The Buyer’s Guide to Selecting Accounts Receivable Automation Software

The global pandemic has made it more clear to businesses than ever before that cash is king.

Unfortunately, with the shift to remote work, the all-important tasks of managing cash flow and optimizing working capital have become exceptionally challenging. Legacy accounting systems are ill-suited for maintaining business continuity when everyone is working from home. They don’t provide accounts receivable (AR) professionals with the transparency, flexibility, and visibility into collections and cash management activities they need to ensure the business remains competitive and emerges through the economic downturn stronger than before.

Finance teams now realize this and are actively taking steps to modernize their AR processes, with nearly 60% of businesses surveyed by the International Data Corportation (IDC) planning to use a SaaS solution for accounts receivable in the next 12 months.

When choosing the best accounts receivable automation software for your business, it’s important you select a vendor that’s going to be the best partner for your organization, helping you deliver on your key requirements both now and as you grow. For B2B buyers researching their options, the 2020-2021 IDC MarketScape for Worldwide SaaS and Cloud-Enabled AR Automation Applications is an invaluable resource.

In this report, IDC identifies common challenges AR teams face when automation is not built into their processes along with advice for evaluating accounts receivable automation software. In this blog, we’ll discuss what these challenges may look like, break down some of IDC’s top recommendations, and offer our unique perspective on how to best narrow down your search.

We’ve even provided a downloadable checklist for you and your team to use during your vendor research to ensure nothing slips through the cracks!


For more insights to help guide your investigation and selection of AR automation software, you can access a free excerpt of the IDC MarketScape for Worldwide SaaS and Cloud-Enabled Midmarket Accounts Receivable Automation Software here.

Get the Excerpt: IDC MarketScape for SaaS and Cloud-Enabled AR Automation Software

The Top 5 Challenges Faced by AR Teams with Zero Automation

1. Cash Management

IDC cites cash management—which involves managing remittance information, applying cash, and posting payments—as the most time-consuming function for AR teams. Remittance data can come in a variety of file formats and must often be manually matched to its corresponding payment as the dollars and data don’t always travel together.

How many hours per week do you spend synchronizing remittance information and reconciling it with open accounts receivable? Probably too many.

When AR processes are digitized and automated, payments can be automatically reconciled and applied to their correct invoices.

2. Trade Promotions Management

Discounts are great for generating sales and incentivizing early payments, but if not communicated accurately—both to the customer and internally—they can cause headaches for your AR team. For instance, a sales rep may have promised a discount during the sales process that didn’t get communicated to Finance. So now that customer’s invoice is for the wrong amount and it looks like they’ve short paid when they haven’t.

Investigating and resolving disputes around unexpected short pays is one of the most time-consuming tasks for AR professionals, particularly when managed completely manually.

The right AR automation software can circumvent these types of issues entirely by providing customers and internal teams with complete visibility and transparency into what was agreed and what is owed, giving your team a single source of truth for all open receivables.

3. Credit Management

Businesses want to ensure they’re extending credit to the right people. Without convenient visibility into your customers’ payment history and behavior, reviewing and evaluating their credit worthiness can be an arduous task.

When you can point to certain trends in customers’ payment behavior—are they usually a few days late on payment but always pay the full amount?—you have a better idea of which accounts you can be more lenient with and which accounts you should double down on.

4. Payments

Without any automation in place, sending invoices and processing payments can eat up much of AR departments’ time, especially if still reliant on paper processes. PYMNTS.com found that these are the functions AR teams assign the most resources to, with 25% and 23% of staff dedicated to supporting invoicing and managing payments, respectively.

AR automation software does away with old-school paper processes by empowering AR teams to send invoices and accept payments digitally. By embracing online invoicing and payments, both customers and suppliers benefit from increased efficiency, convenience, and cost reduction.

5. Collections Management

No one wants to chase customers to get paid. Traditional collections—focused on phoning customers to remind them to pay and sending multiple dunning letters—can be exhausting work that takes your team away from high-value initiatives and potentially sours customer relationships.

Rather than using resources to hound customers for payments, work smarter—not harder—by automating your collections efforts so you’re only reaching out to the most at-risk accounts.

These are all challenges that create a significant strain on your team, hurting their efficiency and the speed at which your business can access cash as a result. When researching AR software, the ability to automate these otherwise time-intensive tasks should be core features to look for.

Now let’s look at how best to evaluate automated accounts receivable software.

Step 1: Before You Start Your Research

Your research will be made much easier if before firing up Google, you take some time to connect with the team members whose work would be directly impacted by an AR automation solution to learn what their main challenges are.

You’ll also want to take stock of any existing solutions your colleagues use so that you’re not duplicating what’s already in place, and if those existing systems aren’t meeting the team’s needs, find out why.

Some questions you can ask at this stage are:

  • What are the issues we would like to resolve and what are the risks of not doing anything?
  • Are these issues due to a gap in technology, knowledge and/or headcount?
  • Which internal stakeholders should we include in the evaluation processes?

Step 2: During Your Research

A principal factor in determining which vendor you ultimately choose should be how well they align with your business’ unique goals and values. If boosting customer satisfaction is important to you—which is greatly impacted by your interactions with customers when managing invoices, collections, and payments—does the vendor prioritize customer experience?

Some questions you can ask at this stage are:

  • Does the vendor have experience with my type of product, service, industry, and company size?
  • Does the vendor understand the regulations that will impact my business?
  • What is the vendor’s strategic investment outlook for the next three to five years?
  • Can the system integrate with my company’s other IT systems and those of my partners?

Step 3: How You’ll Ensure Your Success After Implementation

It’s equally important to consider what your partnership with your chosen vendor will look like post-launch. A solution that works out-of-the-box is great, but if your needs and existing systems are complex, you’ll want to work with someone who can support the customization you need to get the most value out of your AR solution.

