Summary
Your ERP functions as the nerve center of your business, providing you with
various functions and tools to help you run it efficiently. While the nervous
system is vital to the smooth running of your business, there are some aspects
that require special support. Accounts Receivables (AR) is one of them.
Here’s a synopsis of the deep impact AR automation brings into the Microsoft
Dynamics ERP ecosystem:
Optimizes payment processing by enabling customers to make payments
through their preferred mode, ensuring timely payments
Helps your collection agents prioritize worklists to focus on the high-value,
high-risk clients with longer DSO
Speeds up cash application by matching payments with invoices through
various means and ensure same day posting and reconciliation
Mitigates credit concerns by ensuring that the credit rating and history of the
customer is checked at the time of onboarding and at regular intervals
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics| 2
Introduction
Customers and cash are the lifeblood to businesses. Your cash grows when
customers pay fully, on time and this, in turn, contributes to the growth of your
company.
Managing cash flow is the chief responsibility of your accounts receivable (part
of the finance function) team. They often run the risk of alienating customers by
being overly aggressive in their pursuit of accounts receivables.
Balancing collections with a customer-centric approach is essential to keep
customers happy and cash flow healthy. Software tools help create a healthy
balance between process automation, customer delinquency prediction, and
invoice collections prioritization based on predefined parameters, including the
amount due and the financial health of the customer.
According to Kevin Permenter, research manager at htIDC,
ps:/w .idc om/getdoc.jsp?contai erId=US47032 0 “businesses of all sizes
have turned their focus toward cash management and working capital. As a
result, accounts receivable (AR) software, especially SaaS software, has been
highlighted as a place to get a quick return from digital transformation
efforts."
In this article, we look at the various methods businesses adopt to improve AR
efficiency. We also discuss how ERP software like Microsoft Dynamics provide a
starting point for AR automation but needs to be extended with niche AR
solutions to achieve faster processing speed and boost collections.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics| 3
CONTENTS
Chapter 01 The Current State of AR for Mid-Market Businesses
1.1 AR function as a strategic business partner
1.2 Inefficiencies in manual AR processes
1.3 ERP software, accounting systems, and Excel for AR management
Chapter 02 How to Optimize ERP for AR Challenges:
A Look at Microsoft Dynamics
Chapter 03 Enhance Microsoft Dynamics with Invoice-to-Cash Apps
3.1 Key functionalities needed in out-of-the-box AR solutions
3.2 Other things to look for when selecting an AR software
Chapter 04 The Promise Of ROI:
How HighRadius Supports High-Growth Companies
Autonomous Systems
Humans + Machines
for receivables & treasury
httpLearn
s:/ www.highradiMore
us.com/autonomous/
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics| 4
CHAPTER 01
The Current State of AR for Mid-Market Businesses
1.1 AR function as a strategic business partner
Today, the AR team has transformed from being a desk that handles invoices
and receipts to a strategic partner that helps make key business decisions. The
AR team’s fund forecasting models and insights into cash flow positions help the
leadership team make critical decisions around mergers & acquisitions, capital
expenditure, and geographic expansion.
Technology plays a pivotal role in the transformation of AR teams. AR managers
and executives no longer have to spend hours matching invoices or applying
cash manually. OCR engines, web-parsers, and other automated remittance
capturing software save the AR team much time and effort.
AR automation software improves efficiency by reducing errors and supporting
decision-making through features such as collections worklist prioritization,
aging analysis, and credit risk management.
While enterprise organizations have been the front-runners in adopting AR
technology, midsize businesses too have been aggressively pursuing AR
solutions to manage cash flows and stay ahead of competitors. AR teams at
midmarket companies increasingly look to automation to help them free up
cash locked in aging invoices. The pandemic has further accelerated the need
to optimize paper-intensive AR tasks given the remote work conditions and
lockdowns experienced across the globe.
