According to a survey conducted during the CFO virtual agenda, almost 30% of senior finance executives revealed that they had recognized order to cash automation and invoice reconciliation as a necessity in the aftermath of Covid-19 pandemic. Automatizing manual, noncomplex routine processes for invoice reconciliation and receivables management frees up space for more valuable tasks. For example, making and receiving payments at scale is a manual process that requires an employee to spend hours entering data and sending bills, while it would be possible to add value to that job by replacing the manual task with a more productive one.
New startups and technology automating cash management and invoice reconciliation are entering the scene to get a handle on cash flow management.
Suggested Read: What is Fintech, anyway?
Technology trends in Cash Flow Management
Cash flow management is defined as the process of monitoring, analyzing, and optimizing the net amount of cash receipts minus cash expenses. Net cash flow is one of the main indicators of business health. According to a study conducted by U.S. bank, 82% of businesses fail because of poor cash flow management. Especially for small businesses, the most critical task in cash flow management is to avoid prolonged cash shortages caused by a broad gap between cash inflows and outflows.
In this regard, businesses often lack a unique perspective for all the money going in and out of the accounts. With no clear understanding of how much cash is in the business and how it is spent, it becomes complicated to build up an efficient plan and make informed financial decisions.
Firms usually have multiple payment types such as bank transfers, credit cards, or even checks but have no clear viewpoint of the overall financial situation.
This overview can be achieved by using a digital expenses platform which is also integrated by payment instruments. Many enterprises are using this type of technology to have real-time oversight of all expenses as well as receivables and liabilities.
Also, more and more companies such as SmartDebit and GoCardless allow firms to automate the process of taking regular and one-off payments from customers. Direct debit is nothing new, but while it was once an inflexible way to receive payments from customers, now these new startups provide a wider range of options such as regular and variable payments based on usage, or
payments from customers with flexible terms.
Then, many small businesses and startups cannot afford to hire a full-time employee to handle receivables. Therefore, it is usually the owner who spends valuable time sending invoices and chasing payments instead of concentrating on business growth. Providers ( for example, YayPay and Corcentric) allow outsourcing all receivables account functions to a cloud. Through this platform, the company can enjoy predictive tools that elaborate efficient workflow for debt collection. Cash flow management is simplified by tools such as automated reminders, flexible payment methods, tracking actions from vendors and purchase orders, along with seeing real-time ledger notifications increasing problem visibility.
Technology trends in Invoice Reconciliation
Invoice reconciliation is the process of matching bank statements to the outgoing and incoming invoices to make sure that all accounts are clean and every book entry is correctly matched.
Invoice reconciliation is crucial to keep the accounting records up to date and avoiding frauds. Guaranteeing complete alignment of receipts, invoices, and purchase orders is one of the main concerns for any business.
Different reasons can cause anomalies in cash flow:
- An invoice is not fully paid;
- Early payment discount is applied;
- Bank changes fees for international transactions;
- Duplicated or missing invoices;
- Delayed delivery causing delayed payment.
Once one of these errors is detected, it is possible to intervene to correct it. In the past, this process was carried out manually, invoice by invoice, line by line. Nowadays, online accounting software programs can be used to match payments on company’s bank statement to open invoices. Hence, technology can take off much of the strain related to invoice reconciliation. According to OpenEnvoy (a fintech startup providing automated invoice auditing), 30% or more of invoices have unfavorable accuracy errors. Automated software can detect any invoice total or line item that does not match the purchase order and immediately notifies, increasing profits and giving better control over cash flow. Then, automation technologies reduce tedious, repetitive work that takes valuable time away from the team. Accordingly, the entire workflow can be better organized.
To summarize, this kind of automated software programs for both the overall cash flow management and invoice conciliation provides relevant benefits, such as: .
- Risk reduction: the automated process reduces the risk of human error.
- Increase of efficiency: automation can help allocate resources more efficiently and free up human capital for more productive tasks.
- Improvement of quality: When the process is technologically designed and mapped from the outset, automation can leverage data already in the corporate infrastructure and improve the entire workflow.
Bringing together Cash Management, Invoice Reconciliation, ARM and bill collection, CollectionHub is ideal for large organizations with complex AR processes looking for innovating and improving O2C across several functional areas. CollectionHub provides a single source of truth (SSOT) across departments, countries, and roles. This fintech startup is able to solve any problem related to late payments, factoring, and international litigation.
In addition to providing a comprehensive solution for ARM, this fintech startup owns the largest network of debt buyers, collectors, and law firms covering over 134 countries. If your organization issues over 50,000 invoices monthly, you can schedule a product demonstration here.
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