Working capital — that gap between what your company owns and what it owes in the short term —is the lifeblood of your business operations.

When your working capital is tight, everything from paying employees to keeping inventory stocked becomes a little more stressful. And with 59.2% of companies seeing their cash conversion cycles deteriorate in 2023, there's a good chance you're feeling the squeeze too.

What's worse? There's about $1.76 trillion in untapped working capital just sitting there across US companies. That's money that could be funding growth, covering expenses, or helping you sleep better at night.

But your accounts receivable process might be the key to unlocking some of that capital. Companies with strong current assets (like efficiently collected AR) and well-managed liabilities are positioned to take advantage of opportunities while competitors struggle.

In this article, we'll show you how AI-driven AR automation can transform your working capital position without requiring a complete overhaul of your existing systems. Because sometimes, the difference between financial stress and financial flexibility is just a smarter approach to getting paid.

The Impact of Accounts Receivable on Working Capital

Accounts receivable (AR) is a big part of your company's current assets and has a direct effect on your working capital. When customers buy from you on credit, that money sitting in AR represents cash you should get pretty soon — if everything goes well.

Current Asset Significance

Your AR contributes to your liquidity, giving you the resources needed to meet day-to-day obligations. When your AR increases, it signals potential cash coming in, which can be really important for keeping operations running and funding growth.

But there's a catch — with 55% of B2B invoices overdue in 2023, that potential cash often stays just that: potential. And when 37% of AR teams are weeks or months behind on collections, those assets on your balance sheet might not be as "current" as you'd hope.

Cash Flow Relationship

Managing your accounts receivable well is essential for optimizing cash flow. When you collect payments on time, you've got funds available when you need them, and you don't have to rely as much on outside financing.

The connection between AR management and cash flow is pretty straightforward. Companies with efficient invoicing that follow up on unpaid bills can really improve their working capital position. This approach doesn't just help with liquidity — it also supports business growth by freeing up money that can be reinvested.

Just look at Danone North America, which used AI tools for cash application and deductions management. They achieved straight-through cash posting and recovered $20 million annually in invalid customer deductions that would have been lost revenue otherwise.

Challenges in Managing Accounts Receivable for Working Capital Optimization

Managing accounts receivable comes with several challenges that can make it hard to optimize your working capital. If you want to maintain healthy cash flow, you need to recognize these obstacles. Here are the main ones:

Lengthy Payment Cycles

When customers take their time paying you, it can really stretch out your AR cycle. This hurts cash flow and limits the working capital you have available for other things. And with more than half of B2B invoices showing up late, this isn't a small problem.

Customer Disputes

Disagreements about billing or service delivery often cause payment delays. A customer questions an invoice, and suddenly you're waiting another 30 days to get paid. These disputes complicate collections and tie up your AR team's time that could be spent on other accounts.

Inefficient Processes

Manual invoicing and tracking can introduce errors and slow down how quickly you collect. This has a negative impact on your cash flow management. It's a bigger problem than you might think — 77% of AR teams report being behind on collections, with 2.33% saying they'll "never catch up." That's not great for your working capital position.

Lack of Visibility

When you don't have good insights into outstanding invoices and customer payment patterns, it's hard to follow up proactively. This is especially tough for smaller businesses — 59% of SMBs cite cash flow forecasting as their top challenge with manual AR processes.

Addressing these challenges is essential if you want to secure your liquidity and grow your business effectively.

AI-Driven Solutions for Accounts Receivable Management

AI is changing how businesses handle their accounts receivable. Companies are now using AI solutions to make their processes work better and faster. Here's how AI is helping:

Automation of Billing and Collections

AI helps automate invoicing, which cuts down on human error and speeds up how quickly you collect cash. This means your team doesn't have to spend hours creating invoices — they can focus on more important tasks like building relationships with customers.

Intelligent Cash Application

With AI technologies, payments get matched to invoices really accurately. This saves a ton of time on reconciliation, which is usually a headache for AR teams. You know that feeling when you're trying to figure out which payment goes with which invoice? AI pretty much eliminates that problem.

Predictive Analytics

By looking at past data, AI can spot patterns and predict when payments might come in late. This lets you follow up with customers before things become a problem. It's like having a crystal ball for your cash flow — pretty handy when you're trying to manage working capital.

These improvements let your finance team focus on strategy instead of getting bogged down in repetitive tasks. When you implement AI-driven AR solutions, you can significantly increase your working capital and maintain healthy cash flow. Using these technologies gives your business an edge and improves your overall financial health.

Key Benefits of AI-Driven Accounts Receivable Solutions for Working Capital Enhancement

1. Streamlined Invoice Management with Automation

AI-driven accounts receivable solutions are changing how businesses handle invoices. With automation, creating and sending invoices becomes simpler and faster. This directly helps your working capital by minimizing delays in billing customers.

The main advantages include:

• Instant Invoice Generation: AI systems can turn complex sales contracts into invoices right away, making sure billing happens on time and accurately.
• Efficient Tracking: Automated tools keep an eye on invoices throughout their lifecycle, giving you real-time visibility into what's still unpaid. This cuts down on manual errors and improves accountability.
• Customer Reminders: Built-in reminder systems help get payments on time. By sending automated notifications, you can improve cash flow without needing more staff.
• Draft Management: AI solutions manage draft invoices easily, including all the customer information to make sure everything's accurate before sending out final bills.

