We like to think that everything business has gone digital. But, while much of the front-end of business activity is now online and mobile, up until recently the back office has been left behind. Several new startups have arisen to take the back office off excel spreadsheets and to revolutionise the accounts receivable process.
Often taken for granted, an efficient accounts receivable (A/R) process is critical for any business. The front end looks nice, and its where the customer initially engages, but a high functioning backend is what actually makes a company function. Obviously, without A/R a business doesn't get paid for its services, and cash flow is impossible to predict. If it's such a critical part of business, then why is it lagging other business processes in payroll, sales, and marketing that have undergone massive shifts thanks to technological innovation?
Part of the problem lies in the fact that providers of products or services want to be paid as soon as possible to have the cash flow they require to run their business, while customers want to delay payments for as long as possible. When payments are past due, cash flow is difficult to predict. Time must be spent monitoring AR aging reports, and chasing down delinquent customers. All of this makes for a tedious, manual process. Clearly, A/R is long overdue for radical technological innovation.
That change is coming, and there are a few things that are driving change in the industry today. The first major change is that everything is moving to the cloud, including the accounting system that companies are using. This shift makes businesses aware of the benefits of having a system that can be accessed 24/7 anywhere that they have an internet connection and gives financial professionals the visibility that they need to do their jobs well in and out of the physical office.
The second major factor is fraud. Each year the fraud associated with paper checks continue to rise and the stories about check washing and manipulation become more and more prevalent. Many companies today experience some form of fraud, which caused them to really investigate a better option with electronic payments. This is the area where a company named AvidXchange is making an impact. "With AvidXchange's solution, our customers see an adoption rate of electronic payments by an average of 45%," said Michael Praeger CEO of AvidXchange.
Other areas of the A/R process are equally ride for innovation. Yaypay, for example, is leveraging advances in AI and machine learning to literally take the robot out of the human being and allow more time for high value-added work. As Yaypay CEO Anthony Venus said, "This radically changes the dynamic for back office finance. This is good news for mid-sized enterprises in particular because they don't have the vast resources and financial cushions of large corporations. For example, with its innovative SaaS based solution YayPay's customers are experiencing 3x more efficiency in their finance teams, and have accelerated cash flow by 10 to 20% - which means millions of dollars more in free cash flow, and significant savings."
The back office has long been left at the back of the bus of innovation. But, within the next five years, A/R is poised to be radically different than it is today.