Five Steps to Building a Business Case for AR Automation

The pressure on accounts receivable (AR) leaders to optimize operations, reduce costs, and drive measurable results is unrelenting.  Conventional approaches to AR processing – using manual data entry, multiple disconnected systems, and outdated tools – often lead to delays, errors, and frustrated customers.  To overcome these challenges, many organizations are exploring AR automation solutions that streamline invoice-to-cash processes, reduce risk, and improve overall financial health.

However, like any transformation initiative, AR automation projects require a strong business case to secure leadership buy-in and approval.  For many AR leaders, building a compelling business case can feel like uncharted territory.  What challenges should you highlight?  What benefits will resonate with decision-makers?  How do you calculate return on investment (ROI)?  This article provides a step-by-step roadmap for creating a business case that demonstrates the value of AR automation.

What is AR Automation and How Does It Work?

Before you start building a business case for automation, it’s important to understand what AR automation entails and how it can transform an organization’s day-to-day finance operations.

AR automation digitizes and simplifies the activities involved in collecting money owed to your organization. Instead of managing receivables via paper and manual processes, AR automation solutions integrate these tasks into a frictionless electronic workflow that reduces errors, accelerates cash flow, and provides comprehensive visibility into payment status and customer accounts.

Key components of an AR automation solution include:

• Electronic payment processing.

  AR automation solutions enable customers to pay invoices digitally using credit cards or electronic bank transfers (ACH), eliminating delays and the inefficiencies of processing paper checks.  Customers gain self-service access to view and pay bills, update payment methods, and check past payment details in real time.  Payments are posted directly to the customer’s account in a biller’s AR system, easing reconciliation.
  
  

• Lockbox processing.

  Rather than going directly to your business, checks are sent to a secure, centralized facility where they’re scanned and processed.  High-speed check scanners and optical character recognition (OCR) technology record payment details, reducing manual keystrokes and data-entry mistakes.  Once scanned, funds can be deposited directly, and payment information can sync with your ERP or accounting software for immediate posting.
  
  

• Merchant processing.

  Leading AR automation solutions integrate with payment gateways that securely handle credit card payments and other digital transactions, encrypting data and ensuring PCI compliance.  At the end of each business day, transactions are settled with your bank, and reports can be automatically generated to reconcile your accounts.  Built-in fraud detection tools add an extra layer of security, protecting billers and their customers.
  
  

• Integrated receivables.

  The best AR automation solutions include integrated receivables capabilities that enable AR teams to view and manage different types of payments in a unified dashboard.  Payments from different channels are automatically matched to outstanding invoices using machine learning and matching algorithms and other technology.  Consolidated data provides meaningful insights into payment trends and customer behavior.

With these interconnected capabilities, AR automation solutions enable organizations to move away from costly, time-consuming manual processes and towards a strategic, value-driven approach.

The Five Steps to Building a Business Case

With a clear understanding of what AR automation is and how it works, you’re ready to build a compelling business case.  Here are the five essential steps to building a business case:

1. Define the problem.

A strong business case for AR automation starts with a clear explanation of the challenges inherent in your existing AR operations:

• High Days Sales Outstanding (DSO).

  Slow AR processes increase the time it takes to convert sales into actual cash, tying up working capital and hindering investments.
  
  

• Manual processes.

  Many AR teams are bogged down with manual processes.  Manually processing remittances and payments also increases the possibility of typos and misapplied payments, leading to disputed balances and additional reconciliation work.
  
  

• Inadequate visibility.

  Manual AR processes and disconnected systems make it difficult to track which invoices are paid, partially paid, or overdue, impacting operations and service.  This lack of transparency also hinders decision-making and cash forecasting.
  
  

• Increased risk of fraud and compliance issues.

  Conventional AR processes are more vulnerable to fraud schemes – like check tampering – and make it harder to enforce separation of duties and maintain robust audit trails for regulatory compliance.

By calculating error rates, cost of corrections, average DSO trends, and time spent on manual activities will underscore the scale of the issues and the urgency for AR automation.

2. Highlight the benefits of automation.

The next step to building a winning business case for AR automation is to demonstrate how it tackles your pain points.  Focus on four areas:

• Improved cash flow.