If your accounts receivable automation software provides customers with their own payment portal, you’ll want to work out a plan to incentivize them to adopt it. After all, what good is a shiny new system if no one is using it? You’ll want a partner with the expertise to guide you in delivering a smooth experience and simple learning curve to customers.

Some questions you can ask in preparation for this stage are:

  • Does the vendor have a strategy to encourage rapid adoption among employees and customers?
  • Does the vendor provide the right amount of training for employees to master the new features with the system?
  • What support can the vendor offer us to ensure our ongoing success post-implementation?

Creating Your Criteria List

The list of criteria you use to evaluate accounts receivable automation software will of course depend on your organization’s unique priorities and IT requirements, but the chart below can act as a helpful guide in knowing what to look for. When you’ve narrowed down your top three options, comparing them visually like this can help you easily determine which vendor should be your top choice.

Vendor Checklist for Accounts Receivable Automation Software

5 B2B Payment Trends That Will Define 2021

With the pandemic still ongoing, 2021 eludes any possibility of making definite predictions. But, the shockwaves of 2020 have made it clear what businesses need to focus on this year.

“There’s no crystal ball that can tell us how long the pandemic will continue to impact how businesses operate and collect payments, but we can safely assume it will be for most of 2021,” our CEO Craig O’Neill told me earlier this month. “Most workers won’t return to in-office activities and won’t be able to write or process checks, so it’s critical they take their finance processes digital now.”

Coming off the tail end of a turbulent year, the defining themes for B2B payments in 2021 are shaping up to be:

  • The need to optimize processes after the shift to remote work saw businesses hastily adopt electronic billing and payments
  • Reducing friction and providing transparency through greater access to data for both buyers and suppliers
  • Enhancing collaboration between buyers and suppliers to simplify processes

In this blog, we’ll break down the top five B2B payment trends that will shape 2021.

1. Digital Transformation Will No Longer Be Negotiable

Finance teams that are still hesitant to digitize their accounts payable (AP) and accounts receivable (AR) processes will find they’re being left behind.

After having to pivot to digital commerce models due to the pandemic, many B2B buyers and suppliers now prefer these new channels. They see that before making the switch, they were falling short of customer expectations and undermining their operational efficiency.

Research from Gartner points to the “consumerization of the B2B commerce experience,” where “businesses that support and encourage digital commerce and digital payment will see faster growth and increasing market share compared to those that do not.”

2021 will be an important transitional year, as the 70% of B2B businesses who plan to implement new tech to help them manage their AR take the steps to do so, and the remaining 30% come to the realization that they need to do the same.

2. The Decline of Checks Will Be Steeper Than Ever

While consistently in decline in recent years, the B2B world has not been able to kick its affinity for using checks. AFP’s 2019 Electronic Payments Survey found that although check usage in B2B transactions has fallen to an all-time low of 42%, they remain the most popular payment method.

Checks have long been a tried-and-true B2B payment method mostly because finance teams know how to handle them and CFOs haven’t been eager to uproot legacy processes. But as working remotely continues to be the story of 2021 and as teams struggle to maintain business as usual, check usage will no doubt decline more sharply. The need to support a remote workforce is just the latest nail in the coffin for checks, with slower payment times, high manual effort, and substantial processing costs presenting their own issues.

Many teams have already made the leap to distance their organization from checks. AFP’s 2020 Payments Survey found that a third of respondents are already primarily using electronic payments for their B2B transactions and nearly 60% report being likely to convert most of their payments from checks to electronic payments.

3. Use of Smart Payments Will Grow in Efforts to Solve “The Remittance Problem”

With the elimination of checks from AR processes though, teams exchange one challenge for another. Electronic payments like ACH make it difficult for suppliers to apply payments to open receivables as remittance data travels separately. AR specialists have the arduous task of manually matching payments with the right invoice.

This is the main reason teams have been hesitant to increase their use of electronic payments, with finance professionals citing an absence of standard format for remittance information and a lack of integration with accounting systems—74% and 71% respectively—as their main barriers.

As the need for contactless and remote payments intensified over the past year, so have efforts to solve “the remittance problem.” One way finance leaders will increase acceptance of digital payments without creating more work for their teams is by utilizing “smart payments.”

“Smart payments carry business information so that as systems transact with each other, there’s data flowing along with the money,” says Craig. “The ideal outcome is for these systems to work in coordination, applying cash in the right places and closing the correct invoices, replacing much of the manual work AP and AR teams do today.”

As B2B customers have grown more comfortable with digital environments due to the pandemic, adoption of smart payment methods will be much easier to incentivize.

4. Businesses Will Embrace Collaborative Commerce

Beyond simplifying AR processes for teams internally, better availability of payment data can do wonders for reducing friction in how B2B buyers and suppliers transact with one another.

In 2021, forward-thinking banks, card networks and providers, and software vendors will be working to create a better payment ecosystem that addresses longstanding hiccups in B2B payment processes.

This is the idea of collaborative commerce, where companies do business together through their connected systems, allowing for more automation in the order-to-cash process and reducing time spent facilitating both sides of a transaction.

The concept of collaborative commerce is in its early stages but quickly gaining momentum as businesses collectively realize how friction in payment processes hurts their bottom line and payment innovators see solving this as a priority.

Back in October of 2020, in conversation with PYMNTS.com, Visa’s Head of Global Business Solutions, Kevin Phalen stated that in 2021, collaborative commerce would be “a reality moving into a maturity,” citing increased connectivity, standardization for the way data is moved, transparency, and ease of collaboration between buyers and suppliers as core focus areas.

5. Support for Flexible and Emerging Payment Options Will Increase

Another key B2B payment trend in 2021 will be increased support for flexible payment options.

A study of small businesses found that offering multiple payment options helped businesses increase their revenue by nearly 30%, and those that accepted four or more payment options brought in seven times more annual revenue than those who offered fewer options.

B2B companies are becoming more sensitive to this, with support for emerging payment methods like virtual cards and mobile payments like Apple Pay increasing. Greater options for B2B buyers create richer customer experiences and help suppliers get cash in faster.