But, only a limited number of companies can boast of fully automated AR
workflows. According to a research
https:/ www.deluxe.com/blog/mindshifts-to-modersurvey,
nize-ap-and-ar-processing/ only 11% of businesses claim their AR
processes are fully automated while 60% say that they use a mix of automation
and manual efforts to manage receivables. 24% of the businesses continue to
depend on manual processes for AR tasks such as payment collections,
receivables management, and cash reconciliation.
As a result, there is a large scope to improve the AR functions in small and
midmarket businesses (SMBs). Automating AR can help reduce costs and
improve the payment processing speed. A study by PYMNTS reveals that U.S.
htps:/w w.pymnts.com/news/b2 -payments/2019/ntrillion
suppliers face $3.1 ew-dat -wo-thirds-of-smbs- ay-im ediate-payments-can-improve-their-cash-flow accounts receivable problems. ht66%
ps:/w .pymnts.com/newsb2-payments/2019new-dat wo-thirdsof-mbsay-imediat-pyments-caimprove-thircash-flow of SMBs in the US
face frequent cash shortfalls. Without the cash reserves and credit lines that
large enterprises enjoy, SMBs are likely to face higher risks of closure if the AR
problem aggravates.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 5
1.2 Inefficiencies in manual AR processes
If your finance team hasn’t migrated to an automated AR system yet, you could
lose time due to invoicing and reconciliation errors.
Let’s take a look at the inefficiencies in a typical manual AR function in the below
flowchart. The red dotted lines in the flowchart indicate manual processes and
what’s likely to go wrong.
For example, in manual or semi-automated AR processes, once you have
invoices in your accounting system, you'll either have to email those invoices or
mail them in envelopes to your clients. This makes it difficult for you to track if
the client has received the invoice.
You need to manually check this by calling the client. A few days down the line,
you’ll need to call the client again to remind them of the payment due dates.
More calls are needed to persuade them to pay and to validate their payments.
This increases your expenses and reduces efficiency.
You may be able to relate to at least some of the challenges discussed in the
graphic above. Automating the steps in your AR process helps improve
efficiency and cuts costs by up to 70%.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 6
1.3 ERP software, accounting systems, and Excel for
AR management
Many companies continue to use spreadsheets or manual methods to manage
their accounts receivables. htp69%
s:/smalbiztrends.com/2017/04/manual-proces .html of small businesses rely on Excel to track
invoices and expenses. This not only leads to errors but also doesn’t help your
business scale up.
ERP software is another tool that many SMBs invest in to optimize their AR
workflows. 48%
htps:/lockstep.io/blg/27-acounts-recivable-mangemnt-facs-forthe-cfo/ of SMBs in the B2B sector say they rely on the limited functionality
in accounting or ERP systems to manage credit and collections.
ERP systems offer basic features to help you digitize invoices, track outstanding
amounts, create AR reports, apply cash, and close invoices. While this helps to
some extent, it may not prove entirely helpful. Due to the limited AR
functionalities that ERP has, you would be forced to supplement it with manual
efforts or coding scripts that further complicate the system.
Before we look at the shortfalls in an ERP’s AR, here’s a quick snapshot of the key
stats that capture the current state of AR in mid-market businesses.
ERP systems offer basic features to help you digitize invoices, track outstanding
amounts, create AR reports, apply cash, and close invoices. While this helps to
some extent, it may not prove entirely helpful. Due to the limited AR
functionalities that ERP has, you would be forced to supplement it with manual
efforts or coding scripts that further complicate the system.
Before we look at the shortfalls in an ERP’s AR, here’s a quick snapshot of the key
stats that capture the current state of AR in mid-market businesses.
