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The O2C cycle is often riddled with manual steps that can cause a lot of friction in between- and frustration for both the business and customers. This dramatically affects your receivables collection and, eventually, the health of your cash flow.
In our recently concluded webinar, “The 10 Gifts of Accelerated Cash Flow”, we invited Amanda Lee, Founder and Receivables Management Advisor at The Retriever, to speak with Arjun (AJ) Singh, Co-Founder and CEO ezyCollect, to discuss how you can take advantage of a streamlined and optimised O2C process through accounts receivable automation, creating a seamless cycle that not only ensures you get payments efficiently but also improve your relationship with customers. Here are the key takeaways from the session.
Extending trade credit is something that many businesses do manually, and this can cause a lot of issues that can lead to bad debts – affecting your cash flow in the long run. Adapting an automated and data-driven process delivers efficiencies that are beneficial for both you and your customers.
First of which is a more reliable credit check. Unlike manual application processes that primarily rely on trade references given by the customer, an online credit application system integrates credit risk scores from trade reporting agencies so you can get data-driven insights and make better decisions before onboarding customers and extending credit. Having this data at your fingertips gives you that professional knowledge without much effort, and you’ll be able to manage risk right from day one, making that goal of accelerated cash flow much easier.
Another benefit of online credit applications is a better onboarding experience. First impressions last, as the adage goes, and that couldn’t be farther from the truth in business relationships. Onboarding customers in a disorganised, time-consuming process that are prone to error reflects an unprofessional image on your part – inadvertently sending the message to your customers that they can cut corners as you do. By digitising a credit application, you create a streamlined and automated process that not only benefits your operational efficiency but also means you mean business, and customers need to be in that same level of credibility too.
Humanised automation seems contradictory, but part of reducing your overdue accounts hinges on this balancing act of human connection and automation. Automation creates communication efficiencies in accounts receivables, paving the way for a more personal approach to customers that need it the most.
With an automated communication workflow, you don’t have to physically communicate with everyone, but you’ll be able to focus on customers that need more. An AR automation platform tells you who those customers are through consolidated credit and risk data, providing you with that opportunity to connect and build relationships. To truly understand why your customers’ payment behaviour changed, there has to be human interaction involved. You can work with them to resolve blockers preventing them from paying you on time. It’s about continuing that cycle to sell, and having a receivables ledger that’s 100% collected each month and clear, persistent, and personalised communication with your customers is going to help you achieve that.
Getting your payment on time is the goal of an optimised O2C process. It is crucial then to make this part of the O2C cycle as pain-free as possible, allowing your customers to pay at a time convenient to them through various payment methods that they can choose from.
An online payment platform is designed to do just that, not only as a portal where customers can pay you but also includes their statements, so they no longer need to contact you, especially when making the payment after office hours – all the information they need is readily available to them. By creating convenient pathways for payment, you can get paid easily and quickly.
As we’ve learned thus far, an accelerated cash flow is very much possible thanks to accounts receivable automation. While an improved cash flow is the end goal of automation, optimising the O2C process also comes with its benefits.
AR automation gives you access to data and gives you the insights to make better decisions that can affect the health of your business.
AR automation resolves cash flow issues, as we now know. With an improved cash flow, you’ll be able to run and grow your business the way you want to.
Automation gets all the repetitive tasks done, so you can hone in on strategy-related tasks that further your business.
Automation ensures consistency in processes and clears communication pathways – both of which allow you to build trust with your customers and, in turn, foster customer loyalty and growth.
Digital, automated processes are now the norm and what your customers expect. Adapting automation in your business creates a professional image and aids in brand equity.
Automation streamlines your O2C cycle, removing any friction between processes so you can get paid promptly.
AR automation minimises the need for manual entries, reducing errors. Its capability to integrate with your ERP also means there’s no double-handling of data that can lead to more problems in your accounting.
Leveraging an account receivable platform removes the need for manual processes, saving your staff tons of time. The amount of time saved can then be used to focus on more high-value work that can grow the business.
With an AR automation platform, you can get a live view of credit risk scores to be confident in making decisions based on current and accurate data.
While AR automation improves the collections processes of your receivables, this also translates into improvements across business functions and teams.
The cash flow in a business is a critical factor in deciding its success. A steady cash flow can only be obtained if your order to cash cycle is optimized. For B2B businesses, in particular, ensuring that all account receivables are collected on time is essential to increase liquidity. But often, businesses do not pay enough attention to their order 2 cash cycles until they hit a roadblock.
So what is the order 2 cash cycle, why is it important to B2B companies and how can an order to cash platform help? We have all the answers for you, so read on.
The order 2 cash cycle is the collection of activities involved in making a sale, starting with receiving an order right up to the point of payment and invoice receipt. Though the process sounds relatively simple, in reality, it is a lot more complex. Companies often focus all their attention on securing an order from a client, but B2B payments are not given the attention they deserve. This makes the order to cash cycle longer for the business, delays revenue generation, and impacts the overall financial performance of the business.
The usual stages of an order-to-cash cycle include the following-
As evident from the stages listed above, the order to cash cycle does not end with the payment receipt. It involves certain critical activities even after the accounts are reconciled.
The order to cash cycle needs to be optimized, but it is hard to find an end-to-end solution that can improve this process. But businesses today are learning to leverage technology in this area too. With a host of integrated software solutions, companies are learning to improve the various activities involved in the order 2 cash process.
Unlike marketing or sales, the order 2 cash process does not operate on the very surface and is more of a background process, and still has a huge impact on the business’s performance. Not just that, it can impact a business’s customer relations too. An optimized order to cash process improves the customer’s journey from the moment the order is placed. As the process involves every function after this point, including order confirmation, dispatch, and even returns, a well-managed O2C cycle ensures a hassle-free experience for customers.
