At its most basic, the electronics business is about being paid. Companies that don’t get paid don’t stay around too long and late payments can hinder an organization’s business operations. The accounts receivable (AR) process revolves around the invoice – pulling it together internally, sending it out to customers with an expected due date of 30 to 90 days and then, hopefully, receiving payments within that timeframe.
But it’s not a simple process. The invoice data and all the supporting documentation around the invoice —products and services rendered, correct pricing and tax, the expected payment date, disputes and deductions, — all need to be entered, and for many companies, that can be a manual and often paper-heavy process. Even before the invoice is sent, it is a time-consuming and error-prone process that needs to be done promptly in order to get prompt payment. Anohter consideration: some customers may prefer a paper invoice to an electronic one.
After that, payments need to be tracked and applied correctly , and delayed and short payments need to be resolved. If everything falls in place, the money comes at or near the expected date. But it doesn’t always go as planned.
In its 2016 Payments Practices Barometer survey, Atradius found that 92% of businesses had received late payments from business-to-business (B2B) customers, and 40% said they were late paying some of their suppliers because of it. In fact, the study found that B2B customers in the electronics industry were the most likely to intentionally use outstanding invoices for financial advantage.
A lot of these challenges can be lessened or solved with automated software. Supply chain automation has become a phrase embraced by a lot of companies, and automated AR management software is a crucial part of that. Using automated AR processes that leverage artificial intelligence (AI) can remove many of the labor-intensive manual tasks and much of the paper out of the process. No more manually generating invoices or sending paper statements out to customers. Instead, every step is digitized and automated.
So, what would supply chain automation mean, in practical terms, for you and your customers? Here are a few points:
- Faster cash flow: Invoice delivery is automated, getting invoices to customers immediately and enabling them to make payments more quickly and in any format they want, such as electronic data interchange (EDI), email, fax, a customer portal and, yes, even postal mail. Errors are minimized, costs are lowered and visibility into the process is improved. The past-due percentage can be reduced by 4%.
- Improved financial picture: With automated AR management software that compliments existing ERP or accounting system, invoices are delivered, payment reminders are sent automatically and payments can be collected more efficiently. For many electronics companies, this can significantly reduce Days Sales Outstanding (DSO) by as much as seven days, reduce the time spent throughout the entire AR process and improve customer service. Dispute resolution time can be cut by up to 88%.
- Better customer relationships: Automated collections management can mean a more pleasant and frictionless customer experience, which means happier customers, more efficient cash collection and greater collaboration between your AR professionals and customers. Being able to offer customers a self-service portal for making payments means more satisfied customers and on-time payments. Some companies have seen up to a 70% increase in auto-pay customers after implementing a self-service portal.
AR is a crucial part of any electronics supply chain. It’s the process that brings money into the coffers and a key touchpoint with customers. Any hiccup can have a ripple effect through the company. If you’re slow sending invoices out, payments are slow coming back, which will put a financial strain on the rest of the business. Errors on invoices or late invoices can mean unhappy, frustrated customers. Automated AR management software can head off many of those problems, improve efficiency and costs, accelerate the time-to-payment timeline and elevate the customer experience.