The current state of AR in mid-market businesses: A snapshot
84% of businesses are either wholly or partially dependent on
manual methods to complete their AR workflows
U.S. suppliers face a $3.1 trillion accounts receivable problem,
with 66% of the U.S. SMBs facing frequent cash shortfalls
48% of the SMBs in the B2B sector depend on ERP or accounting
systems to manage credit and collections
87% of firms that automate AR functions have achieved faster
processing speed; 79% of them have improved team efficiency
and 72% have saved operational costs
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 7
CHAPTER 02
How to Optimize ERP for AR Challenges:
A Look at Microsoft Dynamics
Enterprise resource planning (ERP) software solutions like Microsoft Dynamics
offer multiple modules to support different functions such as CRM, sales, finance,
and production. Tight integration between the modules helps the management
team get access to company-wide data from a centralized location.
While MS Dynamics offers many functionalities and enables you to store and
analyze your financial data, it may not cover all aspects of working capital
management and cash flows.
While ERP solutions from the Microsoft family have significant finance &
accounting capabilities, the functionalities are often not sufficient to meet all
your accounts receivables needs. For instance, while the ERP helps digitize
invoices and make journal entries, it has limited capabilities for specific AR
processes such as credit risk management and payment processing.
ht ps:/ w w.youtube.com/watch?v=znv74dfsAv0
Fig. Collections management workflow in Microsoft Dynamics (Source)
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 8
Here are five accounts receivable activities that you can optimize within ERP to
free up cash and strengthen your working capital.
1. Payment processing: It is essential to provide your customers with multiple
payment options to enable quick and easy payments. If you don’t offer
customers their preferred payment methods, you’re likely to have a higher days
sales outstanding (DSO) due to delayed payments. The integration of the
payment system and accounting system is also vital to avoid double efforts.
You need to invest in payment connectors and third-party support for
point-of-sale (POS) systems and payment processing to enhance the efficiency
of Microsoft Dynamics. You also need to set up separate workflows for
processing credit card payments, wireless transfers, etc., making it tedious and
expensive for fast-growing mid-market companies.
2. Collections management: Microsoft Dynamics lets you create collections
pages to track your open accounts and also offers customer aging snapshots.
But it lacks advanced features to help collection agents prioritize worklists using
AI-based algorithms. Manual efforts are also required to complete dunning
processes.
3. Cash application and reconciliation: Reconciliation matching rules in
Microsoft Dynamics help you match your bank entries with those in your ledger.
But it has limitations in ensuring straight-through, same-day cash application
for other payment modes such as lockboxes, e-wallets, etc. Matching
incomplete or part-payments is also difficult with the ERP.
4. Customer credit approval: Standardized credit approval processes enable
credit teams to make accurate credit decisions and onboard customers faster.
It also ensures that important credit decisions are approved through the right
hierarchy. Automating the approval process helps plug loopholes and save
time. It ensures that sales teams do not change credit terms without
pre-approval. Proper credit approvals are important for healthy credit risk
management.
5. Credit risk management: Managing customer risk is crucial to AR. You do not
want to offer a customer a large credit, only to find the business going bankrupt
a few weeks later. While Microsoft Dynamics offers features to update credit
attributes of customers and create scoring groups, many of the steps involved
require manual intervention. The tool also doesn’t offer strong AI capabilities to
power predictive risk management models.
ERPs like Microsoft Dynamics help digitize some aspects of the AR process, but
you may have to put in additional manual efforts to ensure their successful
completion.
Microsoft Dynamics offers basic or standard versions of most finance workflows.
But customizing the available features to meet your specific demands is not
easy and requires coding support. You either need to take your IT team’s help or
pay external consultants for it. This delays processes, complicates the usage,
and increases expenses.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 9
With so many bells and whistles, Microsoft Dynamics can feel overwhelming. This
often leads to errors, delays, and the absence of uniform practices. These
limitations arise because the primary focus of ERPs like Microsoft Dynamics is to
unify your workflows for smooth operations and not to augment them.
