The COVID-19 pandemic has brought about significant changes in the business landscape, especially for small and medium enterprises (SMEs). As companies adjust to the new normal, accounting professionals face numerous challenges in managing accounts receivable (A/R). This white paper discusses the state of A/R in 2023, the impact of the pandemic on SMEs, and the role of A/R automation in overcoming these challenges. We also discuss the top 5 SME-friendly Accounting Software in 2023 with A/R Automation capabilities.

The State of Accounts Receivable in 2023

Key Facts and Figures

• In 2023, SMEs account for approximately 90% of global businesses and generate over 50% of global employment.
• The average DSO (Days Sales Outstanding) for SMEs has increased by 15% since the onset of the pandemic.
• A recent survey indicates that 70% of SMEs consider cash flow management to be their top challenge in the post-pandemic era.
• A/R automation software adoption among SMEs has grown by 25% since 2019, indicating a growing trend towards digital transformation.

Impact of COVID-19 on A/R

• Shift to remote work: The pandemic has led to the widespread adoption of remote work, leading to increased reliance on digital tools and cloud-based solutions for A/R management.
• Cash flow concerns: With businesses facing economic uncertainty, cash flow management has become more critical than ever. Efficient A/R processes are essential to ensure financial stability.
• Increased demand for digital payments: The pandemic has accelerated the shift towards digital payments, making it necessary for SMEs to adapt to this change and offer more convenient payment options.

Challenges SMEs Face in A/R Management

• Manual processes: Many SMEs still rely on manual, paper-based processes, leading to inefficiencies, errors, and a lack of visibility into their A/R operations.
• Limited resources: SMEs often have limited staff and budget, making it difficult to manage A/R effectively and invest in advanced technology solutions.
• Changing regulations: Navigating the complex and ever-changing regulatory environment can be challenging for SMEs, increasing the risk of non-compliance and potential penalties.
• Customer relationship management: Maintaining positive customer relationships is essential for SMEs, but ineffective A/R management can lead to disputes and delayed payments, harming these relationships.

Embracing A/R Automation: The Solution for SMEs

• Streamlined invoicing: A/R automation software allows SMEs to create, customize, and manage invoices more efficiently, reducing manual work and the risk of errors.
• Improved cash flow management: Automation enables SMEs to track payments, send reminders, and apply late fees automatically, leading to faster payments and improved cash flow.
• Enhanced reporting and analytics: Automation tools provide real-time insights and analytics, allowing accounting professionals to make data-driven decisions and identify areas for improvement.
• Regulatory compliance: A/R automation software helps SMEs stay up-to-date with changing regulations, reducing the risk of non-compliance and potential penalties.
• Better customer relationships: Automated processes improve communication with customers, reducing disputes and maintaining positive relationships.

Top 5 SME-Friendly Accounting Software in 2023 with A/R Automation

1. QuickBooks Online

A comprehensive cloud-based accounting solution, QuickBooks Online caters to SMEs with its user-friendly interface, extensive features, and seamless integration with other QuickBooks products and third-party apps.

• Established: 2004
• Relative Market Size: Leader in the accounting software market for SMEs
• Top Strength: User-friendly interface and seamless integration with other QuickBooks products and third-party apps.

A/R automation capabilities:

Invoice creation and management
Payment reminders and tracking
Integration with payment gateways
Customizable templates and branding
A/R reporting and analytics

Pros:

Easy to use and navigate
Cloud-based, allowing access from any device
Seamless integration with other QuickBooks products and third-party apps
Strong support and online resources

Cons:

Limited advanced A/R features compared to some competitors
Can become expensive for growing businesses with multiple users

2. Xero

Designed for SMEs and accounting professionals, Xero offers real-time financial data access, a user-friendly platform, and robust integration with a wide range of third-party apps to streamline accounting processes.

• Established: 2006
• Relative Market Size: Strong contender in the global accounting software market for SMEs
• Top Strength: Real-time financial data access, unlimited users, and robust integration with third-party apps.

A/R automation capabilities:

Invoice creation and customization
Automatic payment reminders
Integration with multiple payment gateways
Real-time cash flow updates
A/R reporting and insights

Pros:

User-friendly interface and design
Robust integration with third-party apps
Real-time financial data access
Unlimited users with no additional cost

Cons:

Limited customer support options (primarily email-based)
Some features require additional add-ons for full functionality

3. FreshBooks

FreshBooks is a popular choice for freelancers and small businesses, providing an intuitive interface, excellent customer support, and time-saving features like invoicing, time tracking, and project management.

• Established: 2003
• Relative Market Size: Popular among freelancers and small businesses
• Top Strength: Intuitive and easy-to-use interface with excellent customer support and time tracking features.

A/R automation capabilities:

Customizable invoices and estimates
Automated payment reminders and late fees
Recurring invoicing and billing
Integration with payment gateways
A/R reporting and analytics

Pros:

Intuitive and easy to use
Excellent customer support
Time tracking and project management features
Scalable plans for growing businesses

Cons:

Limited inventory management capabilities
Extra cost for additional team members

4. Zoho Books

As part of the Zoho suite of business tools, Zoho Books offers a comprehensive and customizable accounting solution for SMEs, featuring seamless integration with other Zoho apps and a wide range of third-party tools.

• Established: 2011
• Relative Market Size: Rapidly growing presence in the SME accounting software market
• Top Strength: Comprehensive A/R features and seamless integration with Zoho's suite of apps and third-party tools.

A/R automation capabilities:

Invoice creation and management
Automatic payment reminders and thank you notes
Integration with multiple payment gateways
Recurring invoices and auto-billing
A/R reporting and analytics

Pros:

Comprehensive features for A/R automation
Integration with Zoho's suite of apps and third-party tools
Affordable pricing options
Multilingual and multicurrency support

Cons:

Steeper learning curve compared to competitors
Limited payroll features

5. Sage Business Cloud Accounting

With a long-standing presence in the accounting software market, Sage Business Cloud Accounting provides an easy-to-use platform for SMEs, integrating with other Sage products and third-party apps to streamline financial management.

• Established: 1981 (as Sage Group), Sage Business Cloud Accounting launched in 2011
• Relative Market Size: Long-standing presence in the accounting software market with a global customer base
• Top Strength: Easy-to-use interface with integration capabilities with other Sage products and third-party apps.

A/R automation capabilities:

Invoice creation and customization
Payment reminders and tracking
Integration with payment gateways
A/R reporting and insights
Bank reconciliation

Pros:

Easy to use and navigate
Integration with other Sage products and third-party apps
Mobile app for on-the-go access
Strong support and knowledge base

Cons:

Limited advanced A/R features compared to competitors
Payroll and advanced inventory management features require separate subscriptions

Which Accounting Software should you go for in 2023?

Each of these accounting software options offers automation capabilities for accounts receivable, with varying degrees of customization and advanced features. QuickBooks Online and Xero offer the most advanced automation capabilities, while Zoho Books, FreshBooks, and Sage offer more affordable options with a range of automation features to choose from. Ultimately, the best software for your business will depend on your unique needs and budget.

Conclusion

In the post-pandemic era, SMEs face numerous challenges in managing their A/R operations. By embracing A/R automation, accounting professionals can overcome these challenges and ensure the financial stability and success of their organizations. As we move forward, it is essential for SMEs to adapt to the rapidly changing business landscape and invest in technology solutions that drive efficiency, growth, and resilience.