A/R Automation Market Overview

The state of the A/R Automation Industry in B2B


B2B electronic payment acceptance has grown over the past ten years and will continue to grow because of an industry trend: reduction in the use of paper checks and paper invoices.

This trend has led to a rapidly growing type of business software: accounts receivable (A/R) automation.

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To address the movement toward A/R automation, our research team prepared this document, which not only clearly defines what A/R automation is, but also provides data to help financial executives justify investment in A/R automation software. At their core, A/R automation tools save time for a business by automating manual processes, beginning with onboarding through to the collections process, when those same customers may have severely past due invoices.

B2B electronic payment acceptance has grown over the past ten years and will continue to grow because of an industry trend: reduction in the use of paper checks and paper invoices. This trend has led to a rapidly growing type of business software: accounts receivable (A/R) automation.

As we have observed with credit card acceptance, businesses will continue to move toward automated solutions and away from paper.

Not only is A/R automation software a growing industry, but it is highly complementary to payment processing, both for credit cards and ACH. As a business automates many of its repetitive A/R functions, it is also more likely to increase its use of electronic payment methods.

Some Eye-Opening Stats on the Future of Automation

$11.8 Billion The accounting software market will have a global value of $11.8 billion by 2026, according to a report published last year by Transparency Market Research (CAGR of 8.6% from 2018 to 2026)
50% Over 50% of C-level executives in accounting expect the development of intelligent, automated accounting systems will have the highest impact over the next 3 to 10 years. (ACCA Study)
80% More than 80% of executives believe artificial intelligence leads to a competitive advantage, and 79% believe it will increase their company’s productivity. (Journal of Accountancy)
66% 66% of accountants would invest in artificial intelligence. (Sage Practice of Now)
55% 55% of accountants plan to use AI in the next three years. (Sage Practice of Now)

Plans of Financial Decision-Makers

PYMTS.com and Mastercard published a white paper using survey data collected from about 400 financial decision makers in more than 12 different industries. The report was published in October 2018, and shows what businesses plan to do in the next three years. The results show that automated receivables is one of the most popular endeavors, along with real time payments and automated payables. We’ve highlighted innovations that relate to A/R automation.

As the chart below shows, over the next three years:

  • 54% of the most innovative companies plan to automate receivables
  • 45% of them plan to enable payments directly from invoices
  • 15% plan to implement dynamic discounting

Companies of All Sizes Plan to Automate

The graph below shows that 26% of the smallest companies plan to automate receivables, while 33% of the largest plan to do the same. The numbers are similar for enabling payment from invoices, a functionality EVO B2B has in PayFabric.

The Future of B2B Payments is in Automation

As we have seen with the rise of virtual terminals (authorize.net and PayFabric), businesses can get value from online solutions even if they are not integrated into their ERP. This is an easy first step businesses can take to improve their A/R processes.

A/R automation tools take it one step further, using technology to reduce or do away with manual tasks; foster increased communication; increase the company’s cash flow; and maximize visibility into all aspects of receivables to help executives make decisions quicker.

Businesses now have more software vendors and price points to choose from in the automation space, and the technology continues to improve. The cloud has removed many barriers to automation, making it affordable for organizations of any size to automate processes. As a result, making the transition from manual to automated receivables will become more common.

Why Businesses Invest in A/R Automation

The traditional accounts receivable process is manual, tedious, and inefficient. Accounting teams waste a lot of time doing manual work and jumping in and out of different systems to retrieve or update information. As previously stated, 79% of accountants think that AI would increase the productivity of their business.

Our clients have said the same things repeatedly. They want to move away from disjointed spreadsheets and begin automating their processes in order to reduce their DSO and save time.

The following graph was made with information reported by 1,784 businesses for APQC’s Finance Organization Open Standards Benchmarking survey and it breaks down the number of FTEs (full time employees) needed to perform finance activities, normalized by $1 billion in revenue.

This visual demonstrates how companies can get lean with the help of automation tools by producing the same output with less people. The graph shows that the top 25% of organization reported 36 or fewer FTEs performing finance activities for each $1 billion in revenue. The bottom 25% required at 141.6 FTEs for every $1 billion in revenue – 4x more FTEs than the most efficient companies.

Business are investing in A/R automation software because they have seen these results and want in on the efficiency represented here.

What Does A/R Automation Software Do?

A/R automation technology broadly falls into five categories: onboarding; invoicing; payments; reconciliation; and collections.

Some companies in the A/R space offer solutions for all five categories while others just focus on a few of the categories. For example, HighRadius’ solutions cover all five categories while the solutions offered by Dade Systems only cover two of them. Companies have the flexibility to purchase only the solutions they need and can also choose different service providers for each solution.

ONBOARDING

This type of module helps companies streamline credit application workflows for new clients and credit management workflows for existing clients. These tools can automatically pull from various credit reporting agencies and sometimes query company financials so that new clients requesting credit can be automatically scored. Some tools have customizable risk categories into which prospective clients can be grouped.

