Money in, money out: the yin and yang of a successful business. Without proper accounts payable and receivable management, even the most promising company can quickly spiral into financial chaos. But with the help of modern technology, businesses can streamline their financial operations and achieve the balance they need to succeed. In a prior publication titled Accounts Payable Management Made Simple, we briefly mentioned how automation has to be your best friend if you want to thrive in your business today. In this blog post, we consider the potential impact of technology on accounts payable and accounts receivable processes.
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Accounts Payable Vs. Accounts Receivable
Let’s get to the basics first. So, what’s the account payable? Accounts payable is the amount of money a company owes its suppliers for the goods/services received. The company purchases the goods/services on credit, which means that it has not paid for them at the time of purchase. One of the main reasons why suppliers offer their customers to buy from them on credit instead of making an upright payment is to increase their customers. Therefore, sellers who offer their goods/services on credit have a competitive edge over others. Unfortunately, many beginners often confuse accounts payable as an asset of the company when it is a current liability.
On the other hand, when a company sells its goods/services to its customers on credit (which means that the company does not receive the payment at the time when goods are received), then the amount owed by the customers for the goods/services is known as trade receivables. Accounts receivables are a current asset of the company. Companies invest in their trade receivables department to ensure that their customers pay their bills on time and reduce the risk of bad debt. By having an efficient and effective trade receivables process, companies can attract more customers by offering flexible payment terms and providing a better customer experience. This can result in increased sales, customer loyalty, and a better reputation in the market.
You can learn a more detailed explanation of accounts payable vs. accounts receivables here.
Impact of Technology on Accounts Payable and Accounts Receivables Processes
Efficient processes improve the company’s cash flow management and financial forecasting. It minimizes the risk of errors or fraud so that companies can make informed financial decisions. Plus, an efficient process ensures a healthy relationship between the suppliers and customers.
Technology is changing the accounts payable and accounts receivables processes. Routine tasks such as invoice processing and payments are being automated. Companies are adopting automated systems to extract information from invoices, apply business rules and route them for approval. The global accounts receivable automation market is projected to grow by $1.13 billion during 2022-2026 (Source: Global New Wire).
Integration with other Financial Systems
Integration with other financial systems improves data accuracy and efficiency. For example, companies integrate with ERP (enterprise resource planning) systems for real-time visibility into financial data, thus eliminating the need for manual data entry. In addition, integration with customer relationship management (CRM) systems enables companies to manage customer relationships and payment histories better.
Data analytics tools can enable companies to identify trends and optimize their processes. For example, we can identify patterns in payment behavior and develop targeted strategies to improve collections. In addition, predictive analytics can help companies anticipate cash flow and collections issues before they arise, enabling more proactive management of processes.
The following table shows the impact of technology on the accounts payable vs. accounts receivables process.
Why EA is a Great Choice for Outsourcing Accounts Receivable
Outsourcing accounts receivables is a cost-effective solution for companies seeking to maintain a healthy cash flow throughout their operations. Expertise Accelerated has a proven track record of delivering top-notch outsource accounts receivables to clients across various industries. Our team of highly skilled and experienced accountants specializes in accounts receivable management. We utilize the latest accounting software and technology to automate and streamline accounts receivable processes, which results in improved accuracy, faster turnaround times, and increased efficiency. In addition, EA takes data security and privacy seriously and complies with industry standards and regulations to protect clients’ financial information. So don’t let collections and invoicing bog down your business. Let us help take care of it for you, so you can focus on what you do best.
Future of Technology in Accounts Payables and Accounts Receivables Management
There will be continued advancements in AI and machine learning, revolutionizing how companies manage their accounts payable and account receivables processes. Industries are already opting to automate routine tasks such as data entry and invoice processing so that more time is given to important activities that add value to the business. In addition, companies are looking for more advanced solutions for a more seamless data transfer and more accurate tracking of financial transactions.
In addition, there will be an increasing emphasis on data analysis and leveraging insights to improve processes. With the growing volume of financial data available, businesses will need to use tools and technologies to help them make sense of it. This will require a focus on data analysis and visualization so that businesses can identify trends, spot anomalies, and make informed decisions that drive performance.
Overall, the future of technology for handling the accounts payable and accounts receivable processes looks bright, with AI and machine learning, greater integration with other financial systems, and a focus on data analysis and insights all playing important roles in improving efficiency, reducing costs, and driving business success.
Accounts payable and accounts receivable are essential components of a company’s financial operations. The former represents money that a company owes to its vendors or suppliers, and the latter represents money that a company owes to its customers or clients. Automating routine tasks in managing accounts payables and accounts receivables and using technology reduces the risk of human errors and fraud, enabling companies to make more informed financial decisions. This guide discussed how companies could outsource their accounts receivable management function and focus on what they do best. Overall, the future of technology in handling accounts payable and accounts receivables functions looks bright, as it will help industries improve efficiency and reduce costs.