Dive Brief:

• Accounts receivable teams are struggling to keep on top of collecting payments on invoices, with many being weeks or even months behind schedule, according to a recent poll conducted by payments software provider Versapay.
• The survey of 300 CFOs found that only a minority (23%) of AR teams are up to date. By contrast, 38.33% said they’re slightly behind; 14.67% said they are weeks behind; and 22% said they are months behind. Meanwhile, 2.33% say they will never fully catch up.
• This is partially due to the number of invoices many companies have to process: 10.33% of teams process 10,000 invoices or more in a given month, 28% process between 2,500 and 10,000 and 41% process between 300 to 2,500. The survey also found that 39% of teams report that the average invoice amount is between $300 and $2,500; meanwhile, 32% of teams said their invoices were $10,000 or more. 

Dive Insight:

Payment speed is a major priority for finance leaders, as it affects cash flow and working capital but Russell Lester, CFO of Versapay, said in an interview that AR departments are not always prioritized.

“It’s a part of the business that is sort of forgotten, misunderstood, when really your AR practitioners are the lifeblood of your cash flow,” Lester said. “I think modern CFOs are realizing they hold the tip of the spear in generating healthy cash flow: the number one way is getting paid for what you did.” 

The poll found that communication delays due to missing information were singled out as the major culprit delaying processing while the rise in fraudulent digital invoices is another factor, Russell Lester, CFO of Versapay said in an interview.

“The proliferation of digitization means scammers are getting more prevalent on the [accounts payable] side of things and constantly I am getting emails from people presumably asking for payment… How many fake DocuSign approvals do we get all the time? In this case, communication is the key,” Lester said. 

Disputes over an invoice  — things like missing or damaged items, application of discount rates, or payment terms — are also slowing down AR processes: 56.67% of teams reported that resolving disputes takes up at least a quarter of their day. Larger companies especially have this issue, with 36% of CFOs at such firms reporting their AR teams typically spend half or more of their time on dispute resolution.

Previous data indicate this is not a new issue: a 2022 Versapay report shows 54% of finance leaders saying reducing delays in cash flow was a major priority, while 41% said payment speed is the biggest challenge to their AR process.

The report touted collaborative payment portals, business-to-business invoice delivery and payment acceptance technologies that allow for two-way communication between an AR team and customers’ AP teams in-application as a possible solution to these issues. 

The poll comes as faster payments stemming from improved technology also poses some potential drawbacks for finance teams. For example, the instant payment service FedNow that launched last week is touted as the biggest upgrade to the U.S. government’s payment system in 50 years. But it could eat into the “float” or amount of time between initiation of payment and clearing which some CFOs rely on to manage cash, CFO Dive previously reported.