Editor’s Note: This piece is part of our “Executive Input” blog series sponsored by Capital One Trade Credit — a trusted affiliate member of the National Association of Wholesaler-Distributors (NAW) — thaoperatiot extracts key takeaways from short interviews with distribution executives — often answering three straightforward questions about challenges they are trying to solve with technology. These leaders could opt to have their name and company omitted from the blog to speak freely.

————————

Each year, the senior director of accounting and compliance at a $1.8-billion distributor in the Northwest identifies one area in her department to examine and improve. 2025 is the year of accounts receivables, and she has mapped out a three-step plan for automation that will elevate efficiency so well that the company will be poised to scale without increasing labor costs. 

It’s an ambitious goal: AR is handled by a staff of two AR clerks reporting to a senior AR and credit manager, and the year-end timetable is tight. But the director is a woman who can cite data on a dime and consumes business educational videos with her weekend morning coffee; executing on three new digital tools in the seven remaining months of 2025 shouldn’t be a problem. 

Get Our 1Q25 MDM Forecast Report (Premium access here) 

Those new systems will actually build on a foundation laid in 2024, when the NAW member took a major digitized stride with Billtrust software to automate its customer credit application process. Bolted on to its Microsoft Dynamics NAV ERP system, the software provides visibility to the customer account and credit application process, the director says. The company initiates a link to the customer, who then provides their licenses and various necessary company information, including trade and bank references, and signs the credit agreement digitally — all of which is processed automatically through the system. 

“This year, we are focusing on accounts receivable automation for multiple reasons,” she said. “In this post-COVID era of people working remotely, the biggest risk I see now is the stability of the department as our company has grown to one of the largest family-owned businesses in the Northwest. Due to the unique nature of our customer base, we are unable to completely eliminate check payments — with only two accounts receivable people for so many transactions, the risk of not having a person in the office to deposit checks is very high. We need to find a way to continue depositing checks without having a person in the office.”

Solution No. 1: Lockbox. It’s a bank service that simplifies collection and processing of accounts receivables whereby customer payments are mailed directly to the distributor’s bank. An automated bank system recognizes the customer’s account and sends a file to the company’s system, which will automatically apply cash. 

In the Store: NAW’s 2024 Executive Compensation Study 

The distributor is currently in the project stage with this shift and expects to complete implementation approximately by the end of June. Going forward, manual handling of checks will be the exception and no longer the rule. And the need for a person in the office to process checks? Gone. Lockbox also represents the highest level of robust internal controls for guarding against theft.

Next-Level Cash Application

While lockbox heads to the finish line, the distributor is off to the races on a separate course, conducting a vendor search for internal, automatic cash application software for handling ACH payments. Vendors in the running are Billtrust, Billfire, and BlackLine Systems. This type of software processes ACH remittances and applies them to customer accounts. 

“It’s a highly productive software that will allow us to improve cash application speed and accuracy,” the director noted. “It doesn’t replace the human entirely, but humans will only focus on exceptions that cannot be matched up. We’re working on selecting this technology now, and we believe we can finalize this process and go live before the year-end.

“I would say each company has its own unique qualities, and we’re looking for the right fit,” she added. “Because our company is growing, we need to make sure that we select the company not to fit today’s needs but will instead be scalable. Scalability is one of our huge focuses in all this.”

Anti-Aging Solution

The third step in the distributor’s AR digitization plan is collections automation software that monitors customer payment patterns to determine risks before they grow into past-due problems.

“If the customer’s payment pattern is changing, the system will automatically send notifications well before we start executing a formal collections process,” the director said. “When we make a decision to move this account to a collections agency, we want to know we exhausted all our internal resources. This software will help us to stay on top of our account receivables aging report. 

MDM Case Study: MSC Industrial Supply (Premium access here) 

“That collection component will be our last stage of accounts receivable automation and will allow us to bring all our collection efforts — all the notes and communications with the customer — into one system. It will be fully automated.  

Margin Matters

Cash may be taking the bows from AR automation, but operating costs can grab a little glory, too. Benefits to the bottom line are less visible than cash and collections, says this leader, but they’re not difficult to identify. 

(1) Costs become fixed and predictable. As the company expands, she will maintain the same size team, which is powerful to the bottom line. “Labor is stabilized,” she said. We don’t have overtime and we don’t need to deal with temp labor or new hires. If you want to hire an accounts receivables person even at $50,000 a year, which is extremely low, and you add about 20% for benefits and possible overtime, your $50,000 can quickly become $80,000 or $90,000.  

“With the software, it’s a license cost — we know exactly how much it’s going to cost us,” she continued. “At the same time, the productivity will increase exponentially, because it allows us to handle more with the same number of people.”

(2) Bad debt risk shrinks. The AR team must vigilantly and continuously estimate the risks of uncollectible accounts — in doing so, the company must estimate the expense associated with these risks in advance to create a reserve. 

MDM’s SHIFT Conference Coming May 13-15 – Register Here 

Risks that aren’t detected early — such as a customer that’s heading toward bankruptcy — can cause AR aging to spike, leading to significant write-offs that exceed initial estimates. Collections-related technology acts as a smoke detector and alerts the team when risks are on the rise. The savings realized from early intervention can be significant.

Bottom line, the distributor wins when cash is applied rapidly and collection action is initiated responsibly.

“Who doesn’t want to have more cash?” the director said. “If we have more operating cash available because we turn it quickly, we reinvest in our own business. That’s a huge impact.” 

More in Our Executive Input Series

• • Step on the Gas to Bring Home the Cash in AR
  • Dulling Accounts Receivable Pain with Terms and Technology
  • Counting Down to a Self-Serve World: Who Will Be the Pumpkin When Midnight Strikes?
  • AI, ERP Top CIO Hot List
  • Seamless and Sameness: What Really Matters in the Delivery of Self-Service?