  By offering electronic payment channels and automating cash application, AR automation can drastically reduce a biller’s DSO.  Faster collections free up working capital for investments, operational expenses, or debt reduction.
  
  

• Enhanced customer experience.

  AR automation platforms make it easier for customers to pay through their preferred channels – such as card or ACH – leading to a smoother, more efficient payment process.  Self-service portals and electronic reminders reduce payment friction and boost customer satisfaction and loyalty.
  
  

• Better compliance and fraud mitigation.

  Secure payment gateways, access controls, audit trails, and other integrated security features ensure that payments are safeguarded and that transactions meet regulatory requirements.  Automated record-keeping also simplifies audit preparation and reduces the risk of infractions.
  
  

• Increased efficiency.

  Streamlining the processing of paper checks, reducing manual data entry, and automating reconciliation tasks translates into significant cost savings over time.  Automated AR solutions free up staff to focus on strategic initiatives like credit risk analysis, dispute resolution, and improving customer relations.  

These benefits can win over even the biggest automation skeptics.

3. Align the proposal with organizational goals.

To secure support from executive leadership, tie your AR automation proposal to your organization’s broader objectives.  For instance, automated AR systems help finance teams easily scale to handle higher transaction volumes without hiring additional staff.  This scalability helps support business growth.  Implementing AR automation also is an important milestone in modernizing your finance operations.  Demonstrating how it fits into a broader shift toward digitization can earn you champions in IT and leadership.  Faster, more convenient payment processes foster strong customer relationships, which directly impacts renewal rates, referrals, and upselling opportunities.  And real-time payment insights strengthen an organization’s capacity to forecast revenue, identify risk areas, and proactively manage liquidity.  In uncertain economic times, having a clear view of cash flow is a competitive advantage.  Present these alignments using your organization’s strategic priorities, showing exactly how AR automation helps achieve them.

4. Calculate the costs and ROI.

A persuasive business case for AR automation will give an honest and well-researched financial analysis.  Consider costs such as software licensing, professional services for setup, training expenses, and any potential equipment fees (e.g., check scanners for lockbox processing).  Factor in any costs related to integrating the AR automation platform with your organization’s legacy financial tools.  Estimate how much your organization could save on labor, reduce DSO, and eliminate reconciliation errors over time.  Also highlight intangible benefits like improved morale and reduced compliance risks.  And provide a realistic schedule for deployment, training, and optimization, indicating when stakeholders can expect to see tangible improvements in AR metrics, cash flow, and cost savings.  Presenting a clear ROI analysis that includes payback periods and long-term savings will give executive leadership the confidence to support your AR automation proposal.

5. Build stakeholder support.

Lastly, involve the right people across your organization in your AR automation project from the start.  Demonstrate how automation reduces tedious manual tasks, improves accuracy, and enhances analytics.  Engage frontline staff who will be using the system daily.  Collaborate with IT on technical requirements, data migration, and security considerations.  Secure their buy-in by highlighting the solution’s infrastructure compatibility and the reduction of support for legacy systems.  And show sales and customer service how an integrated receivables system provides quick access to customer payment statuses, simplifies dispute resolution, and improves customer experiences.  Whenever possible, identify “champions” who can advocate for AR automation in their departments.  Early engagement ensures that concerns are addressed and that the project has broad-based support.

By following these steps, AR leaders can create a business case that not only highlights the inefficiencies of conventional processes but also demonstrates the potential impact of automation.  A clear and compelling case, aligned with organizational goals and backed by stakeholder support, paves the way for a successful AR automation project that drives long-term success.

Start on your Way to Automation

Conventional AR processing methods pose significant risks to cash flow, compliance, and operational efficiency.  By understanding what AR automation is and following the steps outlined in this article, AR and finance leaders can make a robust case for transforming their AR operations.

Next Steps

If you’d like help exploring how to begin your AR automation journey – or want additional guidance on building your organization’s business case – please contact us.  The FirsTech team has deep expertise in payment processing, integrated receivables, and AR automation solutions tailored to organizations of all sizes.  Let’s start the conversation on transforming your AR processes.