With so many bells and whistles, Microsoft Dynamics can feel overwhelming. This
often leads to errors, delays, and the absence of uniform practices. These
limitations arise because the primary focus of ERPs like Microsoft Dynamics is to
unify your workflows for smooth operations and not to augment them.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 10
CHAPTER 03
Enhance Microsoft Dynamics with
Invoice-to-Cash Apps
One big advantage that ERP software including MS Dynamics offers is the ability
to integrate with various types of out-of-the-box (OOB) or third-party software.
This helps extend the functionality of the ERP and improve customer satisfaction.
Connecting Microsoft Dynamics ERP with third-party best-in-class AR
automation software helps fill in the gaps and optimizes the ERP for the AR
function.
AR is only one of the many aspects that your finance team works on. But it plays
a crucial role in your business’s success because it manages the cash assets
owed to your company. Any inefficiency in your AR processes affects working
capital availability and your company operations.
3.1 Key functionalities needed in out-of-the-box AR solutions
When extending Microsoft Dynamics’s AR capabilities with out-of-the-box
integrations, you must be careful to choose the right solution. Here’s a list of
functionalities that you must look out for in your AR solution:
Key Functions To Look For In OOB AR Automation Solutions
Invoice Delivery and Tracking Online Credit Application Forms
Automated Dunning Credit Scoring Models
Collector’s Worklist AR Analytics
Automated Cash Reconciliation VoIP Calling
Deductions and Dispute Management Multiple Payment Options
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 11
Invoice delivery and tracking: Your AR team shouldn’t spend long
hours cross-checking invoices and manually sending them. Look for
AR tools that automatically deliver invoices to the right customers via
email or into customers’ accounting (e.g. Xero) or accounts payable
software (e.g. Coupa). Also, track if your customer’s team has
received and opened the invoice emails.
Automated dunning: You need to communicate regularly with
customers to remind them of approaching payment deadlines or
overdue invoices. You should do this irrespective of whether the
client always pays on time. This communication process with clients
is referred to as dunning. The complexity of dunning increases when
you have a growing client base with different credit limits. Manual
dunning processes become less efficient and you’ll need to rely on
solutions that can automate the process by providing
correspondence templates, setting dunning frequency, and sending
dunning letters or emails as per set rules.
Collectors’ worklist: Collection agents often find it hard to decide
which aging accounts to pursue first. Collection agents have to
consider multiple factors such as the aging period, the invoice
amount, and the relationship to decide which clients to pursue on
priority. AR software that offers AI-driven collectors’ worklist
prioritization models and dashboards can help your team save time
and effort, and make better decisions.
Deductions and dispute management: As per data from a recent
poll that we ran, 60% of respondents said they wanted to learn more
about capturing disputes effectively. 40% of the respondents
mentioned that managing escalations took up most of the time
allotted for collections. Look for AR solutions that help create
workflows to capture invoice disputes and share pre-deduction
information. Also, set up customer portals and deduction reason
codes to track and manage dispute cases.
Automated cash reconciliation: Manual cash reconciliation
methods are prone to errors. And errors in cash reconciliation lead to
wrong book entries and poor customer relationships. AR tools with
OCR engines, web parsers, and automated customer identification
and invoice matching features automatically capture data from
checks, customer portals, and emails, and apply cash against the
correct invoices. Many leading AR solutions offer RPA-driven or
AI-based features to automate cash reconciliation. This saves time
and reduces errors.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 12
.
Fig. Automated remittance capture in https://radiusone.highradius.com/
RadiusOne AR Suite
Other good-to-have features to consider are:
Online credit application form: Use online credit application forms
to automatically capture and complete credit limit requests.
Industry-specific credit application forms pre-filled with data from
the CRM software can help onboard customers faster. If you’ve
clients across the globe, check for AR systems that offer credit
application forms in different languages.
Credit scoring models: Credit scoring models help manage risk and
decide on the credit limits for different customers. AR tools that let
users build customized credit scoring models using real-time credit
data from agencies such as Cortera and Dun & Bradstreet can help
improve productivity and reduce the chances of bad debt.
