entire process is automated, with AI now handling key assessments and decisions within your credit management process.

Here are some key highlights:

• AI can analyze payment patterns and predict which invoices are likely to be paid late, enabling businesses to take preemptive action.
• Automation can streamline the entire AR process, from sending personalized payment reminders at optimal times to automating follow-ups and even initiating necessary debt collection.
• AI can ensure timely payments while freeing up valuable time for businesses to focus on their core activities.

Use AI and automation in your accounts receivable process with Chaser

Below are some key ways you can use AI and automation in your accounts receivables process with Chaser to protect and bring your revenue in faster.

Easy receivables management and instant customer insights

Chaser’s Receivables area offers a CRM of all your debtors, drawing data from your accounting system. You can see an overview of invoices, customers, and debtor communications, and initiate automated actions to safeguard your revenue.

On the customer page within Receivables, AI-generated payer ratings predict the likelihood of late payments. This allows you to focus on problematic customers and take necessary actions to ensure timely payments. You can set and adjust credit limits, guided by automated alerts, and log all debtor communications for a comprehensive overview. Early adopters of the AI payer ratings feature have seen their days sales outstanding reduce to just four days, representing a 76% reduction in days to pay.

Understand your revenue blockers

The Chasefeed within Chaser automatically consolidates all your revenue blockers in one place. Receive updates and reminders about significant issues like bounced emails or missing customer details that might delay payments. This feature helps you stay on top of receivables performance and reduce DSO (days sales outstanding) with AI and automation.

Take a proactive, multi-channel approach with automated chasing workflows

Chaser enables complete automation of the payment chasing workflow. Treating all your debtors the same is not going to yield the best results, segment customers based on their payment behavior and apply appropriate workflows. This personalized approach can help you get paid three days faster on average.

You can set and forget all of your payment chasing and have customers enroll in chasing workflows automatically when Chaser sees an outstanding payment in your accounting system or ERP. All payment reminders are automated and personalized based on customer data, including; automating phone calls, which deliver a pre-scripted call to your debtor, text messages, which can automatically include links to their Chaser Payment portal for instant payment, and posted letters - which can include QR codes with a link to make instant payments.

Some Chaser users experience the worst late payments from industries such as construction and trades where the recipients are often not sitting at their desk, they may be onsite, features like SMS and calls can be extremely useful in these instances - let’s face it, these days, most people are glued to their phones!

Chaser places a strong emphasis on proactive payment reminders, advocating for sending friendly prompts before invoices are due and ensuring customers have all necessary payment information on hand. Emails can be personalized and sent from your own email address, maintaining your brand identity. Each reminder is tailored to reflect your business's style and language, including customizable templates and your standard email signature. Upon payment receipt, Chaser can automatically schedule thank-you messages to foster customer goodwill. Some Chaser users go a step further by including links for Google reviews or repeat order forms in these messages, leveraging payment interactions to potentially boost future revenue.

Send payment reminders precisely when debtors are most likely to pay

You can protect your revenue further by ensuring payment reminders are sent exactly when your customer is most likely to pay them. Recommended chasing times use AI to observe debtor email opens and payment history, and calculate and pinpoint exactly the best time and day to chase them, to maximize your chances of prompt payment.

Results from using AI and automation in Chaser

On average, users of Chaser’s tools get paid three days faster just by switching to AI-recommended chasing times. Effective customer segmentation and proactive credit checks can further reduce payment delays by several days. Implementing SMS reminders and Auto-call features has led to customers getting paid 27 days faster on average, resulting in a total reduction of 38 days to payment.

All of these steps and methods will help bring down your days sales outstanding, help you ensure you are receiving your revenue, and that you are bringing it in on time. By not trying these methods, you could essentially be waiting an extra 38 days to receive the invoice payments you are owed, completely unnecessarily.

How to protect and bring revenue in faster with AI and automation in accounts receivables

The adoption of AI and automation in accounts receivables is a game-changer for finance teams and their accountants. By addressing the root causes of late payments, these technologies offer a proactive solution that transforms the AR process, improves cash flow, and frees up valuable time for businesses. As the technology continues to advance, its impact will only grow, providing even more powerful tools for businesses to manage their receivables effectively.

Ultimately, the more methods you use, and the more proactive you are, the more revenue you will protect and bring in at your business. With the technology, AI, and tools available today, there is completely minimal work involved when it comes to putting in place the measures and processes to ensure you get paid for your work on time, and can stop writing off bad debts.

At Chaser, we want businesses to feel empowered to join us in changing the narrative from 'writing debts off' to 'Never experiencing debts in the first place'. Chaser pulls all of the discussed AI and automation (and more!) together in one comprehensive tool specifically designed to help businesses protect their revenue, and bring revenue in faster - without requiring any time or effort. Chaser's goal is to ensure businesses worldwide get paid for their work, in an efficient, and friendly way, so it provides an end-to-end tool which uses AI and automation to remove the manual work and decision making from the accounts receivable process.

Speak to an expert about how AI and automation can help you protect your revenue, or see it for yourself with a 10-day free trial.