Automating Accounts Receivable: What, Why & How to

November 13, 2023
8 min

Learn all about automating accounts receivable. What is it, how to do it, and why you should care.

Mary runs a construction company, and before automating accounts receivable, her invoices were always late.

It took years of hard work and dedication to build her company's reputation, and now that new and bigger projects were coming in faster than ever, she felt the company's growth was not keeping pace. The AR management process wasn’t what you’d call “up-to-date”. All repetitive tasks were done manually, and it was impossible to keep up with the demand.

That's when Mary decided to switch gears. She implemented an automated accounts receivable system, and the change was like night turning into day. Payments began to roll in like clockwork, and the hours once lost to manual follow-ups were now directed toward growth and client relationships.

With automating accounts receivable, Mary's business found its rhythm, ensuring a robust cash flow and a focused team. Now, let's explore how this strategic shift can bring similar clarity and efficiency to your financial operations.

Key Takeaways

  • AR automation ensures round-the-clock invoice management and payment collection.
  • It liberates teams from repetitive tasks, enabling focus on growth and customer relations.
  • Automation reduces errors, ensuring accuracy and compliance in receivables.
  • Regular review and adjustment of AR processes are essential for enduring efficiency.

What is Account Receivables Automation

Accounts Receivable Automation aims to harness digital technology to streamline the invoicing and payment collection process. It can be used to meticulously automate the tracking, follow-ups, and recording of transactions, ensuring that services rendered or products delivered are matched with timely payments. These systems are designed to minimize the manual effort traditionally required in managing receivables, thereby reducing operational costs and enhancing efficiency.

Why is AR automation important?

The importance of AR automation lies in its capacity to liberate finance teams from repetitive tasks, allowing them to focus on strategic analysis and actions that can bolster the company's financial health. With automation, the path to increased profitability becomes clearer as businesses can allocate their resources to growth and innovation rather than the labor-intensive processes of the past. 

Benefits of Account Receivables Automation

Top AR Automation benefits.

The benefits of Accounts Receivable Automation are tangible and transformative, directly addressing the core needs of modern businesses. Here's how:

  • Collecting 24/7: Automation doesn't sleep. It ensures that your collection process is always on, capitalizing on the varied schedules of debtors across time zones, leading to more consistent collections.
  • Reduced Workload: AR automation takes on the heavy lifting of day-to-day receivables management, cutting down manual tasks significantly. This efficiency frees up your team's time and allows you to channel your efforts into strategic growth and customer engagement.
  • Personalization at Scale: Automation allows for the customization of communication with each customer, providing a personal touch without the manual effort typically involved in such detailed attention.
  • Improved Collection Rates: Systematic and timely follow-ups and reminders mean fewer missed payments, directly enhancing the success rate of collections.
  • Cashflow Predictability: AR automation turns the unpredictability of cash flow into a forecastable stream, providing the stability businesses need to make confident, informed decisions for future growth.
  • Reduced Errors and Improved Compliance: Automation minimizes human error and ensures adherence to evolving regulations, keeping your business on the right side of compliance. 

How to Automate Accounts Receivables in 5 Steps

Steps to automate Account receivables

Transitioning to automated accounts receivable is a strategic upgrade that can redefine your business's financial operations. Here's a guide to navigating this transition in five actionable steps. 

1. Talk to everyone involved

Engage with your sales team, who may have insights on customer payment behaviors; your finance department, who understand the nuances of current receivables; and your IT staff, who will be instrumental in integrating new software. It's a collaborative effort to map out a path everyone can navigate together, ensuring the transition to automation is as smooth as possible for all parties involved.

Addressing concerns head-on is also crucial at this step. Automation amplifies our skills, allowing us to avoid repetitiveness and tackle more complex, rewarding tasks.

2. Choose the right software

Choosing the right AR automation software is like choosing a new CFO: the fit must be impeccable. From our experience, you need to focus on three main factors when switching software:

  1. Ease of implementation: Not only how effortless it is to integrate into your current workflow and other software, but how long it will take your staff to master it.
  2. Value for money: How much does it cost vs how much will it improve your collections.
  3. Future-proofing: There are too many completely outdated AR software in the market. You need software that is up to date with the latest AR collections trends and have all the features you’d expect from a piece of software from the 2020s (Not just basic Automation, but AI, Omnichannel communications, Payment processing, etc.) 

How do you know what features you should expect from AR automation software? The key is to engage those already in the accounts receivable processes. Their insights are invaluable in pinpointing the exact features, integrations, and functionalities that will make the software a game-changer for your business.

