8 ways AI will transform accounts receivable processes for businesses

Accounts receivable is a critical business function that directly influences cash flow and financial health. Although businesses have taken this seriously for decades, there are many inefficiencies in existing practices. Leveraging artificial intelligence (AI) offers businesses the opportunity to automate processes and mitigate errors, thereby improving efficiency.
Since the adoption of AI in 2023, multiple businesses have implemented it into their day-to-day processes to automate and oversee functions that are repetitive and error-prone. In this article, you'll learn the different facets of the accounts receivable process that can be improved and improvised with artificial intelligence.

1. Customer due diligence

Customer due diligence is an important step before onboarding new projects or customers. A thorough analysis of a customer's financial stability, Day Sales Outstanding (DSO), past transactions and engagements, and illegal track records is essential to avoid exorbitant repercussions.
Typically, this process is a manual background check done by a dedicated team, after which the project is launched. However, AI tools can be used to automate data analysis and identify potential risks like fraud and regulatory violations, offering a solution with the best possible outcome for businesses.

2. Negotiating deals

Closing a deal is not mere luck, but a result of well-done research, thorough knowledge, and effective communication. Introducing artificial intelligence into this negotiation process can help businesses save time and resources.
AI analyzes customer data like past transactions, engagement patterns, and conversational tone to evaluate their Willingness to Buy (WTB) and spending potential. This data can be used to negotiate and close deals faster. Artificial intelligence can even do the negotiation for businesses and seal the deal by sending a quote with the agreed price.

3. Template customization

Invoices must be as unique as the customers they are sent to. Businesses can utilize artificial intelligence to modify their invoices depending on their industry's niche requirements. For example, a bed and breakfast can use AI to include specific fields for check-in and check-out dates. Additionally, AI can also help tailor invoices to cater to the hotel guest's preferred language and currency.

4. Invoice error detection

A survey done by The Institute of Finance and Management found that nearly 40% of invoices have errors. It's shockingly easy to skip an invoice number, enter the wrong invoice date, miscalculate the total amount, or make typos while naming products and services.
Introducing artificial intelligence in this aspect of the accounts receivable process can help businesses recognize patterns and obvious mistakes that are often overlooked during manual inspection. This helps avoid discrepancies in cash flow while safeguarding customer trust.

5. Payment reminders

Typical billing solutions have a payment reminder automation system that can be configured to send emails that go out on n-1, n-2, and n-3 days before the payment due date. While this has worked well for most businesses, artificial intelligence can help step up operations with smart payment reminders.
Smart payment reminders are all about contextualization. Not all customers need multiple payment reminders; some need to be told just a day before the due date, whereas the rest need extra nudging. Depending on a customer's past behavior, their payment reminder occurrences, the duration, and even the email copy can be personalized with AI to significantly improve the business's odds of getting paid.

6. Customer experience

Billing software often provides customers with a self-service portal, allowing them to view, manage, and download transactions. This feature gives customers the flexibility to perform actions from the portal instead of having to contact the business each time.
Artificial intelligence can take this a step further and act as a customer's personal assistant within the portal. Customers can simply ask the AI tool to accept their last quote or download their customer statement instead of doing it manually, saving them a lot of time.

7. Retention management

While businesses around the world are adopting subscription models for their products and services, their backend operations are no joke. They require sophisticated tools to manage complex operations like retention management. Introducing artificial intelligence into this process can help businesses discover negative patterns in customer behavior that generally lead to churn and accordingly implement retention strategies.
Additionally, an AI-driven metric called a "retention score" could help assess the probability of a customer churning involuntarily. For example, a happy customer who has always renewed on time and had positive interactions with the business will have a high retention score. When a customer with a high retention score fails to renew their subscription, businesses can go out of their way to offer a grace period instead of canceling right away.

8. Forecasting cash flow

Forecasting cash flow is a crucial aspect of financial planning. Most billing software today offers basic revenue forecasting reports by analyzing historical revenue and churn data. However, these reports fall short since they solely rely on internal parameters and patterns without accounting for dynamic market conditions.
By integrating artificial intelligence, billing software can also factor in external parameters like economic downturns, new competitors, and evolving consumer behavior. This holistic approach can elevate revenue forecasting to a whole new level of precision.

Summing it up

From automating customer due diligence to streamlining cash flow forecasting, artificial intelligence is capable of completely transforming the way businesses go about their accounts receivable processes. Embracing this new technology will not only help businesses reduce errors and save time but ensure customer satisfaction and improve business stability while competing in a dynamic business landscape.
Businesses looking for a sophisticated accounts receivable solution that can automate billing, dunning, lifecycle management, revenue forecasting, and more can check out Zoho Billing—our end-to-end billing software for growing businesses.