Since this removes many manual aspects from the underwriting process, potential customers get boarded more rapidly. Credit limits can be set automatically and any situation that requires escalation will be pushed to the attention of an analyst. If the ERP is integrated, payment information can be communicated back to the A/R solution, and automatic periodic reviews of client accounts can easily be done to determine if credit limits should be raised or lowered.

INVOICING

This type of module would have multiple delivery methods of sending invoices to clients. It would also report on the status of invoices that have been sent electronically, as well as facilitate communication about invoices between the business and their clients. The invoicing module also includes digital signatures/approvals, and integrated payment solutions to make paying invoices easier.

This module is often lumped together with a payment module and referred to as “EIPP,” or Electronic Invoicing and Payment Presentment. Since some solutions take invoicing a step further than others, it makes sense to talk about it separately. Keep in mind that a traditional ERP system can make and send invoices via email all by itself, so this module would be an enhancement of the basic invoicing of the ERP.

At EVO B2B, we have seen many clients concerned with the time and investment required to roll out a comprehensive A/R automation solution. Fortunately, there are some very small tweaks you can implement to make an immediate and substantial improvement. We worked with our client Progress Software to simply add a payment link to their electronic invoices that were already going out to customers. This was fast, required virtually no IT involvement, and they saw an improvement of their DSO by 7 days per quarter. This is something our PayFabric tool does out of the box, and it is a very cost-effective way to make it easier for your customers to pay you.

PAYMENTS

This component is the online, selfservice portal that facilitates various payment options (ACH, credit cards, e-checks, virtual cards), automates correspondence between the business and their clients about payments and invoices, and automatically updates the ERP with the results of paid invoices once payments have been made.

RECONCILIATION

This category is often referred to as the cash application or cash allocation component of an A/R solution. However, it is essentially the module used to automate the process of reconciling payments received from all sources with bank statements and the invoices in the ERP. This module in particular can be an impactful part of an A/R automation solution because it automates the most difficult part of ecommerce.

COLLECTIONS

Some solutions also have modules that help streamline the workflows for collections teams handling severely past due invoices and non-responsive clients. Information from the ERP is extracted into the collections module, then predefined business rules help prioritize workflows.

An example of this is automated invoice notices being emailed with increasingly severe language based upon the days past due of the invoice in question.

Some A/R automation tools can handle correspondence and even have a CRM functionality to log all activity and notes in one system. Any payments or payment commitments are also communicated back to the ERP automatically to close any open invoices, free up any blocked orders, stop collection activity, and accurately project cash flow.

The Primary A/R Automation Solution Providers*

Key players in the A/R space are listed in the chart below, along with the types of solutions that they offer:

Company Onboarding Invoicing Payments Reconciliation Collections
PayFabric No Yes Yes Yes Yes
Billtrust Yes Yes Yes Yes No
Esker No Yes Yes No Yes
Bill.com No Yes Yes Yes No
Rimilia No Yes Yes Yes No
HighRadius Yes Yes Yes Yes Yes
SoftCo No Yes Yes No No
Dade Systems No No Yes Yes No
FundingGates No No Yes Yes Yes
YayPay No No Yes No Yes
PayStand No Yes Yes Yes No
Invoiced Yes** Yes Yes Yes Yes
Armatic No Yes Yes No No
Cforia Yes Yes Yes Yes Yes
Cashbook No No No Yes No

* Subject to change as companies are continuously updating their solutions.

** Invoiced’s platform can connect to ERPs/Accounting Systems to manage new client onboarding related info such as credit limits and terms. Their system has flexibility, but does not connect natively to a business credit monitoring platform such as D&B.

To give a good understanding of the value prop these companies propose, below is information derived from their websites:

“Esker’s cloud-based O2C platform helps companies get paid faster by improving each step of the O2C cycle.” – Esker

“[We take] the pain out of payments by replacing manual tasks with automated solutions that seamlessly integrate with existing technology.” – Billtrust

“Our cloud-based platform automates, streamlines, and controls the payments process, saving more than 50 percent of the time typically spent.”
– Bill.com

“PayFabric is a cloud-based electronic payment processing solution designed with an innovative and secure storage algorithm. Validated with a PCI Data Security Standards, PayFabric alleviates many major challenges of PCI Compliance by integrating points and transaction data in the cloud. With the ability to allow connections to multiple payment gateways, processors, and ERPs, PayFabric delivers unparalleled simplicity, flexibility, and security to you and your customers.” – PayFabric

Has a fully integrated platform that “reduces cycle times in your order-to-cash process through automation of receivables and payments processes across credit, electronic billing and payment processing cash application, deductions and collections.” – High Radius

We hope this document has been useful in answering questions about A/R automation and will help you in future decision making about your organization’s needs. As always, if you have questions, please feel to contact EVO B2B at: 888.564.9564 or B2Binfo@EVOpayments.com

Further Reading

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