Collaborative Accounts Receivable Best Practices

Though accounts receivable (AR) automation has helped many UK businesses save time and reduce manual labour, it falls short because it doesn’t:

• emphasise collaboration with customers
• equip the AR department with the right collaboration tools
• bridge silos, thereby frustrating your AR team and customers’ AP teams

In this article, we’ll walk you through the key benefits and a step-by-step implementation process of collaborative accounts receivable. Also, if you’re considering payment options for your customers, Wise Business can help you. It’s a cost-effective way to send business payments and receive money from abroad in multiple currencies, with conversions using the mid-market exchange rate.

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What are collaborative accounts receivable?

Collaborative accounts receivable (AR) involves working hand-in-hand with customers and internal stakeholders like sales teams and executives to create a seamless billing, payment and collections process for your business while providing a smooth customer experience.

This AR process relies on collaborative account receivable automation software to bridge the communication gap between AR teams, internal stakeholders and customers’s accounts payable (AP) teams. It lets you collaborate with customers, resolve disputes, and automate recurring tasks while prioritising your client’s experience.

For context, imagine you are in the finance department of a retail company based in Kent. Your retail company, Warren & Co. still prepares invoices manually, prints them on paper and sends them to your customers’ mailboxes.

With this outdated AR process, your invoices could be inaccurate, missing or land on the wrong table, making payment collection and resolving disputes a long, expensive and strenuous process.

A more effective approach is to use a collaborative AR tool like Versapay and HighRadius to create invoices, receive invoice approvals and verification from customer AP teams, track invoice delivery and proactively prevent disputes.

How does collaborative accounts receivable work?

Collaborative accounts receivable works by streamlining communication between AR teams, internal stakeholders and customers at different stages of the accounts receivable management process. Here’s a stage-by-stage breakdown of how it works:

• Collaborate before invoicing: Before sending an invoice, your AR team should consult the sales team to learn about short pays, discounts or special offers. With this information, the AR team can send accurate invoices to customers, minimising the likelihood of invoice disputes.

• Collaborate while invoicing: Use a collaborative AR tool to automate invoice generation and delivery. This tool gives the AR department and your customers' AP team full visibility into invoices and streamlines payment management.

• Collaborate after invoicing to prevent disputes: Follow up with your customers’ AP team to confirm invoice delivery and resolve issues like missing purchase order numbers, a wrong tax ID, incorrect payment terms or any invoice inaccuracies that might cause late payments.

• Collaborate after invoicing to resolve disputes: Set up an integrated system where your AR department can connect with customers to resolve disputes at the front-office level. Here, you and your customers can open disputes, ask for clarifications about invoices, share supporting documents, and resolve disputes in real-time.

• Collaborate to process payments and reconcile accounts: Use an automated cash application solution that matches payments with outstanding receivables using artificial intelligence.

Benefits of collaborative accounts receivable management

Below are some of the key benefits of collaborative AR management:

Improved collections

A collaborative AR platform serves as a single source of truth. It provides a comprehensive view of outstanding invoices, account statuses, payment trends, and average day sales outstanding (DSO).

Using this platform also enables you to automate reminders and follow-ups with your customers. This means you’ll save time and focus on value-adding tasks.

For example, instead of sending an email or calling your customers individually, your AR team can automate bulk reminders with collaborative AR software. The software gives you access to all the billing and AR collection information you’ll need to chase payments on the cloud.

Improve cash flow

Collaborative AR ensures a seamless billing and payment process, which can accelerate the invoice-to-cash process and boost your business’s liquidity.

Additionally, collaborative AR helps you reduce administrative errors, which are the main cause of late payments. 24% of the businesses surveyed by Gov.UK attributed receiving late payments from their customers to administrative errors, such as failing to log invoices or other invoicing errors.^¹

Using collaborative AR software helps you minimise these administrative mistakes. For instance, automating invoice generation, dispatch, and management can reduce invoicing errors that lead to late payments and disrupt cash flow.

Improve customer relationships

Although chasing payments is essential for maintaining financial stability, many businesses in the UK are reluctant to do it. Research shows that the most common reason provided by 33% of businesses is because they don’t want to damage customer relationships.²

Collaborative AR bridges the communication gap between your customers’ AP and your AR teams. It allows you and your customers to work hand-in-hand to manage payments and resolve disputes. With this, you’ll proactively chase payments while maintaining a good customer relationship.

Streamline dispute management

Collaborative AR helps you manage disputes and provides a centralised communication channel to resolve disputes with customers. Customers can open disputes on these channels, attach documentation to back up their claims and work with your team to resolve them on time.