This streamlined approach doesn't just make operations more efficient — it also strengthens your financial stability. You can use resources better when invoicing is automated. With less administrative work, your finance team can focus on strategic areas, like analyzing cash flow and improving credit terms.

Think about a mid-market company using an AI system to automate invoicing. Instead of spending hours manually creating and sending invoices, the team can proactively follow up with clients on overdue accounts. This not only brings cash in faster but also builds stronger customer relationships through consistent communication.

Adding automation to accounts receivable definitely helps improve working capital by making billing more efficient. As more companies adopt these advanced solutions, they set themselves up for sustainable financial growth and better operational flexibility.

2. Improve Cash Flow by Getting Paid Faster

AI-powered analytics are changing how businesses manage their accounts receivable, with great benefits for working capital. By using these technologies, companies can:

• Spot High-Risk Customers: AI algorithms look at payment histories and patterns to identify which customers are likely to pay late.
• Anticipate Late Invoices: Predictive analytics highlight which invoices might be paid late, giving you a chance to take action early.
• Encourage Timely Follow-Up: With insights from AI, your finance team can start follow-up actions at the right time to encourage faster payments and improve cash flow.

The benefits of using AI-driven AR solutions go beyond just efficiency — they transform how your business operates financially. By getting paid faster and improving cash flow, you can really enhance your working capital position. These innovative tools don't just make invoice management easier — they also help optimize your overall financial health.

3. Improved Accuracy and Reduced Errors in Payment Processing

Adopting AI-driven accounts receivable solutions really enhances your working capital through better accuracy in payment processing and fewer errors.

Key advantages include:

• Machine Learning Algorithms: These algorithms minimize errors during payment matching and reconciliation. By analyzing past data, AI can recognize patterns, reducing manual input errors and discrepancies.
• Increased Financial Reporting Accuracy: Better accuracy leads to more reliable financial reporting, which is crucial for making good decisions and planning strategy.
• Streamlined Invoice Management: Adding automation to accounts receivable simplifies complex processes, ensuring timely and precise invoicing.

The benefits of AI-driven AR solutions don't just optimize cash flow — they also build trust with stakeholders through consistent and accurate financial information. This creates a strong foundation for sustainable business growth.

4. Enhanced Credit Risk Assessment with Data Insights

AI-driven accounts receivable solutions provide great benefits for working capital enhancement through better credit risk assessment. By using advanced algorithms, AI can analyze huge amounts of historical data, creating accurate credit risk profiles for customers. This lets businesses:

• Make Informed Decisions: Assess how creditworthy clients are based on their payment history and behavior.
• Set Appropriate Credit Limits: Establish credit limits that match the risk profiles, reducing exposure to bad debts.
• Tailor Payment Terms: Customize payment terms based on customer reliability, helping manage cash flow better.

With these data insights from AI, companies can identify potential risks early and adjust strategies accordingly. Accurate credit assessments lead to improved financial stability and streamlined invoice management, contributing to a strong working capital position. Adopting automation in accounts receivable doesn't just enhance efficiency — it also strengthens overall financial health.

5. Proactive Dispute Resolution through Intelligent Automation

AI-driven accounts receivable solutions significantly enhance working capital by enabling proactive dispute resolution. By leveraging intelligent automation, these systems can:

• Automatically flag discrepancies: Identify potential issues in customer payments before they become major problems.
• Facilitate timely investigations: Allow finance teams to address flagged disputes quickly, minimizing delays.
• Streamline communication: Ensure clear, consistent interactions with customers regarding payment issues, fostering better relationships.

The benefits of adopting AI-driven AR solutions are clear. Businesses can spend less time resolving disputes, which accelerates cash inflow. With efficient dispute management processes in place, you can effectively optimize your working capital position and improve overall financial health. Embracing intelligent automation in accounts receivable not only reduces risks but also supports sustainable growth in cash flow management.

Final Thoughts: Transform Your Working Capital Strategy with AI-Driven AR

Working capital management doesn't have to be a constant struggle. As we've seen, accounts receivable plays a huge role in your company's financial health — and the traditional ways of handling AR are holding many businesses back.

When your AR team is weeks behind on collections, invoices are going out late, and you lack visibility into what's actually happening with your cash flow, your working capital position suffers. That means less flexibility, more stress, and fewer opportunities to grow your business.

AI-driven solutions like Fazeshift are changing this reality for mid-market and enterprise companies. By automating the most time-consuming parts of AR, from invoice generation to cash application, these tools free your finance team to focus on what really matters. Instead of chasing payments and reconciling accounts, they can contribute to strategic initiatives that drive your business forward.

The best part? Fazeshift doesn't require you to replace your entire financial system. It works with your existing tools like Salesforce and NetSuite, fitting into your workflows rather than disrupting them. And with implementation typically taking just about a month, you can start seeing improvements in your working capital position relatively quickly.

For finance leaders managing AR teams of 5-25 people and dealing with complex billing processes, this kind of solution can be a game-changer. Your team gets the support they need, your cash flow improves, and your working capital works harder for your business.

Ready to Transform Your Accounts Receivable?

If you're tired of manual AR processes slowing down your cash flow and limiting your working capital, it might be time for a different approach. Fazeshift's AI-powered solutions are designed specifically for companies like yours.

Schedule your demo today and see how Fazeshift can help streamline your AR processes, improve your cash flow, and enhance your working capital position. Your finance team will thank you.