Automation is nothing new to distributors, especially as customer demands continue to increase, expecting faster and better results from their suppliers. Automation helps improve efficiencies to meet those demands. From inventory management to fulfillment, automation is helping distributors manage their supply chain and their customers’ needs.

Although businesses have learned that optimizing the physical supply chain drives profit, the financial supply chain often remains an overlooked piece of the overall puzzle, leaving accounts receivable (AR) departments disorganized and full of inefficiencies. Today there are options to streamline these internal processes, saving companies both time and money.

What does the financial supply chain look like?

Distributors have intense invoice demands — working between manufacturers, dealers and even end-users. And distributors can be dealing with invoices that number in the thousands on any given day, often using highly manual processes. These labor intensive processes, such as printing invoices and stuffing envelopes, individually keying in credit card payments, and manually applying payments to customer accounts and updating the ERP, can cause AR departments to fall behind in the invoice-to-cash process. The slower and more manual that process is, the more money is left in the AR spreadsheets rather than being put back to work for the company. This costs companies more money in the long run, and it hurts efficiency, customer satisfaction and employee satisfaction, too.

To combat the negative side effects of poor cash flow, distributors can invest in automated solutions for their financial supply chain just as easily as they have with their physical supply chain. And this automated financial supply chain is defined as payment cycle management, or PCM.

The ins and outs of PCM

The invoice-to-cash process involves several time-consuming and manual steps. From issuing the invoice to receiving and processing the payment, matching the payment to the remittance and reconciling the invoice against any discrepancies, every step can slow down the process.  With an automated payment cycle management solution, AR departments are able to streamline the three distinct components: invoice delivery, invoice payment and cash application.

• Invoice delivery is comprised of sending the invoices to client in any format. This includes print/mail, fax, email and online customer portals.

• Accepting invoice payment can happen through a variety of channels, including wire transfer, credit card, ACH and paper checks.

• Cash application involves matching the received payment to the correct invoice so the cash can be applied more quickly.

A PCM solution automates these three steps for you. With smart AI — robotics process automation to eliminate simple, repetitive tasks and supervised machine learning to continually increase process effectiveness — a world-class PCM solution allows AR teams to focus on more strategic projects that grow the business.

The benefits to automating your financial supply chain include:

• Accelerating your cash flow. This can happen in a number of different ways. Automation increases the speed at which customers will receive their invoices. No more printing invoices, stuffing envelopes and driving the invoices to the post office. By automating the payments process and handling more electronic payments, you increase the speed at which cash is put back into your business. This in turn reduces costs and also days sales outstanding, or the average number of days that a company takes to collect revenue after a sale has been made.

• Improving operational efficiencies. Automation ultimately reduces human error and also reduces the number of resources that are dedicated to these manual efforts. This means that AR teams are able to dedicate their energy to strategic initiatives.

• Increasing transparency. When using manual processes, tracking invoices can be cumbersome.  It’s also difficult to find the data that customers are looking for when they call in about lost invoices, or because they don’t understand the invoice they received. An automated solution that takes advantage of electronic invoicing and payments will also offer a reporting dashboard or self-service portal that allows both your business and your clients to track and manage the invoice-to-cash process.  

This ultimately creates a win for every player in the supply chain. The bill recipient or customer benefits from a more convenient way to do business. And the seller or distributor benefits from significant cost reduction and increased cash flow. Processes are simplified and improved, and customer satisfaction increases.

When automation wins

Supply chain professionals are constantly thinking about driving efficiency and shortening the time and distance between them and the next leg of the chain. But they shouldn’t forget about the financial supply chain in this course of action. There is a significant opportunity to grow the business through increased cash flow, higher efficiency and improved customer satisfaction. By accelerating cash flow, companies can reinvest more rapidly in the business , focus on growth and drive innovation. Altogether, these solutions address the final leg of the supply chain -- actually getting paid for your product or services. Automating PCM is one of the easiest ways to cut the slack in the financial supply chain and support your entire business.

Ed is the Chief Financial Officer at Billtrust and leads the finance and administration functions. He has more than 35 years of experience working as a CFO at both public and private companies.