For B2B finance teams, 2021 will be the year for adapting to changing buyer expectations and creating the systems needed to support payments and processes digitally. Although this year will be much like the last in its unpredictability, you can take comfort in knowing that going digital is a future-proof strategy. The one thing you can’t afford to do is continue to put off digitization, hurting both your customers and your business.

Why Your AR Processes Might Be Stuck in the 80s—and What It’s Doing to Your Cash Flow

The 1980s were a decade that defined technological advancement.

During this time, the world was introduced to the Walkman, VHS tapes, and VCRs. (And Beta tapes! Remember Beta?) These devices quickly changed the way people consumed media, from music to movies. Since then, however, continued improvements in technology have rendered most, if not all, of these devices obsolete.

Instead of purchasing physical copies of music and movies, we consume these things on demand through streaming services like Spotify and Netflix. And now with email and communication tools like Slack, once ubiquitous tech like fax machines are a distant memory for most of us—that is for those of us who even know what they are.

Like technology, much has changed in the world of finance thanks to developments in software and improved methods of payment acceptance. Yet with all these advancements, many finance departments in B2B today still rely on the use of dated accounts receivable (AR) processes in their day-to-day activities.

In this blog, we’ll discuss how AR processes for many finance teams today are stuck in the ‘80s, and what effect this has on companies’ cash flow and customer experience. We’ll also offer advice for how you can transform your AR processes by leveraging automation and online collaboration to help bring your finance team into the future.

Does all our mention of Walkmans and VHS tapes have you feeling wistful for a simpler time? Revel in the 80s nostalgia with our newly released Versapay video game, “Payment Runner” here!

Managing AR Processes in the 1980s

If we were to travel back in time to the 1980s, what would the AR process look like? For starters, we would see lots of checks. Checks dominated the 1980s and much of the 20th century as the preferred form of payment for B2B suppliers and their customers. In 1989 alone, over 18 billion commercial checks were collected by the U.S. Federal Reserve, over four times more than the 4 billion collected in 2019.

Accounting for all these checks required significant manual labor from finance teams—not only in processing them, but also in scanning and printing copies to file them away for future reference. Accounting clerks were also responsible for manually matching check payments to their corresponding invoices.

You would think that we’ve come a long way since then, but many businesses still receive checks from their customers, with some even preferring them to modern alternatives.

A study by PYMNTS.COM found that checks remain the most popular payment method among businesses, with as much as 81% of surveyed respondents using checks to pay their suppliers. And although only 51% of these firms are satisfied with their use of checks, they remain the first choice over automated clearing house (ACH) (49%), credit cards (34%), and cash (30%). But checks do not have to be the only way!

The Negative Impact of Manual and Dated AR Processes on Cash Flow and Customer Experience

The U.S. Federal Reserve approximates that the total cost of processing paper checks and invoices exceeds $150 Billion annually. The direct cost of processing a single invoice is estimated to be $17 USD. Multiply this by hundreds or thousands of invoices per month, and this total works out to be a significant amount against the business.

With manual AR processes, you’re not just paying with your dollars—you’re paying with your time. Comdata estimates the average processing time of one invoice to be ten days, which can increase the time it takes suppliers to receive their cash by as much as 30 days—even for the simplest of charges. Extending the order-to-cash cycle in this way means you wait unnecessarily long for the funds to reach your account, hurting cash flow.

Another often overlooked but highly important concern with manual AR processes is the impact they can have on the customer experience (CX) you provide. Customers want easy access to their account history. They want visibility into their account status, disputes, discounts available, and credits. They don’t want to have to call your team any time they have a question. They want a modern customer payment experience.

With manual AR processes, you also lack important visibility into your customers’ activities and account status. This inhibits your ability to form insights from customers’ payment behavior that could help you engage with them in better ways.

How to Transform Your AR Process

The first step you can take to eliminating manual work and paper from your AR processes lies in automation. Beyond basic process automation that can simplify manual tasks, the key to truly bringing accounts receivable processes into the future is to eliminate the need for many of those tasks—like dispute resolution and matching payments—altogether.

You can do this by bringing all your AR efforts online and in one central location that allows you to collaborate directly with your customers. By empowering customers to communicate with you more closely—say, to raise an issue on a particular invoice line item—you can solve issues before they become disputes.

Providing your customers with an online portal to manage their invoices and pay you eliminates much of the work finance teams would do to match payments with their appropriate remittance information. With an online payment portal, you can require customers to provide information on what they’re paying and give a reason if they’re making a short payment, which makes cash application effortless.

When comparing solutions, keep in mind that the right tool should help your business achieve these four things:

1. Save Time

Your AR automation tool should be equipped to send payment reminders, invoices, and notices of overdue invoices to customers automatically and according to rules you create. This will eliminate the need for your staff to make phone calls or send emails to your customers when managing collections, which will support in maintaining strong relationships with them.

2. Improve the Flow of Information

When customers have to go through you to access their account information or make payments, this creates delays—especially if you’re fielding all your customers’ inquiries through phone or email. When you have an AR solution in place that has a dedicated portal for your customers, you can let them serve themselves, taking a lot of strain off your team. When customers make payments directly through this portal, you’re also able to collect remittance information at the time of payment, saving you time in matching payments with open AR as this happens automatically.

3. Prioritize Workflows

Without an AR automation solution, it can be difficult for your team to know exactly what their priorities should be. But with AR automation, the mundane tasks take care of themselves, so your team can focus on the important tasks that require more immediate attention.

4. Gain Greater Visibility and Transparency Into Customer Accounts

Relying on manual data entry and exports for your AR processes means any customer data you pull is likely out of date before you’ve even shared it. AR software can give you real-time access and visibility into important data.

As the world continues to become more digital, don’t get left behind with your manual efforts. Take advantage of any opportunity to get paid faster and improve processes, giving your business the competitive advantage it needs to succeed in today’s uncertain economy.


