How Outsourced an Order-to-Cash Aids Transformation

Order to cash (O2C) process outsourcing helps you optimize the efficiency of your O2C cycle. This is important because it covers the entire order fulfillment process and begins when the customer orders a product or service and ends when the customer makes the payment for this order. As can be seen, it has a massive bearing on your business’s financial health; therefore, you need to make sure the O2C process performs optimally.

What is the goal of the order to cash?

Let’s discuss the subjective goal first. One can say that O2C is a critical process that drives customer satisfaction by fulfilling customers, buy making sure they get their order on time. Now, the tangible – order to cash aims to complete all orders that a business receives and includes every aspect related to order fulfillment, including order processing, invoicing, shipping, payment collection, and reporting on the end-to-end process. The goal is to ensure a steady cash flow for any business, and the more you improve this process, the more seamlessly your cash will flow.

What are the most common order-to-cash challenges?

Why must the O2C cycle be transformed at all? Why can’t it be left as is? The answer lies in the challenges this process experiences. Transformation helps address any issues that might interfere with a business’s ability to present bills on time, get paid on time, exercise credit control, and more.

Let’s take a closer look at some of these challenges:

Legacy Approach to Payment Processing

Whether it involves invoicing or payment, businesses must leverage digital transformation to accelerate the payment cycle. Unfortunately, some businesses are still caught up in a legacy paperwork process that, in a best-case scenario, is a mix of the traditional paper-based approach and digital. In the event this process goes digital, businesses still have to make sense of a massive amount of spreadsheet data to ensure a seamlessly functioning payment cycle.

A Focus on Manual Approach

Order-to-cash includes various activities, including accounts receivable, credit control, reporting, and more, which many businesses manage manually; not the entire process, but at least a part involves making repetitive manual data entry, which is prone to errors and highly time-consuming. Lack of automation results in a long-drawn-out O2C cycle that leaves no room for accountants to manage other strategic tasks such as financial planning, analysis, etc.

Lack of Cost Optimization

As a business grows, so does the volume of orders and all associated activities including order fulfilment, accounts receivable and more must grow as well. The challenge is businesses want to improve process efficiencies through the prism of cost optimization; when it comes to the accounting department and trying to scale their team, businesses in the UK are being faced with an expensive proposition as accounting talent is in short supply, and they need to pay more to hire the right talent. In such cases, the business either decides not to hire more accountants, which stretches their existing team to their limits, or they choose to bite the cost bullet and decide to hire accountants, which increases their overheads a long way. In both cases, the business suffers, and the cost of the O2C cycle keeps rising.

RELATED BLOG: Order to Cash Business Process: What is it and How do You Optimize its Performance?

What are the risks of order-to-cash?

The risk that towers above the rest is ‘data security.’ You are working with sensitive financial information from the business point of view and the customer side of things. You don’t want this information to fall into the wrong hands, meaning you don’t wish criminals to gain unauthorized access to sensitive information.

Another risk is ‘fraud’. Let’s look at this particular risk from the perspective of credit management. You are extending favourable credit terms to a customer who you think has a solid financial capacity and will pay due on time. When the payment is due, the customer keeps delaying it, and one fine day, you know that the customer has disappeared. This fraud and the fault in this case lie squarely on the shoulder of credit control that couldn’t perform the necessary due diligence. Another critical risk is ‘compliance’; there is a danger that businesses will fall short of specific regulations and run the risk of incurring penalties if the O2C process has gaps.

How End-to-End Order to Cash Outsourcing Services Drive Transformation?

Enhanced Efficiency and Productivity

Streamlined Processes

Standardized Processes and Best Practices: Outsourcing providers leverage standardized processes and best practices specifically tailored to the Order-to-Cash cycle. This includes systematic workflows for order management, billing, and collections, ensuring consistency and accuracy in every step of the process.
Automation and Advanced Technologies: The integration of automation tools, such as robotic process automation (RPA) and AI-driven analytics, within the O2C cycle reduces manual errors and accelerates the processing of orders, invoices, and payments. Automation ensures that repetitive tasks, like data entry and reconciliation, are completed quickly and accurately, freeing up human resources for more complex activities.

Focus on Core Business Activities

Strategic Initiatives: By outsourcing the O2C process, internal teams can concentrate on strategic initiatives such as customer relationship management, market expansion, and product development. This allows businesses to enhance their competitive edge and drive growth without being bogged down by operational tasks.
Reduced Administrative Burden: Outsourcing the administrative aspects of the O2C process reduces the workload on internal teams, leading to improved productivity. Employees can focus on high-value tasks that contribute to the company’s strategic goals, rather than getting tied up with routine operational activities.

Cost Savings and Financial Benefits

Reduction in Operational Costs

Economies of Scale: Outsourcing providers achieve economies of scale by servicing multiple clients, allowing them to spread the costs of technology, infrastructure, and skilled personnel. This results in lower operational costs for businesses compared to maintaining an in-house O2C team.
Cost-Effectiveness: Maintaining an in-house O2C team involves significant expenses related to recruitment, training, salaries, benefits, and technology. Outsourcing these functions to specialized providers can be more cost-effective, as businesses can access expert services without incurring these additional costs.

Improved Cash Flow Management

Faster and More Accurate Invoice Processing: Outsourcing providers utilize advanced systems and processes to ensure timely and accurate invoice processing. This reduces the time taken to generate and send invoices, leading to quicker payments.
Reduction in Days Sales Outstanding (DSO): Efficient management of the O2C cycle by outsourcing providers helps reduce the Days Sales Outstanding (DSO). This means faster collection of receivables, improved cash flow predictability, and better liquidity management, enabling businesses to reinvest funds into growth opportunities.

Access to Expertise and Technology

Skilled Workforce

Specialized Expertise: Outsourcing firms employ professionals with specialized expertise in managing the O2C cycle. This includes knowledge of best practices, industry standards, and regulatory compliance, ensuring high-quality service delivery.
Continuous Training and Development: Outsourcing providers invest in the continuous training and development of their workforce. This ensures that their employees are up-to-date with the latest trends, technologies, and regulations in the O2C domain, providing clients with cutting-edge solutions.

Advanced Technology and Tools

Latest Technology and Software: Outsourcing providers utilize state-of-the-art technology and software tailored for the O2C process. This includes tools for order management, automated invoicing, payment processing, and analytics, allowing businesses to benefit from advanced solutions without significant investments.
Improved Data Analytics and Reporting: Access to advanced data analytics and reporting tools through outsourcing providers enables businesses to gain deeper insights into their O2C processes. This helps in identifying bottlenecks, optimizing workflows, and making informed decisions to enhance overall efficiency and performance.

RELATED CASE STUDY: Optimising O2C Process for a Leading Recruitment Giant through Bank Download Automation

Working with the Right Outsourcing Provider

Sustainable and outcomes-focused O2C transformation can only be achieved if you work with the correct finance and accounting outsourcing provider, who not only focuses on the affordability factor but ushers in a new era of efficiency to the O2C cycle.

QX Global Group offers order to cash outsourcing services that address specific clients’ organizational needs with a people, process, and platform approach to drive transformation and improve O2C ROI. With demonstrable expertise in delivering value for various clients across business domains, we are the ideal choice for order-to-cash outsourcing services.

Originally published Oct 03, 2023 07:10:06, updated Oct 04 2024

Topics: Back-office Outsourcing Services, Benefits of Outsourcing, Order-to-cash cycle, Outsourcing