The cash cycle of your business needs to be supported through the efficiency of accounts receivables and payables. Both functions impact the liquidity of a business and are equally necessary for seamless operations. Managed accounts receivable is an automation tool that caters to the AR vertical in aiding the timely recovery of dues from customers. 

Accounts payable is the money the business owes to the vendors who supply raw materials or services to help your operations. For instance, if a business sells baked goods, then suppliers of flour, butter, margarine, dairy, and confectionery goods are all the vendors of the business. Their payments have to be settled routinely so that the long-standing relationship is always in positive territory. Consumers who buy baked goods in bulk are the customers, and they usually pay within an agreed period to maintain the credit cycle. The amount due from them is handled by the accounts receivable function. 

In traditional AR and AP functions, the accounts team has to manually review the invoices that are raised to get dues from customers before they exceed the days to outstanding threshold. Simultaneously, the bills that need to be honored in time should be processed. If the number of transactions is high, then manually reviewing and processing all the payments and raising invoices in time is difficult. Often there are errors because of printing or calculation mistakes that delay the cash-out and inflows. This has a detrimental impact on both the creditworthiness of the company in case of payment delays and liquidity crunch in case of money that is receivable from consumers. 

Moving to software that can manage accounts receivable and payables will automate the process. The software can be integrated with the existing enterprise version and the terms of both payments and receivables are embedded into the process. For instance, if clients who pay on time are given a five percent discount, the software will calculate and calibrate the invoice. There are abundant benefits to automating the process of accounts receivable and payable. The primary is peace of mind as one can never keep a price tag on that one. 

Reasons To Move From Traditional Approach In AR & AP

Traditional accounts receivable and accounts payable systems, often reliant on manual data entry and paper-based processes, struggle to keep pace with the demands of modern business. These limitations create a drag on the cash conversion cycle, hindering profitability and hindering positive vendor and customer experiences. Here’s how traditional systems fall short:

  • Inefficiency and Errors

Manual data entry is time-consuming and prone to errors like typos, miscalculations, and misplaced invoices. These delays slow down invoice processing, payment cycles, and reconciliation, impacting cash flow.

  • Limited Visibility

Traditional systems often lack real-time data and reporting capabilities. This makes it difficult to track outstanding invoices, predict cash flow, and identify potential payment delays.

  • Poor Communication

Paper-based invoices and manual follow-ups create communication gaps with customers and vendors. This can lead to confusion, frustration, and disputes over payments.

  • Lack of Scalability

Traditional systems struggle to adapt to business growth. Adding new vendors or customers often means increasing manual workload, creating a bottleneck, and hindering growth potential.

  • Security Concerns

Paper-based records are vulnerable to loss, damage, and unauthorized access. This can pose security risks and complicate compliance with data privacy regulations.

Advantages of Automated Accounts Receivable and Payable

Automated AR and AP systems streamline financial processes, boosting efficiency, accuracy, and visibility. Here’s how automation benefits businesses:

  • Increased Efficiency

Automation eliminates repetitive manual tasks like data entry, invoice generation, and sending reminders. This frees up valuable time for AR and AP teams to focus on strategic initiatives and customer relationship management.

  • Improved Accuracy

Automating data entry reduces errors and ensures consistent formatting across invoices and payments. This streamlines reconciliation processes and minimizes disputes. The tasks are auto-updated and the audit trail is maintained throughout the process. 

  • Enhanced Cash Flow

Faster invoice processing and automated payment schedules accelerate cash collection from customers and optimize payment timing to vendors. This improves the cash conversion cycle and frees up working capital for vital business needs.

  • Real-time Visibility

Automation provides real-time insights into outstanding invoices, payment statuses, and cash flow. This allows businesses to make better financial decisions, forecast cash flow accurately, and identify potential issues early on.

  • Improved Communication

It is an added advantage that automation systems facilitate electronic invoicing, online payment portals, and automated reminders. This improves communication with customers and vendors, reduces confusion, and fosters better relationships.

  • Scalability and Flexibility

Automation platforms can easily scale to accommodate business growth. Adding new vendors or customers requires minimal effort, allowing businesses to adapt and expand efficiently.

  • Enhanced Security

Automated systems store data electronically, ensuring better security and access control. This minimizes the risk of data breaches and simplifies compliance with data privacy regulations.

  • Analytics At Core

Real-time data and reporting capabilities provided by automation systems allow for accurate cash flow forecasting. Businesses can predict upcoming inflows and outflows, proactively manage their finances, and avoid potential cash shortages. If the business needs to fund an ad hoc purchase, then the immediate receivables can be tapped into and if necessary based on the near future payments, the business can use its credit line pragmatically. 


Running a business is a challenging task that requires pleasing employees, consumers, and vendors, often all at once. It can be difficult to maintain positive relationships with all parties, especially when factors like supply chain delays, price wars, product innovation, and geopolitical uncertainties come into play. The constant pressure to perform and keep investors satisfied can be overwhelming, and although it takes a team effort, it is not easy. One reason why businesses turn to automation for critical processes such as accounts receivable and payable is to manage and retain their human capital. A good team is a valuable asset, and businesses that invest in hiring and training the right talent should also provide them with automation tools to save time and focus on winning bigger battles for the company.