4 Steps For Turning Accounts Receivable Into a Strategic Growth Driver

On paper, accounts receivable (AR) is one of your largest assets. But how long does it typically take for you to have that cash in pocket?

A lengthy cash conversion cycle not only spells trouble for paying your business’ regular expenses but it also inhibits your ability to grow. Fast-growing companies need quick access to cash to fund expansion into new regions, hiring of additional staff, and research and development efforts.

A new report from the International Data Corporation (IDC) titled “It’s Time to Transform Accounts Receivable” shows how overhauling traditional AR processes with cloud-based technology leads to unlocking working capital faster, so you can invest it where it matters.

In this blog, we’ll break down four strategies IDC highlights for improving processes that would otherwise leave cash tied up in operations for extended periods of time, helping you accelerate cash conversion.

1. Understand Your Customer

Miscommunications and customer disputes can cost you precious time when awaiting payment on receivables. Sometimes discounts promised to customers by sales reps aren’t reflected on their invoices or goods can arrive damaged. Straightening out these kinds of issues via phone or email can mean weeks go by before customers are prepared to pay.

Collaborating with your customers more directly can clear up miscommunications before they become disputes and make it easier to get to the root cause of an issue. An AR automation solution that provides customers with an online portal enables this level of bi-directional communication. Customers can view invoices on their own time and leave comments directly on those invoices when they have a concern. That way, your team never has to search for the context of an issue and can quickly resolve problems that hold up payment.

Engaging with your customers this closely can also help you spot recurring issues in your processes that contribute to late payments, so you can make changes that’ll positively influence future payment behavior.

2. Know Your Process

In order to optimize your AR process, you should first know exactly what’s currently involved in it. This sounds simple enough, but when finance teams operate with a high degree of manual work, having visibility into the status of all their receivables becomes difficult.

Beyond just being irksome for your team, manual AR processes hurt your cash flow. A recent report from PYMNTS.com found that businesses that rely on manual AR processes tend to have 30% longer average DSO compared to those with medium to high levels of AR automation.

Centralizing your AR operations in one location with cloud-based software gives everyone on your team an easy way to understand where each account stands and at what stage a delay might be occurring.

3. Control Your Cash

Unifying all your data on customer accounts and the status of receivables in one place through an AR automation platform also gives you easy access to the insights you need to accurately manage cash. When your AR platform syncs in real time with your ERP, you can be sure you’re basing decisions off the most accurate data when aiming to optimize working capital. 

Many AR automation platforms offer advanced analytics capabilities, aggregating all-important metrics like DSO in one convenient dashboard. Instead of having to refer to multiple sources to pull reports that inevitably get stale the moment you export them, you can get everything distilled in one real-time view. A simpler data measurement process makes it easier for you when reporting to executive leadership, which concern over the economic downturn likely has you doing more frequently.

4. Make Your Customers Happy

One often overlooked way to accelerate payment times is to focus on your customers’ experience. With the barrier to switching suppliers getting lower and lower in most industries, every aspect of the customer experience counts—and that includes the billing and payment processes. Research from American Express points to the fact that for 33% of American customers, it only takes one negative experience to get them to consider switching their service provider.

By giving your customers a better billing and payment experience, you motivate them to pay you faster. For instance, think about the invoice delivery and payment methods you currently support. Are these the channels that your customers want to be receiving invoices and making payments through or are they simply the most convenient options for you? If it’s the latter, you have a clear opportunity to better serve your customers.

Shifting your mindset from supplier-centric (what’s best for you) to customer-centric (what’s best for your customers) means giving customers flexible options for receiving their invoices and making payments. When customers are given the convenient experience they want, they’ll happily pay you faster, contributing to shorter cash conversion cycles.

Turning Unlocked Cash Into Growth

Improving the speed with which you collect receivables, paired with an effective working capital management strategy, allows you to take advantage of opportunities to invest in your business’ growth and innovation. By automating traditionally time-intensive and people-intensive accounts receivable tasks, you can reduce expenses by avoiding the need for additional headcount and direct your team’s efforts to projects that bring the highest value to your organization.

For more practical insights on how you can transform your AR processes to optimize cash flow and increase operational efficiency, you can download IDC’s report “It’s Time to Transform Accounts Receivable” for free here.

It's Time to Transform Accounts Receivable

Shopping Small: How We Partnered With Batch This Past Holiday Season

As we all know, the past year has been a particularly challenging one for small businesses. Research from McKinsey & Company published in June 2020 found that of the small businesses they surveyed, between 1.4 million and 2.1 million (25%–36%) of them were at risk of closing permanently as a result of the early impacts of COVID-19.

The shop small movement has been around since long before the pandemic began, but it’s been great to see it pick up momentum recently as small businesses need support now more than ever. In this spirit, we wanted to take a moment to shout out one of our own small business clients and maybe introduce you to a new favorite #shopsmall gem.

This past holiday season we wanted to support a small business when organizing gifts for our partners—and what better place to look than within our own client base. Instead of using a massive retailer to send out our company gifts this year, we worked with one of our clients, Batch, to deliver holiday gifts to our value added reseller (VAR) partners.

Batch is a small retailer based in Nashville, founded in 2013 by friends Sam Davidson, Stephen Moseley, and Rob Williams. Batch offers handcrafted locally made gifts ranging from sweets and treats to apparel, and much more! Although they’re small, Batch offers a surprising variety of products, selling over 1,000 different items including unique finds from iconic cities across North America.

Delicious s’mores kit, courtesy of Batch!

Working with Batch was a great experience for us, as the whole process was smooth and convenient. We loved being able to spread holiday cheer and show our gratitude to our partners, all while supporting our own client.

Batch and Versapay

How did Batch become a Versapay client? Batch was referred to us by a partner and after conversations with their CEO Sam Davidson, we discovered there was an opportunity for us to help them save on card processing costs and streamline their processes.

