While hefty projected receivables amounts might look nice in terms of “money that will be coming in,” you can’t exactly pay your company’s bills with unpaid invoices.
In order to avoid cash flow problems and ensure you have enough capital on hand to cover operating expenses, your accounting department needs to create and maintain aging AR reports. These reports show you the age of the invoices you’re waiting to collect payment on, but more importantly, will help determine the financial health of your customers - and your company, too.
For years, businesses big and small approached aging reports the same way. Accountants would create them manually—by region, salesperson and “bucket” at 60 days, 90 days and even 120 days late.
Here’s how they’d typically go about it:
- Employees would download AR aging data from their accounting software or ERP solution. The data would often be disorganized and difficult to share immediately.
- Accounting staff would analyze the data in what is usually a very time-consuming process.
- Once analysis was complete, accounting would send out the aging reports—usually via Excel.
This legacy approach to aging reports created a monthly drain on organizational resources. Since reports didn’t contain real-time data, they weren’t particularly useful. There could be a situation, for example, where several customers with outstanding invoices pay you the day after an accountant accesses the relevant AR aging data.
There’s good news: thanks to the evolution of technology, companies can now leverage real-time aging reports without having to create them manually. With the power of automation, organizations can gauge the real-time status of their receivables while freeing accounting teams to focus on other core revenue- collecting activities that help them get paid faster.
By investing in an AR automation system, your organization will:
- Save time. Believe it or not, employees spend 19% of their time each week searching for information. Instead of tracking down data manually, accounting staff will be able to create aging reports via a streamlined process that’s incredibly intuitive. This reclaimed time translates into increased productivity.
- Enjoy easy managerial oversight. Cloud-based dashboards enable CFOs and controllers to check metrics at their convenience without interrupting accounting staff. This functionality provides 24/7 visibility into AR aging reports for all authorized stakeholders.
- Access comprehensive reports. Knowledge is power. Automation allows a company to generate real-time reports that are easy for everyone, from sales to the C-suite, to understand. That data can be used to get a more accurate picture of a company’s financial well-being and help them make smarter decisions.
- Leverage more accurate data. We’re all human and we all make mistakes. According to one study, 27.5% of accountants say that they’ve encountered incorrect financial data in a report due to human error. Thanks to accounting automation solutions, companies don’t have to worry about relying on inaccurate data. All figures will be precise and up-to-date.
- Improve your cash flow. There’s no sense in risking the chance you’ll run into cash flow problems if you can avoid it. By investing in an accounting automation solution that enables your company to generate AR aging reports with a click of a button, you won’t have to worry about unforeseen cash shortages. With up-to-date receivables information on hand, you’ll know exactly where your company’s financials stand at any given point in time.
If your organization is still relying on outdated methods to create aging reports, it’s time to move into the future.
With an accounting automation solution on hand, your team will have access to the data it needs to make the best decisions. Not only will you be able to move faster, your employees will get more done in less time.
Learn more about AR automation and how to pick the best solution to drive maximum impact for your business with our key features checklist.