Accounts receivable is nothing new. In fact, the first invoice-like artifact was thought to have been created more than 7,000 years ago by the Mesopotamians. But it wasn’t until the early 1920s that bookkeeping machines provided some level of automation for the accounting profession. Fast forward to today, and virtually every business on earth now has access to at least some form of accounting technology that couldn’t have even been dreamt of not so long ago.
Read More: How Blockchain and DeFi are Impacting Fintech
Today, it’s a given that accounting professionals will use some type of technology for doing their work. And in no other area of accounting is that technology more consequential than with accounts receivable—that’s because A/R is the function that keeps cash coming in the door for businesses that sell on credit terms. In today’s cloud-enabled world, we take it as indisputable truth that digital transformation is on an unstoppable path toward automating a wide array of business and accounting functions. At my company, Invoiced, we have front row seats to this industry trend. Our thousands of customers in 92 countries are now automating their accounts receivable functions to the tune of more than $2 billion in invoices on an aggregate basis each month.
Cloud-based accounts receivable is now well past the “early adopter” stage and rapidly becoming a must-have for businesses of all sizes and industries. But as we look ahead to 2021 and beyond, where is accounts receivable technology going, and what can we expect from it in the future? Here are 4 key areas where we see the category rapidly evolving:
More A/R platforms will cover more of the A/R continuum
A/R is often thought of as a lifecycle, and different businesses see the stages in that lifecycle differently. For some, A/R is focused on invoice-to-cash, while for others, the continuum might be more along the lines of order-to-cash. No matter the case, A/R platforms who want to serve the broadest spectrum of industries and use cases will feel constant pressure to cover the furthest reaches of the A/R continuum. That means down the road we can expect more A/R technology providers to start as early as the quote stage and cover every stop along the way, ultimately to cash application. To be sure, there’s enough room in the A/R software category for many different vendors to have different focus areas, strengths and weaknesses for satisfying requirements for different A/R stages. But the category leaders and those who are industry-agnostic will be stretched from both sides—and the best will deliver.
Read More: How to Build Modern Customer Service That Matches the Growing Expectations of Banking Customers?
ts payable will become better connected
While A/R technology has been gaining traction rapidly in recent years, our compatriots on the A/P side of the world have a bit of a head start. The A/P automation category is more established and entrenched with accounting teams, who are loath to spend even one more moment than is absolutely necessary to pay their suppliers. But as cloud-based A/R solutions start to become more ubiquitous, there is a very obvious need to better connect the payables systems with the receivables systems. As an example, most A/R systems can send out bills via email – but instead of having the software request payment from a person who then pays through the payables system, why not issue the invoice directly to the A/P platform? It sounds quite simple, but it’s a complex multi-network problem to solve since every supplier has customers with a diverse set of A/P solutions represented. While there are several business payment networks actively working on solving this enigma, it will take a strong foot forward from cloud-based A/R platforms in order to fully thread the needle.
A/R solutions will become more powerful tools for predicting future cash
Even the most basic accounts receivable solutions can let you know when you’ve received a payment. And across the vendor landscape there are loads of different reporting capabilities that can tell you what happened from a collections standpoint. But CFOs, treasurers and controllers are keenly interested in more crystal ball-like technology. They want to know when they can expect to see cash hit the bank and they want to be able to forecast as far ahead as possible, with high accuracy and minimal effort. The good news is that cloud-based A/R software holds perhaps the best single source of data for informing accurate cash collection predictions. At Invoiced, we introduced a Cash Forecasting capability last year, but we still see much more room for using AI and machine learning as well as benchmarking to give finance and accounting professionals more of the forward cash visibility they crave.
Integration and extensibility will become central capabilities
For many cloud-based A/R systems, integrations with core accounting or ERP systems is sometimes an afterthought, and that’s even more true of integrations with systems that are less central to businesses such as CRMs or data warehousing services. But integration and syncing are an essential frontier for driving further automation into the A/R function. In fact, in a recent research report we published, we found that integration with other systems was most frequently cited as the most important vendor decision driver for financial automation technology among U.S. finance and accounting professionals. That means A/R platforms will only need to get better at doing things like detecting and applying cash from bank deposits, connecting with other technologies for communication or customer management, and picking up sales tax rates from separate tax compliance software. Put more succinctly, more vendors will begin to start new product development initiatives with integration as a primary concern vs. a “phase two” consideration.
All told, cloud-based A/R technology has advanced by leaps and bounds in just the last handful of years. But as businesses become more comfortable with entrusting the sacred function of A/R to software instead of people, they’ll need and expect only more from their chosen toolset. It won’t all happen in the year ahead, but at some point we will hopefully reach a level of power and sophistication that makes today’s cloud-based A/R technology look as primitive as the accounting implements of the Mesopotamians.
Read More: Why Application-Layer Security Is The Future Of Fintech
