Accounts receivable management automation - benefits and pitfalls

Automation has made its way into Danish bookkeeping and accounts receivable management.

While the technology is far from new, recent versions of ERP systems - such as Microsoft Dynamics 365 Business Central - as well as modern accounting software like e-conomic, have made it significantly easier to add and customize features. With apps and add-ons, businesses today can leverage automation in both bookkeeping and accounts receivable management without large investments.

At Collectia, we know how much automation can contribute to an easier and more productive workday. Many tasks that previously required manual workflows can now be done 100% automatically.

In this article, we focus on automation in accounts receivable management - with a special focus on the benefits you can achieve and the pitfalls you should be aware of.

Read also: Integrations for Collectia

General about automation in accounting and accounts receivable management

Bookkeeping - and especially accounts receivable - is typically characterized by many manual routines. This is where automation can make a significant difference by reducing time spent and increasing accuracy in daily tasks.

With automation, you can either completely or partially eliminate manual processes. It can be, for example:

• Follow up on payments
• Send out bank statements
• First and subsequent reminder letters
• Automatic debt collection notification

The technology typically works by triggering a specific action - or a whole series of actions.

The trigger can be time, but also specific postings, changes in a customer's payment pattern or other relevant events.

For example, when a certain number of days have passed after an invoice has been sent, the system automatically checks if payment has been received. If not, the automation can send out a reminder letter - and in the next step, perhaps notify debt collection.

Read also: How technology can shorten the time from invoice to payment

Benefits of introducing automation in accounts receivable management

The benefits of introducing automation in bookkeeping are many - and especially in accounts receivable management, the gains can be significant.

The most obvious wins are:

• Time saving: Tasks that normally take a long time are taken care of automatically so the bookkeeper can focus on other tasks.
• Scalability: The company can handle more customers and invoices without adding more resources.
• Quality: Consistent processes and fewer human errors result in more stable management.
• Shorter lead time: Payments are followed up quickly and systematically, boosting cash flow.

More benefits from automation in accounts receivable management

There are also additional benefits that can be just as valuable:

• Better data quality and insights: Automation provides an accurate overview of payment patterns, arrears and at-risk customers.
• Improved customer experience: Professional and structured communication without errors or delays.
• Compliance and documentation: Statutory procedures are consistently followed and all documentation is stored automatically.
• Stable cash flow: Timely follow-up results in a more predictable cash flow.

Pitfalls of automation in accounts receivable management

While the benefits are many, it's important to be aware of the pitfalls that come with automation.

The most common challenges are:

• Lack of flexibility: Systems follow fixed rules, but customers may need special payment terms.
• Lack of human judgment: Should an important customer be treated the same as a new customer? Systems cannot make such judgments.
• Integrations that fail: For example, if online banking integrations don't work, you may think that the processes are running even though they are stalled.
• Unclear rules: When should an automation be triggered - always after a number of days, or only the next business day?

Several pitfalls of automation in accounts receivable management

There are also other risks that companies often underestimate:

• Over-automation: Too many automated processes can take away the personal touch, especially in B2B.
• Hidden costs: Setup, integrations and maintenance require resources that can erode benefits.
• Errors that escalate: Where a manual error affects a few customers, an automated error can affect hundreds at once.
• Resistance in the organization: Employees may fear losing tasks or control, which can create resistance.
• Dependency on the system: The more you automate, the more vulnerable your business becomes to crashes or failures.

Conclusion

Automation in accounts receivable management can be a powerful tool for increasing efficiency, freeing up resources and improving cash flow. But success depends on how the automations are implemented and whether they are adapted to the needs of the business.

By being aware of pitfalls such as lack of flexibility, poor integrations, hidden costs and the risk of over-automation, you can ensure that automation becomes an asset in your bookkeeping - not a challenge.