Modernizing B2B accounts receivable to unlock ERP-driven efficiency

For many finance leaders, implementing a new ERP system is the start of a new wave of digital transformation. But to fully modernize finance operations, companies must pair this upgrade with additional innovation to streamline and automate workflows.

That’s especially true for business-to-business (B2B) accounts receivable.

“Unlike the accounts payable (AP) process, which is more straightforward to automate, the B2B accounts receivable (AR) process is more of a coordinated dance between two entities,” says Alberto Casas, Head of Product for Treasury and Payment Solutions at U.S. Bank. This poses some significant challenges, he says.

“Buyer preferences can vary significantly depending on their level of sophistication and their level of commitment to technology. Companies are adapting by providing the flexibility of choice on how to pay, and they’re carving out exceptions for buyers. But this leads to fragmented, and often manual, AR processes that undermine efficiency.”

Automating processes or creating centralized ecosystems to manage AR activity can be incredibly beneficial to a company’s cash flow. However, the amount of unstructured remittance data and the number of disparate ERP and AR technologies in the market make this difficult to achieve.

AR innovation at Ziegler Companies

Despite the challenges of modernizing AR processes, an ERP upgrade can serve as a jumping off point to embrace AR innovation. That was the case for Minneapolis-based Ziegler Companies, one of the largest Cat dealers in the United States, which has provided construction, agriculture, power generation and mining equipment to its customers for more than 100 years. Despite moving to the Microsoft Dynamics 365 ERP system, the company found that many of its receivables processes remained manual, slow and costly.

Ziegler set out to embrace AR process automation to reach two key objectives: Improve the payment experience for their 25,000 strong customer base and minimize AR costs.

“Our customers were looking to us for flexibility,” explains Jason Syverson, Vice President of Finance for Ziegler Companies. “They wanted the ability to make payments via their preferred method, whether that’s ACH or credit card. And they also wanted the option to have us enter their invoices into their preferred payment platform.”

Leveraging automation to streamline ACH payments, in particular, became a key priority for the initiative. “More and more of our customers were paying with ACH, but we didn’t have the capabilities to automate matching or payments for the open AR invoices in our system,” Syverson explains. “This was creating a bottleneck in AR, since ACH was using more of our resources.”

For Ziegler, finding the right approach was a balancing act: The company wanted to realize significant gains across its AR processes, but didn’t want to overload IT by integrating too much new tech at once. It ultimately opted for a three-step implementation that involved:

1. Deploying automated payment matching to reduce the burden of manual data entry on the AR team
2. Creating a customer portal that would allow customers to review their invoices and make payments online
3. Integrating payment data into each vendor’s preferred payment platform to provide a tailored, personalized experience

With this strategic approach, Ziegler was able to transform its AR process while boosting efficiency. The company was able to deliver nearly three-quarters of its invoices electronically and achieve a 76% cash application match rate at invoice level.

They were also able to sidestep the delay of mailing invoices to view AR updates in real time, as well as scale more efficiency. “It gives us the option to take on more customers, knowing that we can more easily or more automate the invoicing process as a whole,” Syverson says.

How to set your AR digital transformation initiatives up for success

These best practices can help lay the foundation for B2B AR automation:

Build the plan around business priorities

Amid economic headwinds, finance leaders are continually asked to juggle multiple challenges and pursue complex — and sometimes competing — priorities. Put simply, it’s nearly impossible to transform every aspect of your B2B AR process at once, but taking a phased approach can help you achieve your business objectives over time.

Consider starting your journey by automating one use case — such as invoice delivery — to make a measurable impact without overburdening IT. From there, you can roll out additional functionalities based on the organization’s priorities and needs.

Track and select KPIs early

Strategic decision-making starts with strong data, and tracking KPIs allows you to continually measure your performance and refine your strategy. Zeigler’s teams focused on three crucial metrics to gauge their AR process automation success: percent of invoices delivered electronically, invoice match rate and average days to payment.

Your organization could select a range of KPIs, depending on your pain points and goals. Other possibilities include:

• Percentage of overdue invoices
• Time spent on collections
• Invoice dispute rate
• AR turnover ratio
• Customer satisfaction rate

Get support to reimagine your AR processes today

AR digital transformation can feel daunting, but a trusted partner can ease the effort by providing the right expertise and support partnered with a solution that can optimize your AR processes. U.S. Bank’s dedicated team of treasury experts is here to help show you how.

Integrated receivables can streamline invoicing, payment processing, cash application and collections while improving cash flow. Interested in learning more about receivables solutions from U.S. Bank? Connect with us today.