3. Integrate with your Accounting Software

A spotless integration is the secret sauce that makes your AR automation software and accounting software work like a dream team. It's about creating a seamless flow of data that keeps everything in sync. Every software integrates differently, so you must follow their specific steps.

At Arrears, we know that the integration process is one of the biggest struggles for businesses looking for a software upgrade. That’s why we are proud to say we’ve been able to create the most up-to-date, sleek, intuitive, and easy-to-integrate Accounts Receivable software in the market. Not only that, we managed to do it while also adding all the functionalities that an AR team will need to operate at maximum efficiency in today's demanding market.

How easy is it to start collecting with Arrears? As simple as a drag-and-drop of a CSV file. 


4. Define which AR processes to automate

Visual representation of the Account Receivables process of a company, with the title "Define Which AR Process to Automate"

Identifying the AR tasks ripe for automation is a strategic step towards streamlining operations and bolstering your financial workflow. Here are the ones we think you should focus on.

Payment Reminders

Automated reminders are a vital function in maintaining a steady payment flow. By setting up automatic notifications through email and SMS, you ensure that clients are reminded of upcoming and past-due payments without manual effort.

At Arrears, we've distilled this process so much that “automation” takes on a whole new meaning. Here is how:

You can take a few minutes to use the AI template generator to craft personalized reminder campaigns that resonate with your clients, use our omnichannel communication system to ensure your message is heard loud and clear, no matter the medium, and use our Smart Timing feature, which analyzes client activity to pinpoint the optimal moment for sending reminders, based on past interactions and payment behaviors.

This way, the outreach process is fully automated and optimized.

Payment Plans

Payment plans Customization is crucial for a healthy cash flow. Providing a specific solution that suits each and every one of your customers will decrease resistance to payment, as they can set them up on their own terms. But it would take forever if done manually.

Arrears simplifies this critical process with a self-service payment portal that empowers customers to manage their payments easily. Clients can opt for paying in full or set up automated payment plans, choosing dates that align with their financial planning. This autonomy enhances the customer experience and streamlines your cash inflows, ensuring that payments are received consistently and without the need for manual follow-ups.  


Customer support queries can be one of the most time-intensive tasks for any accounts receivable team. Arrears transforms this dynamic with an AI-driven chatbot (GPT-4). By feeding it with your specific FAQs, it learns to address a wide array of inquiries, providing accurate, helpful responses that reflect your company's voice and knowledge base.

This advanced support system is designed to halve your team's message load, allowing them to focus on more complex issues that require a personal touch. With Arrears, support becomes less about deflecting and more about connecting, ensuring every client interaction is an opportunity to impress and inform.

5. Measure, Rinse, and Repeat

We hate to break it to you, but complete operational efficiency doesn’t exist. There will always be room for improvement, so adopting a posture of continuous optimization is the best you can do to take control of your cash flow.

  • Measure: Start by establishing clear metrics for success. Whether it's the speed of invoice payments, the percentage of on-time payments, or the reduction of overdue accounts, these metrics will guide your evaluation of the AR automation's effectiveness.
  • Rinse: With data in hand, it's time to cleanse your processes of inefficiencies. Identify patterns that lead to delays or errors and adjust your automation rules and parameters to mitigate these issues.
  • Repeat: Finally, apply what you've learned. Implement changes and monitor the results. This measurement, refinement, and application cycle is crucial for continuous improvement, ensuring that your AR processes remain as efficient and effective as possible over time.

Next Steps

Cashflow predictability awaits, and it begins with a single step: automating accounts receivable. Check out how Arrears can help you in your journey.

Automating Accounts Receivable FAQs

Can accounts receivable be automated?

Yes, accounts receivable can be automated. Automation involves using software to manage invoicing, track payments, send reminders, and reconcile accounts, significantly reducing manual tasks and increasing efficiency.

What is AP and AR automation?

AP (Accounts Payable) and AR (Accounts Receivable) automation refer to the use of technology to streamline and manage the processes of paying bills and collecting payments. This includes automated invoice processing, payment tracking, and financial reporting.

Can accounts payable be automated?

Absolutely, accounts payable can be automated. Like AR automation, AP automation software helps businesses manage their outgoing payments through electronic invoicing, automated approval workflows, and digital payment processing.

What is an example of accounts receivable automation?

An example of accounts receivable automation is a system that automatically sends payment reminders to clients before and after the invoice due date, processes incoming payments, and updates the financial records without manual input. For instance, a company might use software that issues invoices, tracks whether they have been opened, and follows up with tailored reminders via email or SMS until the payment is received and recorded.