Batch now uses Versapay’s Solupay for NetSuite payment acceptance solution, integrated with their ecommerce platform. “The integration is seamless, saving me time in reconciling payments and doing financials,” says Sam.

At Versapay, we aim to improve the way businesses work together by minimizing manual processes, reducing costs, eliminating fraud, and increasing sales. As we’ve been able to do with Batch this year, we strongly believe in being a partner to all our clients and supporting them beyond what we do for them day to day.

With all that has been happening in the world since the COVID-19 pandemic began last year, there’s no better time to shine the light on small businesses. We encourage you to think about how you can support small businesses in your own local community!

What is DSO and Why is it the Lifeline for Accounts Receivable?

Picture an astronaut floating in space. What’s the one thing keeping them alive?

You guessed it, it’s a steady supply of oxygen. Just like an astronaut needs oxygen, a business needs cash to survive.

For companies that make a considerable amount of their sales on credit, Days Sales Outstanding (DSO) is a pretty good indicator of the business’ cash availability and overall financial health. Keeping a close eye on DSO and its trends is essential for any finance team in monitoring and managing the business’ cash flow.

What Does Outstanding Receivables Mean?

Outstanding receivables refers to the debt owed to a company when they’ve provided a product or service but accept payment from a customer later. Since accounts receivable will be converted to cash, it’s considered a short-term asset on the balance sheet.

What Is Days Sales Outstanding (DSO) and Why Does It Matter So Much?

DSO (also referred to as the average collection period or days receivables) helps finance leaders understand the average number of days it takes to receive payment after a sale is made. A low DSO means that it takes your company a reasonably short time to collect payment while a high DSO means that it takes your company longer.

Not only is DSO a measurement of how long it takes to receive payment, but it’s also a reflection of customer satisfaction, customers’ credit worthiness, and the effectiveness of your collections team. (More on this later.)

With the economic pressures of the pandemic, C-suite leaders now lean on their finance team’s guidance more than they did before to inform their decision making. A Gartner survey from April 2020 found that 70% of finance leaders were conducting cash flow forecasts more frequently and 75% were reporting to their C-suite at least once a week.

With so many insights coming from this one metric, you’ll want to have easy access to this data, letting you report on the status of receivables efficiently and accurately to leadership. You can track DSO proactively and automatically with accounts receivable software, meaning less work for you.

How Do You Calculate DSO?

If you want to calculate DSO manually, here’s how to do it. For the period you’re calculating (a single month for instance) you’ll need to divide total receivables due by the total sales you’ve made on credit and multiply this by the number of days. The formula looks like this.

Days Sales Outstanding equals Accounts Receivable divided by Total Credit Sales, times the number of days

How Do You Calculate DSO for 3 Months?

For businesses with seasonal sales or fluctuating sales month over month, calculating your DSO over the course of a quarter instead of a month is a great way to normalize your data and see trends over time. If you want to calculate your DSO for the quarter, take your total receivables for those 3 months divided by total credit sales during that period and multiply this by 90.

Days Sales Outstanding for three months equals Accounts Receivable divided by Total Credit Sales, times 90 days

What Is a Good DSO?

According to the Credit Research Foundation’s National Summary of Domestic Trade Receivables, the average DSO in Q2 of 2020 was 41.56 days. In general, anything below 45 days is considered to be a low DSO. But since DSO ranges wildly from industry to industry and from business to business, it’s a good idea to look at companies that are within your industry and have similar terms to see how you compare. To get a full picture of your company’s operations, it’s best to look at trends in your DSO rather than focus only on the number itself.

What Could Be Causing a High DSO?

There are a couple reasons your DSO could be trending higher. It could be an indication that customer satisfaction is low and as a result, customers are taking their time to pay you—or aren’t paying. In the case of the latter, it could be that your sales team is extending credit to customers they shouldn’t.

A higher DSO could also be a result of inefficient collections processes. Getting away from highly manual accounts receivable processes in favor of automation reduces the length of the cash conversion cycle significantly. PYMNTS.com’s recent B2B Payments Innovation Readiness report found that businesses that rely on manual AR processes tend to have 30% longer average DSO compared to those with medium to high levels of AR automation.

5 Strategies for Improving DSO

Here are some strategies you can use to reduce DSO:

1. Make it easy for customers to know what they owe—Giving customers visibility into all their current and past invoices makes it much easier for them to know exactly what they owe and when payment is due.

2. Get paid faster by embracing digital payments—Accepting digital payments means no more waiting on checks to arrive. When made through an online portal, digital payments also eliminate the issue of cash getting tied up in the process of matching payments with open AR, since remittance data is captured at the time a payment is made. Dollars and data move together.

3. Incentivize early payments with discountsDiscounts can be a great way to incentivize customers to pay you early. But, as managing which customers are eligible for discounts and accounting for them later can be a nightmare, teams are often hesitant to use them. The right AR platform with built-in tools to help you collaborate with your customers can eliminate this block, as you’re able to communicate discounts to a targeted selection of customers and even require a specified reason for the discount when payment is made.

4. Automate payment reminders—Send customers personalized notifications and reminders on when it’s time to pay. Nudging your customers in this way both saves your team time and preserves customer relationships by avoiding what could become confrontational collections calls.

5. Set customers up with autopay—You can make the payment experience even more convenient for customers when you introduce the option to set up autopay. With payments being made from their account on a set timeline automatically, customers have less to think about and you know for sure you’ll be paid on time.

A modern AR Platform can be your business’ lifeline when it comes to staying on top of outstanding accounts receivable and maintaining control of your cash position. Interested in learning about Versapay’s AR solutions? Find more details here.

2020 Wrapped Up: Growing and Innovating Through a Challenging Year

As we near the end of 2020, like us we’re sure you’re experiencing a lot of mixed feelings. This year has seen us through some unprecedented challenges as we’ve navigated a global pandemic, a social revolution, and a new culture of remote work.

