Streamlining Accounts Receivable: Transforming an Overlooked Cornerstone of Business Operations

Accounts Receivable (AR) is the lifeline of any company’s cash flow, yet it often goes unnoticed in the hustle of product launches, sales drives, and marketing…

Accounts Receivable (AR) is one of the most critical components of any company’s operations. Yet, it often gets overshadowed by the demands of product development, engineering, sales, and marketing. So, what exactly is Accounts Receivable, and why does it frequently find itself sidelined?

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After the sales team secures a deal—navigating champions and stakeholders, enduring rigorous contract negotiations, and finalizing the agreement—the contract must still journey through the organization. It reaches the finance and billing teams and eventually the tax department, especially when future funding rounds, mergers and acquisitions, or going public are on the line.

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The Billing Bottleneck

The first step is the billing team’s review. They need to record the new customer in the CRM or Enterprise Resource Planning (ERP) system— then placed into the accounting software be it Puzzle, QuickBooks Online, or something else. The contract’s terms become the billing parameters, and key details are extracted using the C.H.A.R.G.E. framework:

C.H.A.R.G.E.

• Cost: How much are we charging?

• Handling: What is our invoicing method?

• Amount Due: When is the payment expected?

• Responsibility: Who is responsible for the payment?

• Growth: Do rates increase over time? Are there additional usage fees?

• Extend: What are the renewal terms?

Generating the first invoice hinges on successfully answering these questions, which can vary based on your company’s revenue model and sales process. This often leads to extensive back-and-forth between account executives and finance teams.

Once the invoice is issued, sending it becomes a monthly routine. However, simply emailing a PDF is no longer sufficient in today’s automated procurement landscape. Purchase orders may need to be attached, invoices uploaded to custom portals, and additional forms submitted. Finance and sales teams often resort to maintaining customer databases in Excel spreadsheets—a method prone to errors and inefficiencies.

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The Unpaid Invoice Dilemma

Regularly sending invoices doesn’t guarantee payment. If an invoice goes unpaid, services may continue while expenses mount without corresponding revenue. At this stage, customer service and billing teams collaborate to reach out with friendly—or firm—reminders. Collecting payment is crucial; without it, can sales sustain your organization’s growth? This process can consume hours of communication and require constant updates to multiple spreadsheets.

At month’s end, Financial Planning & Analysis (FP&A) and tax teams review customer contracts to recognize revenue from each sale.

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Making the Process Cleaner

Feeling overwhelmed yet? When the workflow is well-structured, it operates smoothly. But when issues arise—like a soaring AR balance—you might find yourself stepping in to manage collections. The company may look profitable on paper, but cash flow tells a different story.

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Here are some tips to streamline the process:

1. Maintain a Clean CRM: Keep your Customer Relationship Management system updated with each deal’s start and end dates, along with financial details.

2. Monthly Reconciliation: Align your CRM with your accounting software to account for new deals.

3. Invoice Scheduling: Create a detailed invoice schedule for each deal.

4. Shared Tracking Sheets: Use spreadsheets to list all deals and generated invoices, color-coding paid versus unpaid.

5. Assign Follow-Up Responsibilities: Designate team members to follow up with customers and maintain communication notes.

6. Monitor AR Aging Reports: Prevent invoices from aging beyond 60 days.

7. Implement Overdue Policies: Establish procedures for invoices over 90 days old, including timely write-offs.

If you’d prefer to automate this workflow, JustPaid can help your team stay organized and manage every sale through AI-driven automation.

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Case Study: Transforming Billing Efficiency

One of our clients faced labor-intensive billing processes, with some contracts taking up to an hour to process. This inefficiency led to delayed revenue collection, difficulty tracking due dates, and a significant amount in outstanding payments, with invoices extending beyond 90 days overdue.

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Key Challenges:

• Manual Billing Processes: Processing each client contract was time-consuming, contributing to billing delays.

• Delayed Revenue Collection: Prolonged billing cycles resulted in invoices overdue by 60+ days.

• Collection Difficulties: The finance team struggled to monitor cash flow effectively due to outstanding payments.

• Limited Revenue Visibility: Disparate data made it hard for leadership to track revenue metrics and payment schedules in real time.

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JustPaid’s Solution:

We collaborated with the client to implement an automated billing solution based on individual sales contracts. By auditing the CRM and reconciling billing entries, we took over the manual billing process with an all-in-one platform, eliminating unnecessary steps.

Key Learnings and Common Mistakes Addressed:

• Lead with Executed Contracts: Use mutually signed contracts to guide the billing sequence.

• Proactive Reminders: Start reminding customers about upcoming payments instead of overdue ones to improve collection rates and client satisfaction.

• Immediate Invoicing: Send invoices promptly post-sale to capitalize on customer engagement, including clear payment instructions and necessary attachments.

• Regular Audits: Conduct monthly checks where the CRM is reconciled with financial records. Leverage integrations to automate data cleanliness.

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Lessons Learned:

• CRM Maintenance is Crucial: While essential for projecting revenue, CRMs are often poorly maintained.

• Centralize Contracts: Keeping all contracts in a shared folder streamlines reconciliation between CRM and billing records.

• Enhance Team Communication: Improved collaboration between sales and finance teams is imperative for smooth operations.

• Automate Routine Tasks: Even simple tasks like invoicing and reminders can free up significant time for finance teams, allowing focus on strategic efforts.

• Dedicated Collections Personnel: Assigning someone to focus on collections improves overall collection times.

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Results and Impact:

Recovered Outstanding Payments: Over $230,000+ in overdue invoices were recovered, stabilizing the startups cash flow.

Reduced Payment Times: Average payment cycles dropped from 55+ days to just 10.

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Increased Efficiency: Time spent on billing tasks was reduced from an hour to 5 minutes per contract, allowing the finance team to focus on more value-added activities.

Improved Revenue Awareness: CRM close-won deals are now seamlessly imported into the accounting software, keeping finance teams informed of new revenue for billing.

By addressing these challenges head-on and leveraging automation, companies can transform their Accounts Receivable processes from a neglected necessity into a streamlined, efficient operation that supports growth and financial stability.

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At JustPaid.ai, we believe Accounts Receivable shouldn't be a burden—it should be a strategic advantage. By automating repetitive tasks, integrating with your CRM, and providing real-time insights, we empower your finance teams to focus on what truly drives growth, not just administrative work.

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