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7 Ways Your Accounts Receivable Process Might Still be Inefficient, Error-Prone, and Costly

Many finance executives believe that their accounts receivable process is as automated as it could be thanks to traditional lockbox services. They may be surprised to learn that most of their AR teams are still stuck with hours of inefficient manual processes that impact the bottom line.

AR teams have to clean-up files they receive from their lockbox provider before posting receivables in their ERP, every day. Additionally, AR teams often put receivables on account, inflating the automation rates that businesses believe they’re realizing, only to be dealt with in the costly collections process.

Based on our experience working with hundreds of businesses that have lockboxes in place, we recommend seven areas to examine:

  1. How does the lockbox process really work for your AR team? Your lockbox provider likely opens and scans mail, deposits checks, and keys in data, typically with a per keystroke fee. Files are then sent to your AR team to be corrected, before being uploaded to the ERP (or maybe sent directly to the ERP). ERPs vary in their ability to ingest these files – some identify exceptions, and some don’t. AR departments are left scrambling to correct dirty or incomplete data.
  2. What happens with electronic payments? Lockboxes providers often struggle to handle electronic payments efficiently, which is a rapidly growing problem as the rate of electronic payment adoption increases. This increases the overall cost for your business to receive and apply what should be the most cost-effective payment methods.
  3. What if a payment has vague remittance detail, or lacks remittance detail entirely? Most lockbox solutions can’t handle these situations well, leaving it to you to resolve cash application in the ERP.
  4. What about multiple accounts? Sometimes a single lockbox can’t post to multiple accounts. When payments can only be posted to one account, the remainder remain unapplied. Leveraging multiple lockboxes can cause other cash application challenges. Lockbox offerings have improved in this area, but the functionality gap still exists with others.
  5. Can your lockbox solution post to multiple ERPs? If your business has expanded globally or grown through acquisitions over time, you may be running multiple ERPs across divisions, with a lockbox solution that is unable to efficiently post to all of them.
  6. Does your lockbox solution help you improve its accuracy? Some lockbox providers do not accept an Open Accounts Receivable load file that can assist with matching, data augmentation and straight through processing rates.
  7. Still dealing with “Day 2” exceptions? Lockboxes have “Day 2” exceptions that are typically handled by the customer in their ERP. With more intelligent payment and remittance capture driven by AI and machine learning in AR automation solution like DadePay, businesses can often reduce keying service costs—which can add up quickly—and day 2 exceptions.

Lockbox solutions can add significant value to your Accounts Receivable process, but there are many reasons to consider adding AR Automation capabilities to further reduce costs and errors, increase efficiencies, and better position your business to apply both paper and digital payments straight-through. It is important that Treasury and Accounts Receivable teams collaborate to assess areas of opportunity.

As electronic payments like ACH and card continue to make up an even greater portion of your receivables mix, enhanced AI and machine learning capabilities available in solutions like DadePay can lead to more sophisticated capture of critical payment transaction and remittance details, more seamless integration with your ERP(s), and faster cash application. In turn, this speeds your company’s ability to access cash and replenish customer credit, while minimizing unnecessary collections.