Against the backdrop of these obstacles though, it’s been incredible to witness the resilience of our clients and team. We’ve seen our clients support their customers through making the shift to remote working and we’ve seen our growing Versateam masterfully manage both work and home as those worlds collided.

To finish the year off with some levity, we thought we’d share some of the bright spots from 2020.

How Has Accounts Receivable Changed This Year?

From the challenges businesses have had to face this year, more finance teams are finally modernizing their accounts receivable processes and increasing their acceptance of digital payments.

COVID-19 put into perspective just how impractical manual and paper-based AR processes are, especially as teams made the switch to working from home. With no one in office, who’s going to print and mail out invoices and process checks?

A recent report from PYMNTS.com found that 83% of businesses reported having changed their AR processes since the pandemic began, with 83.1% of firms using tech to manage their AR at a high level accepting more digital payments than they were before COVID-19.

The past year has also made businesses reflect more on the importance of customer experience, as providing online channels for billing and payment experiences became non-negotiable. While ecommerce used to be regarded as a channel for lower value purchases, the pandemic has made B2B buyers even more comfortable making big purchases in an online environment.

A report from McKinsey & Company found that 70% of B2B decision makers reported being open to making purchases well over $50,000 in a fully self-serve or remote capacity.

Embracing digital payments and AR automation means finance teams are unlocking potential for cost savings like 30% DSO reduction and giving customers what they’ve long been asking for—a convenient, online experience.

This Year at Versapay HQ

We started the year off on an exciting note as we went through the final stages of Versapay’s acquisition by Great Hill Partners, a Boston-based technology investment firm. In October, we followed this up by announcing our merger with leading payment services provider Solupay and affiliated companies ChargeLogic and 2CP.

Our coming together means we’re better able to deliver on our goal of simplifying the way buyers and sellers do business together by digitizing the accounts receivable process and simplifying payment acceptance.

Merging with Solupay has also meant that we’ve grown from a team of ~100 employees to over 200 and counting. This year we brought on 100 new hires, 92 of whom have never set foot in a Versapay office.

We were pleased to see Versapay recognized for the first time on both Deloitte’s Technology Fast 500 and Fast 50 lists, honoring the fastest growing and most innovative tech companies in North America and Canada respectively. We were also named a Leader for the second time in the IDC MarketScape for Worldwide SaaS and Cloud-Enabled Midmarket Accounts Receivable Automation Software.

Our Clients

In 2020 our network of clients served has grown by the thousands, connecting us to 500,000+ end customers. We onboarded some stellar new clients this year, including Dream Office, Amer Sports, and TireHub. Through Versapay, our clients created millions of invoices and processed payments collectively totaling $12 billion.

During the onset of the pandemic, we worked with our clients on ways to support them and their customers. For instance, we:

  • Helped our clients quickly pivot to accept credit card payments as their customers needed ways to pay remotely
  • Enabled clients to give their customers a financial break by waiving convenience fees at a time when the future for many small businesses was uncertain
  • Accelerated the testing and roll-out of pre-payments and initial deposits for more clients, allowing them to accept more payments faster and provide their customers with more flexibility

We were moved to see how a few of our clients went even further to support their customers and first responders through COVID-19.

Kite Realty Group launched a small business loan program aimed at local small shop tenants. To communicate the availability of this program to all their tenants, Kite Realty used the Marketing Message feature in ARC, sending two email blasts to all active tenants.

Bedford Industries, a manufacturer of packaging solutions using Versapay’s Solupay for NetSuite solution, shifted from making twist ties to face shields during COVID-19. Bedford already manufactured the nose wires that go into medical masks and on seeing the dire need on the front lines for Personal Protective Equipment (PPE) decided to start making plastic face shields. To quickly get up and running shipping out the face shields and accepting payments, Bedford looked to NetSuite and Solupay to build their ecommerce instance.

A Year of Exciting New Features

This year we released several enhancements to our ARC solution. Here are our clients’ top 3 favorites:

  • Electronic Cash on Delivery: Cash on Delivery (COD) has traditionally involved a lot of challenges for distributors, from applying cash payments to open invoices to the logistics of collecting payment at the time of delivery. We’ve tackled these challenges by giving COD customers a way to store their preferred payment method and automating the invoicing, payment, and application of payment the moment an order is requested.
  • Discount Management: Our discount management features make it easier to communicate discount terms to customers via their invoice, the ARC portal, or email and tie them to specific payment methods. We’ve made it easy for customers to take advantage of early payment incentives and eliminated the potential for unearned discounts. Reconciliation is automated so you have complete transparency into which discounts are used and why.
  • Document Manager: With this new feature, we’ve made it easy for you to securely share documents, marketing messages, memos, and other communications with your customers all in one place—and know when they’ve been viewed.

What’s Ahead in 2021?

We know there are many challenges that complicate payment acceptance for B2B companies, preventing them from delivering exceptional billing and payment experiences to their customers. We’re committed to tackling these issues one by one to simplify the entire order to cash process for buyers and sellers.

As remote work and social distancing will continue well into 2021, we’ll be focused on supporting businesses as they make the shift to digital payments and modernize their AR processes to match. Although 2020 has been challenging, it’s also been a milestone year for Versapay. We’re grateful to our clients, partners, and team who drive us forward in everything we do, and we’re optimistic for what the next year will bring in the world of B2B payments. Will you come along for the ride?

Versapay Again Named a Leader in the IDC MarketScape: Worldwide SaaS and Cloud-Enabled Midmarket Accounts Receivable Automation Software

Toronto, ON—December 17, 2020—Versapay Corporation, the leader in Customer-Centric Order-to-Cash solutions, has been named a Leader in the recently published IDC MarketScape: Worldwide SaaS and Cloud-Enabled Midmarket Accounts Receivable Automation Software 2020-2021 Vendor Assessment, December 2020, IDC#US47032320.

The report highlights Versapay’s strengths in collections and analytics, self-service and collaboration, and payments, stating: “The platform consistently achieves strong buyer adoption and drives material savings for suppliers through faster payment, reduced processing costs, removal of manual processes, and customer self-service.”

