Automating Accounts Receivable Maximizes Cash Flow, Minimizes Risk

The same design ingenuity that is applied to automotive products can be used to improve the performance of back-office processes.

Brian Shannon

March 25, 2016

4 Min Read
Automating Accounts Receivable Maximizes Cash Flow, Minimizes Risk

The automotive industry is built on innovation and speed, externally by the continuous advent of new vehicles and internally through improved data and process solutions.

The industry currently is experiencing a shift in the order-to-cash process, steadily moving toward automation of these important business transactions. This shift is minimizing paper’s impact in accounts receivable, allowing organizations to automate each part of the order-to-cash process from upstream sales orders to delivery documents, payments and rebates downstream.

To stay relevant in the competitive, ever-shifting landscape, manufacturers need to upgrade older, manual processes if they want to contain costs, optimize cash flow and mitigate risk. Effective process changes can help automotive companies manage the ever-evolving mix of payment and remittance forms, and to handle demanding exceptions.

Business-to-business payments by check are in swift decline, as utilization of automated payment processes, including Automated Clearing House (ACH) and Electronic Data Interchange (EDI), are steadily rising. The technology now available has created new possibilities and opened eyes to the inefficient and error-inducing repetition that manual data entry presents.

Combined with a general resistance to hiring back-office staff, the technology trend inevitably is driving the auto industry toward greater process automation. Organizations that fail to act now will be at a disadvantage and lag behind the leaders who are reaping the benefits experienced from a streamlined accounts-receivable process.

Benefits to Streamlining Accounts Receivable

To achieve organizational growth it is essential to implement processes that optimize cash flow. This is particularly true in the automotive industry, which can experience occasional periods of unevenness.

Controlling how cash flows through the business is imperative to success, fostering increased operational efficiency while supporting an organization’s ability to implement strategy. By automating essential accounts-receivable processes such as cash application and dispute resolution, organizations can get paid faster and keep operations moving.

Streamlining processes also gives organizations greater control over cash flow, providing valuable, tangible benefits to an organization by lowering the cost of funding new innovations and creating business stability during slower economic periods.

Technology and innovation always have been at the heart of the auto industry, and the same design ingenuity that is applied to automotive products can be used to improve the performance of back-office processes.

It is evident the rise of electronic payments already is transforming how payments are received. Now, organizations must think of how to use technology to facilitate processing those payments. Template-based capture-of-remittance advice documents and automated payment-matching are two simple ways organizations can employ technology to process payments faster and more easily.

Digitizing processes and eliminating manual tasks wherever possible will enable organizations to track payments more closely, increase efficiencies and eliminate bottlenecks to improve cash flow.

In addition to faster payments, streamlining operations for maximum efficiency enables the accounts-receivable department to focus on higher-level tasks, such as dispute resolution, freeing it from the cumbersome and tedious manual data entry and matching processes.

A comprehensive, adaptable and digitized process will increase productivity significantly for these higher-level dispute-resolution tasks, providing staff with instant access to needed information.

Existing manual, paper-based processes are difficult and cumbersome, particularly when users are required to assemble complex sales and distribution document trails to support dispute-resolution cases.

With a digitized process, users have instant visibility into the entire sales-transaction history, including all of the supporting documents. Increasing speed of access to information improves the speed of the entire process, which leads to improved cash flow, as employees can respond quickly to inquiries and shorten the day-sales outstanding.

The tighter controls implemented through automation also mitigate risk, ensuring discounts are taken only according to contracts and policies and proper documentation is provided at each step in the process. Ensuring correct pricing and comprehensive supply-chain information is imperative as a differentiator, and problematic in the event of an audit if it is missing.

Automotive manufacturers are more frequently gravitating toward optimizing finance-department operations and understand that has direct ties to cash flow, operational efficiency and risk. The auto industry can be unpredictable and often difficult to navigate, and organizations looking to implement a measure of stability are taking advantage of the technology available.

Improved cash flow and transparency, mitigated risk and other benefits of adopting technology are enabling organizations to embrace strategic growth and engage in smarter, more flexible decision making.

Accounts receivable no longer is viewed simply as a means to pay company bills. The potential business benefits of an effective process change now are direct contributors to organizational success and drivers of cash flow for the automotive industry.

Brian Shannon is principal business process management strategist for Dolphin Enterprise Solutions. He has more than 15 years of SAP experience, and his background includes thought leadership, knowledge management, project management, training and SAP consulting.

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