How automating Accounts Receivable and Accounts Payable can help improve cash flow

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While managing a small business can be an expensive venture in itself, not having the right system in place to manage your cash flow can make it even more expensive, especially when your business is facing a crisis. If your business has been in the market for a little while, then you probably already know that improper cash management can bog down your business workflows.

But properly managing your cash flow is tricky and time-consuming. You need the capacity to track all the transactions taking place in your organization. You also need complete visibility into your spending, from collecting all the data needed for a transaction to initiating a payment. So, how do you ensure smooth functioning of the operations that determine your cash flow? By automating your AR and AP functions.

In this article we will see how you can automate your accounts payable and receivable processes and how you can maintain your cash flow when the going gets tough.

Automating AR & AP

Accounts Receivable (AR) automation

It is only when you find efficient ways to bring money into your organization that you can keep up with your required payments and maintain a healthy cash flow. To keep the cycle going, you need to dispatch your customer invoices on time, remind customers when payments are due, and offer convenient payment options.

Doing all of this efficiently with a reduced workforce can be difficult, but you can make it easier by allowing your system to take over a few tasks on your behalf.

1. Matching retainer invoices to estimates:

When you send an estimate to a customer and the customer approves it, you can request an advance payment or retainer payment before you begin working on that project. This is a great way to keep cash flowing in, but if you have several customers in the retainer stage at the same time, it gets difficult to track the retainer payments and keep them associated with the right estimates.

An automated system can easily convert customer-approved estimates to retainer invoices, subtract the retainer amount from the total amount due for future invoices, and send the retainer invoices out to the customers.

2. Setting up payment reminders

When you are buried in paperwork, you may not have time to send payment reminders manually. Automating your payment reminders is a good way to save time and make your customer communication more consistent.

When you set up your automated payment reminders, customize the wording of your message to make sure that it’s friendly, polite, and consistent with your company’s communication style. Decide when you’d like the messages to be sent, whether it’s a certain number of days before the due date, or after the due date has passed without a payment. Most likely, your customers are just forgetful and will appreciate the gentle reminder, especially if you make it easy for them to pay by including a payment link.

3. Accepting online payments

If you’re set up to accept online payments, you can take it a step further and charge your customers automatically through an auto-charge option.

Because the customer doesn’t re-enter their card credentials for every payment, you’re less likely to run into invalid card info or failed payments. You can have a recurring invoice sent by the system to each customer on a regular basis, which triggers the amount on the invoice to be debited from the customer’s account and a notification to be sent to the customer. You save time and get paid on a more reliable basis, which is what your cash flow needs.

Accounts Payable (AP) automation

As businesses are realizing the inefficiency of manually processing invoices, they have begun investing in AP automation solutions to streamline the process of collecting information, using automated payment approvals within their departments to cut down the processing time and cost.

Here’s what you can automate to keep your business running.

1. Autoscanning bills and expenses

Financial data can get chaotic when your business is facing disruption. If your system provides an autoscan feature, using it will help you maintain uniform data. It also helps your organization avoid paper clutter. Paper invoices have a short shelf life and are often prone to damage, resulting in loss of data. They also contain sensitive information, and if they’re thrown around carelessly, it increases the chances of that information being misused.

Autoscanning bills and expenses can help you record your expenses promptly and  share them safely with other accounting staff. By digitizing your financial information, it can help you save storage space and time. If you combine autoscanning with an efficient accounting system, you can maintain spotless records and always have an accurate idea of your cash flow.

2. Matching POs with invoices

One of the important steps in the AP process involves matching vendor invoices against purchase orders. Errors due to manual data entry are unavoidable if you have multiple staff feeding data into the system without coordination.

An accounting system with automated features can easily scan information such as GL codes, line items, and the quantity and cost of the items from each document once you have set up the workflow rules. Then it can check the information line by line against the corresponding purchase order and flag any mistakes. Doing this automatically reduces data inconsistency, improves accuracy, and frees up time for the AP staff to move on to other important tasks.

3. Recurring invoices

Crisis or not, you still have expenses, from paying your employees to purchasing new inventory.

A recurring invoice feature can help make sure you are properly allocating money for ongoing expenses with fixed amounts. All you have to do is to select a start date, an end date, a type of expense, an amount, and a frequency for each invoice you pay regularly. Automating these expenses can help cut down on missing and late vendor payments, especially when your staff are busy or distracted.

4. Setting up payment reminders

If your cash flow is in crisis, you may need to strategize about which bills you want to pay off first, rather than following the order in which you received them. Once you’ve decided when you’re going to pay each bill, you can set up email and SMS reminders so that your AP team doesn’t miss any deadlines. This helps you avoid spending more on penalties for late or missing payments.

5. Payment approval

Your AP staff have a lot of invoices to deal with, and many of them need a manager’s approval. To make the approval process more efficient, automate it. You can set thresholds for small payments that don’t require approval, and configure workflows to send larger invoices to the correct approvers automatically. Once an invoice has been approved, it will return to your AP staff so they can initiate payment.


AR and AP form the foundation of cash flow management, which is the lifeline of your business. One of the best ways to keep them running smoothly is by automating them.  A typical AR/AP workflow contains a lot of manual, time-consuming operations, and automating it can help you streamline your invoice approval process, cut down on processing time, reduce mistakes, and increase the chances of on-time payments. All of these benefits help put your business on its best financial footing and increase your chances of weathering an economic crisis.

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