Technology & Innovation

Transforming the digital front door of accounting

Financing resources for businesses

The digital front door of an accounting department is an inbox with an email address such as [email protected] or [email protected].  Digital transformation of your accounting front door — through AI, workflow, and automation — can dramatically improve cash flow especially in the new normal of remote work.

In this article we will cover:

The digital transformation of the accounting department

For the past year accounting departments have stepped up to the challenges of the pandemic.  Their essential role in organizations has been performed with extraordinary efforts as many legacy paper-based processes left accounting teams to navigate in-office requirements amidst various work from home mandates around the globe.

There is, however, a growing recognition that relying on sheer effort to keep cash flowing is not sustainable nor sufficient.  With cash flow as an imperative, CFOs, controllers, and accounting managers need to deploy digital transformation solutions to manage cash flow more effectively and efficiently in the face of ongoing volatility over the long term.

The pandemic has given a real-world view of how far along accounting departments are in their digital transformation journey. In most cases, the verdict is coming back “not nearly as far as we thought we would be.” Although most departments have some level of automation, the extensive use of spreadsheets to manage receivables and payables is an indicator of just how much transformation remains. In fact, research and experience with accounting departments indicates that very few have taken the steps they need to become truly digital.

Personal inboxes create workflow bottlenecks

One survey by Lockstep, a provider of accounting email automation, found more than 90% of accounting departments use Outlook or Gmail to manage their digital front door.  The consequence: After a vendor or customer sends an email to the accounting department email address the resulting conversation will ensue from a staff member’s personal inbox.

Personal inboxes are inherently manual given that they are, in fact, personal and only accessible by the account owner.  Once an email conversation begins in a personal inbox the conversation is sucked into an information blackhole as the conversation is no longer visible to other team members.  If that person is out-of-the-office or busy on another project, the conversation can stall and suddenly it becomes a bottleneck.  With each personal inbox the possibility and likelihood of bottlenecks increases.   And what if someone leaves the company?  Or goes on vacation?  Requests and communication to that personal email address that go unaddressed can lead to disruptions in operations and damage to customer relationships, among many others.

Personal inboxes are cash traps that slow down collections and increase past-due deliverables, but they are also cash leaks when duplicate invoices are paid, early discounts are missed, or fraud goes undetected.  Simply put, personal inboxes impair cash flow and in today’s world, accounting departments simply need a new approach.

Lessons learned from automating other functions

There’s no need to reinvent the wheel – accounting departments can, and should, learn from their peers in the company.  Other departments use advanced automation behind their own digital front doors.  Customer service uses support software to assist customers.  Human resources use HR automation to work with candidates. IT uses help desk software to serve employees.  Accounting should do the same and abandon personal and shared email addresses for an enhanced ‘accounting inbox’ that is integrated with the ERP or accounting software.

Taking a play from support software, an accounting inbox provides for a shared workspace with roles and assignments.  As emails come in from customers and vendors, those emails are assigned to a member of the team.  With clear ownership and transparency, responses are easier to track and nothing is lost, and the measurement and enforcement of committed response times to customers and vendors is also easily managed.  Now more than ever, the shared workspace of an accounting inbox is critical to teams that are remote and need to coordinate work.

Kathy Panaro, Controller at EST Associates, an environmental firm in Massachusetts, saw the value in moving her accounting department to a shared workspace. Her goal was to eliminate manual processes in collections so they could streamline their invoice-to-cash process. To achieve this, she tasked her team with harvesting an AP department email address for each customer so they could eliminate the delays in receiving payment. “We wanted to make sure that the invoices are getting into the hand of someone in a department that can eventually pay us,” Kathy said.

Benefits of automating your accounting department

Similar to marketing automation, an accounting inbox provides automated mail merging.  Email templates can automate remittance advice, dunning, statements, and receipt notification to name a few, which saves massive amounts of time that can be used for other activities such as calling customers or negotiating early payment discounts with vendors.

Approvals for invoices, disputes, and early payment discount offers require tracking and follow-up to ensure timely payment and collection.  An accounting inbox automates approval management and accelerates the approval cycle.

“Lockstep Collect has been a game-changer.  Our invoices are emailed from Lockstep Collect.  Statements and reminders are automatically generated at our pre-defined terms. Customers are able to pay or dispute their invoice utilizing a secure and unique link without having to create and remember a password. And, we are able to create an audit trail to document our collection efforts for each customer. This provides an instant snapshot of a customer’s credit history to be used in determining a credit risk before scheduling additional work. The customer is also able to alert us if there is a discrepancy on the invoice without the invoice aging to or past terms. An important factor in our decision was Lockstep Collect’s seamless integration with Sage Intacct,” Kathy explained. “It has allowed us to fully automate our AR process, from beginning to end.”

Improve customer and vendor communication

An accounting inbox also provides communication channels for each vendor and customer.  All history of communication back and forth are stored in conversational email given one searchable source of truth.  The automated organization saves the overhead of manually filing emails and attachments along with the inevitable filing mistakes that come about.

EST immediately saw ROI from moving to an accounting inbox with AR automation. Their efforts to open the digital front door to their customers by collecting a departmental email address moved the needle to almost all of their customers receiving invoices digitally – from 27% to 80%.  This resulted in a 148% increase in cash flow, resulting in $243,000 more cash in the bank.

Just as the accounting inbox sets up channels, it can also help to monitor for fraud which has become more and more prevalent in recent years.  Should an email arrive from an unknown email address, the accounting inbox can flag it as new and determine if it matches with vendor or customer master records in the ERP.

In conclusion

The pandemic has uncovered the cash traps and cash leaks caused by use of personal and shared email addresses alone. In this new normal where cash flow management is critical, it is time to digitally transform to using an accounting inbox.  The results? You will collect faster, spend less, save time, and strengthen your reputation with customers and vendors.