Accounts receivable (AR) automation is software that helps a company get paid by its business customers. It sends each invoice, accepts the payment and matches each amount that arrives to the right invoice. Accounts receivable is the money that customers owe a company for goods or services already delivered.
The hard part is the matching. A customer often pays several invoices in one transfer, or pays less than the full amount, or gives no invoice number in the payment details. An employee in the accounts team then has to work out which invoices the money is for. Until that is done, the company does not know which customers still owe it money.
Here is a typical case. A steel distributor in Rajkot sells to 800 hardware shops and builders. One builder has three unpaid invoices: ₹1,20,000, ₹80,000 and ₹40,000. The builder sends ₹2,00,000 by NEFT, with only "March payment" in the note. The AR software looks at the amount, the payer's bank account and the unpaid invoices. An AI model suggests that the payment covers the first two invoices, and that the third is still unpaid. An employee checks the suggestion and approves it. This way of working is called human in the loop.
Matching each payment to its record is a kind of reconciliation. Many Indian companies make it easier with virtual accounts. Each customer gets its own account number at the company's bank. So when money arrives in that account, the software knows at once who sent it.
AR software also sends the invoices and the reminders. It can email each invoice with a payment link, or publish it on a bill payment platform. Distributors often take orders on a B2B ordering portal, which sends each order to be invoiced. When a payment is matched, the software records it in the company's ERP, its main accounting system.
AR is the other side of accounts payable. The buyer's AP software pays the invoice, and the seller's AR software receives the money and matches it. A company that cannot wait for its customers to pay can sell its unpaid invoices to a financier, through invoice discounting.