Working capital

AR Automation Cash Flow Calculator

Estimate accounts receivable automation impact from lower DSO, faster collections, and reduced cash application effort.

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Annual credit sales$

Annual revenue subject to invoice collection and receivables follow-up.

DSO improvement (days)days

Estimated reduction in days sales outstanding.

Cost of capital (%)%

Internal carrying cost used to value released cash.

Monthly AR hours savedhrs

Time removed from collections follow-up, deduction review, and cash application.

AR hourly cost$

Average hourly cost for AR analysts or collections specialists.

Annual software cost$

Yearly spend for the AR automation platform.

Implementation cost$

One-time setup, ERP integration, or onboarding cost.

Example scenario

Collections modernization case

A finance team with $18M in annual credit sales wants to test whether a four-day DSO improvement plus workflow automation would justify an AR platform.

Why this matters

AR automation often creates value through working capital improvement, but many teams need a simple way to translate DSO improvement into a defendable number.

This calculator combines cash release from lower DSO with labor savings from collections and cash application workflows.

It is especially useful when finance teams are comparing AR automation tools against a largely manual collections process.

When to use this calculator

Use this when evaluating collections, cash application, or receivables automation software and you want a business case that goes beyond workflow efficiency alone.

The model treats DSO improvement conservatively by turning days released into cash freed, then adds labor savings from the AR team.

How the math works

Cash released = annual credit sales ÷ 365 × DSO days reduced
Annual labor savings = AR team hours saved per month × hourly cost × 12
Total first-year value = cash released × cost of capital + annual labor savings
ROI = (total first-year value - first-year investment) ÷ first-year investment

Common questions

Why multiply released cash by cost of capital instead of counting the full cash amount as savings?+

Because the cash released is a balance-sheet benefit, not pure income. Using cost of capital creates a more conservative first-year value estimate.

Can I add bad-debt reduction too?+

Yes, if you have a credible estimate. Many teams add it as an upside scenario rather than relying on it in the base case.

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