“The events of the past year have made it clear just how critical convenience and digitization are in creating strong customer experiences,” stated Kevin Permenter, Senior Research Analyst, IDC. “Forward-thinking companies are transforming their AR processes to remove friction from the billing and payment experience, a goal that Versapay supports.”

“We’re excited to be recognized as a Leader for the second year by IDC MarketScape through their comprehensive market research,” said Craig O’Neill, Chief Executive Officer of Versapay. “We’re focused on simplifying buyers’ and sellers’ experience throughout the entire order-to-cash process, and this report confirms that our customer-centric approach highly resonates with the market.”

Versapay was also named in Deloitte’s 2020 Technology Fast 500 report and recently announced its merger with Solupay, creating a B2B Payments network supporting 500,000 end-customers.

About IDC MarketScape

IDC MarketScape vendor assessment model is designed to provide an overview of the competitive fitness of ICT (information and communications technology) suppliers in a given market. The research methodology utilizes a rigorous scoring methodology based on both qualitative and quantitative criteria that results in a single graphical illustration of each vendor’s position within a given market. IDC MarketScape provides a clear framework in which the product and service offerings, capabilities and strategies, and current and future market success factors of IT and telecommunications vendors can be meaningfully compared. The framework also provides technology buyers with a 360-degree assessment of the strengths and weaknesses of current and prospective vendors.

About Versapay

Versapay is focused on changing the way companies do business together by offering Customer-Centric Order-to-Cash solutions and B2B Payments for mid-market and enterprise businesses. We help our clients offer a superior customer experience, enabling CFOs to accelerate cash conversion, streamline payments, and digitally transform manual business processes. Based in Toronto with offices in Atlanta, Cleveland, Baltimore, and Las Vegas, Versapay is owned by Great Hill Partners, a Boston-based technology investment firm.

How To Make It Through Economic Uncertainty by Digitizing Accounts Receivable

In the last eight months, we’ve all learned that the future is anything but certain.

The economic instability businesses have had to endure due to COVID-19 highlights the need for a predictable cash flow and greater control of working capital. One way you can support this is by optimizing the cash in part of the equation—your accounts receivable (AR).

A new report from the International Data Corporation (IDC) titled “It’s Time to Transform Accounts Receivable” highlights how transforming dated approaches to AR with cloud-based technology can help businesses unlock cash flow and stay resilient to future challenges.

In this blog, we’ll delve into key opportunities IDC highlights for digitizing your AR, and how this can better equip your business to withstand the whims of today’s economy.

Get A Complete Picture of Your AR

As businesses respond to the economic challenges of COVID-19, senior leadership increasingly leans on finance teams to inform their decision making. A Gartner survey from April of this year found that seven out of ten finance leaders reported conducting cash flow forecasts more frequently and 75% of finance leaders stated that they were reporting to the C-Suite at least once a week.

In order to accurately report on your business’ financials, you need a clear view of all your AR activities. For finance teams that refer to multiple data sources—whether it’s your ERP, bank lockboxes, ecommerce sites, or even spreadsheets—this is easier said than done.

When you’re preparing to report to senior leadership, it’s not efficient to have to manually run and export reports from separate platforms to calculate key metrics like DSO.

An AR automation solution with strong reporting capabilities can eliminate this friction and ensure you’re always accessing the most accurate data. Look for a solution that can break down your AR at the company, division, invoice, and line-item levels and puts metrics like DSO and ADP front and center. Integration with your ERP should also be a prominent factor in selecting a vendor.

Focus on High-Value Activities

Having a detailed view of each of your customers’ account standing is particularly helpful for determining where your AR team should spend their time. 

Another way to free up time to connect with the customers that most need follow up is to automate time-consuming collections activities. Instead of calling and emailing customers to check on the status of open invoices, deliver personalized notifications to your customers at various points throughout the collection cycle, reminding them to pay.

In periods of economic uncertainty, CFOs will want to focus their team’s efforts on the activities that drive cash flow optimization. Fast-tracking collections naturally falls into this group of high-value activities and businesses that heavily rely on manual AR processes will struggle to achieve this.

Reduce DSO

Not surprisingly, reducing DSO is a core strategy for maintaining business continuity in periods of uncertainty. Embracing digital transformation is essential for any finance team working towards DSO reduction. PYMNTS.com’s recent B2B Payments Innovation Readiness report found that businesses that rely on manual AR processes tend to have 30% longer average DSO compared to those with medium to high levels of AR automation.

Beyond streamlining your collections activities, there are other ways you can incentivize customers to pay you faster. The first is making it easy for customers to know what they owe you. Offering a variety of invoicing formats like email, within an online portal, or direct to AP portal lets customers choose the option that’s most convenient for them and as a result most likely to get them paying promptly.

The second is making it easy for customers to pay you. B2B buyers increasingly expect their payment experience to mirror what they encounter as consumers—meaning online.

If you’re hesitant to increase your acceptance of digital payments because of high processing fees, there are options that can take care of this concern. Working with a payment processor that provides interchange optimization helps with lowering processing costs, making accepting a high volume of card payments more feasible.

Minimize Workload Without Adding Headcount

Adding headcount to solve operational challenges isn’t practical for many companies right now. With sufficient AR automation though, you can increase efficiency and streamline workflows even with a lean finance team.

A recurring challenge for most AR teams is manually having to match payments with open AR, especially when they come with minimal remittance data. You can automate much of the cash application process with tools for auto-matching like portal crawling, inbox scanning, and OCR for extracting remittance data from your various file types and reconciling it with the appropriate payment.

Getting customers to pay you through an online portal is also a great way to reduce your efforts spent on cash application, given that online payments made through a payment portal capture complete remittance data at the same time.

Maintain Strong Customer Relationships

An area that many businesses tend to overlook that will play a critical role in helping them emerge strong through the economic downturn is customer experience.

