How to Automate Accounts Receivable

To automate accounts receivable, you integrate invoicing, payment collection, and follow-ups into one streamlined system that runs with minimal manual input. This usually involves using accounting or invoicing software that can generate invoices automatically when a project or service is completed, send them to clients instantly, track payment status in real-time, and issue reminders before or after due dates. 

Digitize Your Invoicing Process

The foundation of AR automation is moving away from paper invoices and manual spreadsheets. Digital invoicing makes it easier to track, send, and automate reminders.

Example: Instead of creating Word or Excel invoices, use an invoicing platform that automatically generates branded invoices with client details, terms, and payment links.

Best practices:

• Standardize invoice templates with your logo, payment terms, and due dates.
• Integrate your invoicing system with your CRM or project management software.
• Offer multiple payment methods (ACH, credit card, PayPal).

Set Up Automated Invoice Delivery

Manually emailing invoices introduces delays. Invoice automation ensures invoices are delivered instantly after a service is completed or a milestone is reached.

How to do it:

• Use an invoicing tool that sends invoices automatically after project completion.
• Schedule recurring invoices for subscription or retainer-based clients.

Example Table: Manual vs. Automated Invoice Delivery

Automate Payment Reminders

Following up on late payments is one of the biggest drains on AR teams. Automated reminders reduce awkward conversations and keep payments on track.

Options to automate reminders:

• Send a reminder 3 days before the due date.
• Trigger another reminder on the due date.
• Send escalating reminders (e.g., 7 days overdue, 14 days overdue).

Example Reminder Sequence:

• T-3 days: Friendly reminder: “Just a heads-up, your invoice is due soon.”
• Due date: Polite notification with payment link.
• 7 days overdue: Professional reminder with late fee note (if applicable).

Implement Automatic Payment Matching

Reconciling payments manually with bank statements or transaction records wastes hours each month. Automated payment matching ensures payments are instantly applied to the right invoices.

How it works:

• The system scans incoming payments.
• Matches payments with invoice numbers or client records.
• Updates your accounting software automatically.

Example: A client pays via ACH with their invoice number in the reference field. Your AR automation software detects the number and closes the invoice in real-time.

Enable Auto-Pay for Repeat Clients

For subscription-based or recurring services, setting up auto-pay eliminates the payment delay altogether.

Benefits:

• Predictable cash flow.
• Zero manual intervention from clients.
• Stronger client retention since billing becomes frictionless.

Example: A landscaping company sets up monthly auto-pay for clients who receive regular maintenance services. Instead of chasing monthly payments, funds are automatically debited.

Track Metrics with Automated Reporting

Automation doesn’t just streamline workflows — it provides insights into payment patterns.

Key AR metrics to monitor automatically:

• Days Sales Outstanding (DSO): Average number of days it takes to get paid.
• Percentage of overdue invoices.
• Collection effectiveness index (CEI).

How it helps: If you notice that DSO is increasing, you can adjust payment terms, improve reminders, or encourage auto-pay adoption.

Integrate AR Automation with Your Accounting System

For true efficiency, your AR automation must connect with your accounting or ERP system. This prevents data duplication and ensures financial records stay accurate.

Example integrations:

• QuickBooks
• Monday

Result: Invoices, payments, and reconciliations flow seamlessly without manual data entry.

Choose the Right AR Automation Tool

Not all tools are created equal. The best option depends on your business model, industry, and client preferences.

What to look for in AR software:

• Customizable invoicing.
• Automated reminders and late fee enforcement.
• Payment gateway integration.
• Real-time reporting.
• Security and compliance (PCI-DSS, SOC2).