The receivables market has always been very broad and complex to navigate.
The payment solutions adopted by many businesses have so far proven more than capable of meeting the changing expectations of customers. Whether we’re talking C2B or B2B, individuals and companies have many different payment options to choose from—ACH, e-payment, wire, check, or otherwise. Especially as e-payments have grown more popular, receivables solutions across the market have adapted their front-end interfaces and payment portals to streamline user experience for customers.
Back-office processing, however, remains a different story—and full of challenges.
In fact, solutions continue to largely deliver inadequate responses to even the most common receivables challenges, requiring manual processes that raise costs and drag down staff time. Worse, they can lead to errors that potentially affect customers' days sales outstanding (and ultimately, a company's cash flow).
Companies also tend to rely on several different solutions providers and payment systems. That creates a need for multiple tools to gain visibility into exceptions.
As new payment forms and credit card types emerge, however, it’s more important than ever for companies to embrace more integrated, tech-enabled processes—not only to resolve their receivables challenges, but also to reduce the potential for exceptions and make posting payments faster and easier.
Common Receivables Challenges
Now that customer expectations span many different payment types, linking payments to invoices is a process riddled with inefficiencies.
Routing a payment to the right system of record can be substantially more difficult when employing a fragmented set of solutions. In terms of manual effort and time, a single exception costs roughly $5 per payment to resolve. And that cost adds up quickly.
Unfortunately, online research tools and integrated receivables files don’t lessen the resources required to move from exception to posting.
With lockbox solutions, matching often demands data keying of customer-supplied information—account details, for example—that can come at a hefty cost. Electronic exceptions (both ACH and wire) often lead to a trail of emails or other correspondence between businesses and their customers, elevating costs and other risks.
Meanwhile, “integrated receivables” files simply aren’t that integrated in practice: Speed and efficiency depend upon straight-through processing, but receivables solutions don’t adapt or apply logic based on past exceptions. And because customers are, like all of us, habitual creatures, the same exceptions arise time and time again—and it always takes manual effort to create the right linkages.
It’s a state of affairs that impedes cash flow while absorbing staff effort that could be better applied elsewhere.
Worse, exceptions on the back end also have the potential to drag down positive customer experiences on the front end: For B2B customers who spend substantive time on RFP processes and purchasing decisions, the stakes for seamless payments are high. If a payment issue results in a customer contact, it can negate or minimize the positive experiences leading up to the transaction.
Improving Receivables Solutions
Thankfully, the receivables space is evolving to address back-end needs.
Many legacy solutions, for example, have debuted new features designed to digitize some elements of the back-end process or showcase data in clearer visualizations. In reality, little about the actual processing itself has changed; the tools have largely been electronic versions of those which already exist.
Further out on the cutting edge, some emerging solutions now use artificial intelligence to do receivables matching on the organization's behalf, allowing linkages to be closed out in a given system, with payment details and invoice already tied to the matching output. AI that reads and computes customer account info is lessening data keying expenses, as well.
Solutions with in-line matching are also making same-day deposits possible by employing automation and AI to auto-apply decisions to payments. Certain lockbox solutions now have pre-deposit workflows built in that can begin processing payments right away, and prevent many previously costly errors.
Utilizing deep logic and self-learning technology—rather than staff effort—some AI and machine learning solutions even possess the ability to turn frequent, repeat exceptions into payments that qualify for straight-through processing. Such programs learn what the recurring exception is based on ongoing customer behavior and auto-match it for further handling.
Finally, working with a large payments provider can minimize time spent on routing payments. That helps companies improve back-office effectiveness and reach fewer days sales outstanding—and more satisfied clients—by handling payments in faster, more efficient ways.
Where to Go from Here
Embracing more digital, integrated solutions throughout your own back-end could potentially allow you to reap benefits across many areas of payments.
To get an outside perspective on which solutions might best fit your needs, Fifth Third’s Expert AR Receivables Matching services are available to discuss how to take your processes into the future.