If previous crises can offer business leaders any direction on how to handle the current situation, it’s that focusing on customer experience is a winning strategy. Research from Forrester found that during the recession from 2007 to 2009, businesses that led in customer experience had returns that were three times higher than businesses that fell short in this area.

An aspect of your customers’ experience that shouldn’t be ignored is how you bill them and collect payment. With remote work likely being a fixture for most businesses well into 2021, you should make the transition easy on your customers by optimizing how they manage their payments and interact with your AR team.

Giving your customers an online self-service portal empowers them to take control of their account preferences and find any information they might need—anytime, anywhere. An online portal is also a great vehicle for enabling direct communication and collaboration with your team, making it easy for both you and your customers to clear up questions and potential disputes.

Not even the most seasoned forecasters can definitively tell us what to expect as we navigate the economic fallout from COVID-19. But, this doesn’t mean businesses are powerless in the face of uncertainty. Organizations that prioritize transparency, flexibility, and visibility into cash management by transforming their order-to-cash processes will be better prepared to handle whatever comes their way.

For more insights on how digitizing your accounts receivable processes benefits your business and customers, you can download IDC’s report “It’s Time to Transform Accounts Receivable” for free here.

The Top Challenges Accounts Receivable Managers Face Today—And How to Solve Them

Most accounts receivable (AR) professionals would agree that their roles can be pretty tedious. Because many organizations haven’t fully modernized their approaches to AR, these teams are spending a high volume of hours on low-value tasks.

A new report from the International Data Corporation (IDC) titled “It’s Time to Transform Accounts Receivable” puts into perspective just how many obstacles AR pros face, spotlighting issues around processes, systems, and customer experience.

In this blog, we’ll delve into the top challenges IDC highlights as most critical for accounts receivable managers, and most importantly, how you can solve them.

1. Late Payments

The challenge: Making sure the company gets paid on time is the core function of an AR department. When customers pay late, this makes balancing cash and accessing working capital exceptionally difficult. If you have little way of knowing exactly why your customers haven’t paid yet, or why they’ve short paid or taken deductions, then you’ll have difficulty addressing the roadblocks that could be holding up payments from customers who are willing and trying to pay.

The solution: A great place to start is looking at the way you communicate with your customers. In contrast to fielding customers’ questions through phone and email—which can easily be a full-time job in itself—an online portal that lets customers comment on specific invoices and line-item details cuts out this unnecessary back and forth. Your team is then able to answer messages quickly and directly via the portal and never has to search for the context of a particular question.

2. Data Management

The challenge: Between ERPs, bank lockboxes, ecommerce sites, and spreadsheets, AR managers require data from multiple sources. But the more places you pull data from, the more time-consuming a process it is and the likelier you are to get stale or inaccurate data.

The solution: The more you can consolidate your data and give your team a single source of truth for all things AR, the better. One way you can facilitate this is by opting for an order-to-cash solution that integrates directly with your ERP. To account for the complexities of your particular ERP instance, make sure you select a vendor that will partner with you throughout the implementation process and post-launch to ensure all of your systems are integrating smoothly.

3. Time Management

The challenge: There are better uses for your time than resending invoices, calling customers, or sifting through a sea of emails to track down the status of an invoice. With old-school approaches to AR, teams end up spending much of their effort on manual tasks, which could be redirected towards projects that will actually help move the needle for the business.

The solution: Automating key back-office AR functions like invoice delivery and collections task management saves time and reduces your margin of error, meaning you also spend less time troubleshooting.

4. Customer Management

The challenge: Billing and payment are important aspects of the customer experience and AR managers are the face of this part of the journey. Ensuring your customers have a positive experience is particularly important as you navigate the current economic downturn, seeing as a good experience can promote customer retention and even be a competitive differentiator. Traditional approaches to AR tend to be operation-centric rather than customer-centric, meaning teams’ focus is on completing an overwhelming list of day-to-day tasks rather than making sure customers’ needs are met.

The solution: B2B buyers’ expectations are very much informed by their experiences as consumers. Customers are looking for flexibility and convenience in the way they receive invoices and pay you. To deliver on these expectations, you should support a variety of invoice delivery and payment method options and give customers the power to customize their preferences. A self-service customer portal is a great vehicle for this, as it gives customers control of their account 24/7.

5. Payment Management

The challenge: Many AR teams are hesitant to lean into digital payments due to concerns around security, compliance, costs, and cash application. Although card payments, for example, are incredibly convenient for buyers, they often only represent a small portion of businesses’ total payment acceptance volume due to high processing fees.

The solution: You can increase your acceptance of digital payments by working with a payment facilitator that is able to provide lower processing costs thanks to volume pricing and interchange optimization (which is achieved by the processor sending more data through with each transaction, so that issuing banks lower their interchange fees and customers get a rate reduction in turn).

6. Cash Management

The challenge: For AR teams that still accept a high volume of paper checks, cash management remains a big challenge. Checks can take days or weeks to arrive and often with minimal remittance information, making it difficult to reconcile these payments with open AR. With your cash tied up in these lengthy processes, accessing your working capital becomes an issue—one made even more urgent in a turbulent economy.

The solution: You can unlock cashflow by first moving away from accepting checks in favor of online payments made via a payment portal, which can be processed in real-time and capture remittance data at the time of payment—meaning less time spent matching payment to invoice for your team. For the checks that you do accept—and other payment methods where remittance travels separately such as ACH—you can automate cash application with tools for auto-matching (like portal crawling, inbox scanning, and OCR for instance).

Addressing these core challenges positions you for DSO reduction, better visibility into the status of your AR, and improved relationships with customers. Finding an order-to-cash solution that can deliver on all the recommendations outlined above makes your and your team’s lives much easier.

For more insights on how you can benefit from transforming your current approach to AR, you can download IDC’s report “It’s Time to Transform Accounts Receivable” for free here.

It's Time to Transform Accounts Receivable