Reduce manual labour

Collaborative accounts receivable software helps you automate repetitive AR tasks and minimise manual input. You can automate tasks like generating, delivering, and tracking invoices with little to no manual input. This saves your AR team time and helps you focus on more meaningful tasks.

Collaborative accounts receivable best practices

To get the most out of collaborative accounts receivable, here is a list of the best practices to consider:

Automate recurring tasks

Automating repetitive tasks using AR software frees up time, minimises human errors, and increases efficiency. This helps you maintain consistent communication and ensures you don’t miss any important reminders.

You can automate tasks like:

• generating invoices
• delivering invoices
• sending prompt payment reminders
• processing payment
• analytics and reporting
• cash application

Have clear invoicing procedures

A well-defined invoicing procedure ensures consistency in your billing process. This reduces confusion when you prepare invoices for clients.

Having clear procedures also minimises errors and the likelihood of invoice disputes. This means invoices are delivered quickly and payments are processed on time.

When preparing your invoicing procedures, ensure it includes the following:

• billing periods and invoicing dates
• purchase order numbers and address
• billing contact
• payment details and terms

Automate your invoicing and track the delivery status with a software program. Doing this saves you time and helps you deliver invoices accurately.

Conduct a thorough credit risk analysis

Credit risk analysis helps you determine the likelihood of a customer defaulting on payments. This would help you identify high-risk clients and reduce bad debts.

When onboarding customers, ensure you conduct thorough credit risk assessments. This assessment helps you tailor credit limits based on the customer's creditworthiness.

Offer multiple payment options

Provide several payment options to accommodate different client preferences. This allows you to process payments faster and reduce delays.

Have clear credit and collection policies

Have a detailed document that states the terms and conditions for giving credit, and payment deadlines. This document informs customers about your credit policies, reducing invoice dispute risks.

Having clear credit and collection policies also ensures that your team makes a consistent credit decision and that all customers are treated fairly.

Effective communication in collaborative accounts receivable

Effective communication ensures successful debt recovery while improving customer experience. Below is a walkthrough of tips to improve communication between your team and your customers:

Be clear and transparent

Communicate clearly with your customers to avoid confusion. Be explicit about your payment terms, preferred method of receiving payments, and penalties for late payments.

In the case of any changes in your credit policies, inform your customers of these new developments. Doing this helps you build trust and minimise misunderstandings.

Leverage accounts receivable collaboration tools

Many AR software solutions provide a centralised platform, letting you communicate with customers and other internal stakeholders. This platform facilitates collaboration and strengthens customer relationships.

Use multiple communication channels

Provide multiple communication channels for your customers. You can stay in touch with them via phone calls, texts, emails, live chats or a collaborative AR software built-in online portal. This gives your customers the option to choose the best way to communicate with them and in turn, increase their response rates and experience.

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FAQs - collaborative accounts receivable

Here are some of the most common questions answered:

What is the main function of the accounts receivable team?

The main function of accounts receivable teams is to retrieve money owed to the business. AR department ensures this by issuing invoices to customers, tracking invoice delivery, sending payment reminders, and accessing customers' credit eligibility.

What are the common challenges AR teams face?

Some of the major pain points many account receivable teams face include:

• using siloed legacy systems (like spreadsheets) to get their work done
• resolving invoice disputes and payment issues
• not having a standardised collections outreach process
• maintaining good relationships with customers who are late on payment

What is the difference between accounts receivable (AR) and accounts payable (AP)?

Accounts receivable are funds that customers owe your company for products and services that have been invoiced.

Accounts payable are funds that your company owes to third parties that must be paid within a certain period.

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Collaborate to satisfy customers and improve cashflow

Accounts receivable management depends on healthy customer relationships to succeed. Instead of your AR team working in isolation, strengthen the quality of customer relationships and collections through collaborative AR.

To begin, collaborate with:

• Executives: Design accounts receivable strategies that align with the company’s revenue goals and objectives.
• Sales: Document payment terms and discounts that your sales team offers customers in a centralized system.
• Customer AP teams: Set up a collaborative platform where you and your customer’s AP teams can discuss payment details, monitor invoices, identify discrepancies and resolve disputes quickly.

Finally, modify your collaborative AR process to suit your business’s specific needs.

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Sources used:

1. https://assets.publishing.service.gov.uk/media/66eb01e7ba4b4b3f945016c8/late-payments-research-understanding-variations-in-payment-performance-and-practices-across-business-sectors-and-sizes.pdf
2. https://assets.publishing.service.gov.uk/media/66eb01e7ba4b4b3f945016c8/late-payments-research-understanding-variations-in-payment-performance-and-practices-across-business-sectors-and-sizes.pdf

Sources last checked on date: 30-Jun-2025