The complete process from order placement to invoice receipt involves several departments in a company, including marketing, pricing, sales, finance, warehousing, collections and more, depending on how the business functions. This expansiveness of the order to cash process is what makes it so complicated. With so many functions and departments involved, making changes to the process becomes all the more challenging.
The order to cash process affects various operations throughout an organization, from supply chain management and logistics to inventory management and more. An optimized order to cash process means that all of these different operations involved are working at an optimum level. On the contrary, a bottleneck in any one of these business areas will affect the entire order to cash process.
The O2C process is also important because it determines the cash flow in the business through invoicing and accounts receivable functions. Any significant delays in invoicing or collection can affect other areas of your business’s finances like accounts payable, salaries, business loans, probable acquisitions, or any other activity that relies on liquidity. This is one of the major reasons why optimizing the order 2 cash cycle is essential.
Despite the dire need for a digital solution that can optimize the order 2 cash cycle, it is not possible to have an off-the-shelf software solution that can handle the entire process as one. This is because the process can be dynamic. There is no one-size-fits-all approach here, as the O2C process can vary for different industries, products, companies, locations, or customer segments. The process can also keep varying within the same company as well. So a comprehensive solution is not possible.
But businesses today are building their own order to cash platforms that unite all the related functions through integrated applications and technologies.
An order-to-cash platform is a technological solution that lets B2B businesses bring all the functions involved in the O2C cycle together by seamlessly integrating various applications across various functions. The applications can readily exchange data to ensure that the process runs smoothly from end to end. Payments are collected faster and disputes resolved quickly so that customers can find a reason to remain loyal to the brand.
The best way to ensure that the order 2 cash process is optimized is by making sure that the related functions can exchange information and data with ease for every transaction. For achieving this, technology plays a very crucial role. Interconnected applications that allow different functions to have access to real-time data increase productivity in the order to cash process. Technology also provides other perks like digital invoicing capabilities or accounts receivable automation.
An organization that runs on a platform-based structure can brave these challenges by building platforms that utilize the power of both the human workforce and the technological tools. They combine modular data and technology architecture to create scalable solutions that are handled by agile front-end teams.
An efficient and futuristic O2C platform should have a front-end team, an underlying support team, and a modular infrastructure of applications and tools. This entire ecosystem needs to be dynamic to instantly pivot to meet customers’ changing demands and the organization’s.
The front-end team in an O2C platform is a multi-functional team that directly deals with the customers to ensure seamless orders and payments while delivering a frictionless experience for the customer.
Supporting the front-end team is a well-defined structure of agile teams that work on the back-end using digital tools and applications and effectively manage end-to-end processes to deliver the order to cash services.
At the base of it all is the technological infrastructure that completes the ecosystem. The tools and applications are necessary to manage all the different functions related to the order 2 cash cycle. Examples of such applications and capabilities include CRM software, customer service platforms, ar automation platforms, automated workflows, among other things.
A comprehensive order to cash platform can help your business in more than one way. Right from analyzing data, increasing sales, and providing automated transparency to customers at the time of invoicing to payments, the O2C platform can bring numerous benefits. An O2C platform can provide a unified processing capability that helps deliver faster turnaround times for customers and the front-end teams.
A unified O2C platform also ensures data consistency and accuracy across the various functions. The flexible modular architecture of individual applications and platforms enables repeatable processes. It also ensures that you can add new applications and platforms to the ecosystem as the need arises.
An order-to-cash platform can address many of the pain points that a business faces in optimizing its order 2 cash cycle.
Now that we know why a cash 2 order platform is beneficial to your business, it is also important to know how you can implement one to manage your B2B payments and the O2C process overall. Like all other initiatives, you take in business, deploying an O2C platform for optimizing your order 2 cash cycle requires measurable goals before anything else. Having your goals set will give direction to your efforts.
For most organizations hoping to optimize their O2C cycle, there are three measurable goals in general.
When designing your order to cash platform, three essential characteristics can ensure efficiency and effectiveness. These three characteristics are –
The platform’s architecture has to be such that it easily integrates with your existing internal applications, external applications, and any new application you may need to add in the future. Integration is the key to success in an O2C platform. An effective order to cash platform allows both internal applications of the organization and applications used by third parties to run together seamlessly.
This ensures that the ecosystem created is barrierless and that there is free, unrestricted data flow wherever necessary.
Introducing customer-centric solutions can make your order to cash platform far more effective. Leveraging technology to offer customer-facing solutions, like self-service capabilities, order tracking, payment requirements, and such can help improve the customer experience further. It can also reduce the order 2 cash cycle time as the manual intervention required is minimal.
The O2C platform cannot be the responsibility of a single team or a single department. As the process itself involves multiple functions throughout the organization, the responsibility has to be shared among various teams. So any time an issue arises, it should be clear who is responsible for tackling it. Also, there has to be a process owner to distribute responsibilities across functions. This will ensure that the platform is not fragmented and there is no scope for confusion or mistakes, irrespective of the volume of client interactions on the O2C platform.
In implementing an order-to cash platform in your business, you may face a few common challenges. Some of the most likely challenges that almost every organization faces in its efforts to optimize the order 2 cash cycle are –
Receiving B2B payments on time is only one of the many advantages of having an effective O2C platform. Optimizing the order 2 cash cycle in a business can bring better cash flows, increase process transparency, and enhance customer and employee experiences. With new insights from the integrated data across applications, more informed decisions can be made in sales and other areas of the business. If done right, an order to cash platform can be an invaluable addition to your business.