Analytics: Analytics capabilities in AR software provide insights such
as what is the best time to make a collections call and which clients
have a higher probability of delinquency. Analytics functionalities
can also predict cash flows, aging, and collector effectiveness.
VoIP calling: Voice over internet protocol(VoIP) helps collection
agents make phone calls directly from the software using the
internet. This saves collectors much time as they do not have to
depend on an external system. Some AR tools also allow you to save
notes of the VoIP calls.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 13
Multiple payment options: Select AR automation software that
offer multiple payment processing capabilities including wire
transfers, ACH, checks, and e-wallet transfers. You do not want
to delay receiving payments from clients or risk damaging
customer relationships due to unavailability of customers’
preferred payment options.
ht ps:/ w w.highradius.com/software/integrated-receivables/eip -automation/
Fig. Multiple payment options supported in EIPP Cloud
3.2 Other things to look for when selecting an AR software
In addition to the functionalities in the OOB accounts receivable software, you
must also consider the following factors when shortlisting AR solutions.
Implementation time: Plug-and-play AR software that seamlessly
connect with your ERP system is crucial. Ensure that the software
does not take long to implement and can be connected easily
without much coding or extensive IT support.
Support and service: Check for customer service terms and the
implementation support offered by shortlisted AR vendors. Confirm
that minimal IT support is needed from your side. Ensure that the
vendor helps you with training, customization, and other
troubleshooting for free or at minimal charges. Also, check for other
services such as data backup and server uptime.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 14
Cost: One of the deciding factors when purchasing software is the
cost. With AR automation software available for as low as the cost
of a cup of coffee, you must ensure you get the best solution at the
best price. Look for the software features as well as hidden charges
for upgrades and services.
Scalability: Can the AR solution scale with you as your business
grows? Is adding new users and customers on the portal easy?
Migrating from one tool to another is difficult. So, when you
purchase AR software ensure that it can scale with you as your
business grows.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 15
CHAPTER 04
The Promise Of ROI:
How HighRadius Supports High-Growth Companies
Digital transformation has taken the economy by storm this year, and we are
now seeing this trickle down to companies’ accounting and finance
departments. Nearly 93% of CFOs at US firms with at least $25 million in
revenue are currently transforming their accounting operations with
automation.
HighRadius is a leading fintech company focused on optimizing order-to-cash
processes and treasury operations by leveraging automation across credit,
electronic billing, payment processing, cash application, deductions, and
collections, powered by AI and integrated receivables platform for major
companies globally. With lightning-fast remote deployment, minimal IT
dependency, and prepackaged modules with industry best practices,
HighRadius is the ultimate choice for your company's order-to-cash processes.
Easy to deploy Analyst Recognition
Out-of-the-box integration HighRadius named IDC Marketspace
with popular ERPs for Leader (2020-2021) for Accounts
lightning quick implementation, Receivable Automation Software
with minimum IT dependencies second time in a row
HighRadius
AR Suite
for Midsized
Businesses
Easy to scale Quick time to value
Prepackaged modules with Automate repetitive tactical work,
industry specific best practices lower DSO and improve
AR solutions that scale with your needs working capital
HighRadius by Numbers
600+ Across Mid-market and $2.23 Transactions processed
Customers Enterprise companies trillion daily
92+ Truly global SaaS with Finance transformation
1600+
Countries users around the world projects
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 16
Trusted by Leading Mid-sized Businesses
AR automation for hundreds of other clients who use the same ERP software as
you do.
Let your receivables run on auto-pilot so that your finance teams can focus on
website
what matters most to your business. Check our https: //www.highradius.com/ to learn more about us.
If you want to talk to somebody in person and learn more about our products,
schedule a time hthere
ps:/info.hig radius.com/ e tings/radiusone/introductory-cal and we’ll connect with you.
Beyond ERP: The Impact of Optimizing Accounts Receivable for Microsoft Dynamics | 17
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