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?

The core objective behind outsourcing the order-to-cash function is to address its various challenges and improve its deliverables. This is driven by:

Availability of Accounting Personnel: We are essentially talking about scalability here. The inability to scale the O2C function is the bane of many businesses. We discussed the shortage of accountants earlier in the article and now add a high attrition rate to the mix as well. Not adding to your team directly impacts your in-house accounting teams’ efficiency and productivity levels. With outsourcing, you can easily leverage outsourced accounting skills such as O2C without worrying about talent shortages in the accounting domain. This allows you to grow your business exponentially, knowing that your O2C function can be scaled easily to meet the growing demands of your business.
Leveraging Tech-Led Optimization: Investing in technology is difficult, especially when you need a buy-in from a senior leadership team wanting to make cost-optimization-led business decisions. In such cases, an order to cash process outsourcing provider can help bring in the benefit of advanced accounting technology without increasing technology-related expenses. They can not only make results-driven interventions to the accounting tech stack by integrating new software but also deploy new versions of the existing software. The right provider can also leverage automation to speed up repetitive O2C tasks and facilitate improved accuracy in the O2C cycle.
Cost Effectiveness: The most significant benefit of outsourcing is cost arbitrage. This is no secret, and most businesses harness outsourcing for this benefit alone. However, there is another way of looking at it. Your accounting department can adhere to its cost optimization goals and improve the O2C cycle by scaling it on demand, accelerating the various sub-processes, and ensuring a more complete and accurate process. Moreover, the money you save while scaling your accounting department can be invested in other revenue-generation avenues. It is a win-win for everyone.

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 outsourced O2C 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 03 2023

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