Topics: Finance and Accounting Outsourcing Services, Order-to-cash cycle

Identifying and Mitigating Risks in the O2C Cycle

Posted on May 30, 2024
Written By QX Global Group

Top Risks to End to End Order to Cash Process


The order-to-cash process (O2C) is a critical finance and accounting (F&A) function. Some key tasks that are part of the O2C cycle include credit control, accounts receivable, billing, customer master management, customer helpdesk, month-end closing, and reporting. It is imperative that you optimise the O2C cycle to ensure robust business health backed by strong financials.

Benefits of Maximizing the Potential of End-to-End Order-to-Cash Process

If you are able to maximise the potential of end to end order to cash process, your business can experience the following benefits:

Strong Cash Flow

  • UK businesses are troubled by the slowing down of the UK economy, and in such a scenario, it is important to have good cash reserves.
  • But for this to happen, optimising cash flow should be imperative for the business.
  • This ensures a healthy cash flow in the normal course of events and excess cash flow to combat any economic downturn.
  • This helps businesses make sustained investments in improving business processes, whether in people or technology.

Financial Information Accuracy

  • With 47% of data analytics leaders in the UK not trusting data, it is imperative that various business processes leverage reliable data to improve decision-making and drive efficiency.
  • Accurate reporting drives an efficient O2C cycle, which helps facilitate confident decision-making.

Real-Time Data Availability

  • Data should be accurate, but this data should also be available at all times to all the stakeholders.
  • An optimised O2C cycle is backed by data centralisation, where a centralised data repository is leveraged by key stakeholders for timely reporting and to gain critical insights.
  • More importantly, by integrating automation into the O2C process, data is updated in real-time and can also be accessed in a timely manner to deliver holistic and granular insights into the financial health of the business.

Process Standardisation

  • We are not talking about ordinary standards but Lean Six Sigma quality standards and the ability of the process to meet key industry standards and regulations.
  • The seamless coming together of people, processes, and platforms ensures better quality, breaking down of siloed workflows, and ensures a consistent O2C framework that is purpose-built for optimising its various sub-processes.
  • This consistency can be scaled easily and on-demand.

Customer Experience

  • Think of an unsatisfied customer owing to invoicing issues.
  • Either the invoices were not sent in time, reminders were sent late, or there were issues with the information in the invoice.
  • In all such cases, you are not just staring at potentially delayed payments but also irate customers who can slowly lose trust in your business.
  • On the other hand, a customer-oriented O2C process that offers a wealth of customer-facing features such as e-invoices, multiple payment options, immediate conflict resolution, and more is guaranteed to boost customer satisfaction, which in turn results in brand loyalty, driving customer retention and acquisition.

Key Risks in the O2C Processes

Many businesses suffer from financial stress due to external problems such as the pressures of an economic downturn, flagging demand for products and services, and more. However, this stress often results from internal issues, one of which is a weak O2C process that doesn’t allow them to maintain a healthy cash flow.

Let’s take a look at some of the critical risks to the O2C process:

Manual Invoicing

  • The real challenge with invoicing is that different customers have different invoicing preferences, and therefore, businesses see sense in creating such custom invoices manually rather than going for automation.
  • For example, an enterprise business might prefer that invoices be prepared in a specific format, which are then uploaded to their own company finance and accounting portals; on the other hand, some other businesses might prefer a hard copy and a digital copy of the invoice.
  • Meeting such demands manually sounds like the right approach, but this process is risky because it is error-prone and time-consuming, which can leave very little time for some of the more strategic O2C tasks.

Process Intricacies

  • Managing an end to end order-to-cash process is a complex exercise composed of different tasks connected with one another.
  • Therefore, there must be a well-established synergy between the teams handling different tasks such as credit management, order placement and management, customer billing and invoicing, payment collection, payment processing, cash application, deduction management, reporting, order fulfilment and much more.
  • Each task has its own complexities, and therefore, these intricacies can only work if the different processes are standardised and monitored to ensure they do not have issues and issues, if any, are sorted out quickly.

Reactive, Rather Proactive Collections

  • Imagine a scenario wherein you have to choose between contacting ten customers to either follow up on pending payments or just sending a timely reminder for an upcoming payment.
  • In such cases, you might have to prioritise outreach, but what if you are reaching out to customers with a history of paying on time or on a specific date?
  • On the other hand, you miss out on talking to risky customers who have a history of paying late.
  • In such cases, you are building inefficiencies in the collection process because of incomplete visibility into your at-risk customers as well as financially sound customers.
  • This makes you take a reactive approach rather than optimising a proactive approach towards collections.

Legacy Technologies not Delivering ROI

  • Technology evolves rapidly, but companies might not have the capacity or the vision to make sustained investments in technology to keep harnessing the power of advanced technology to support their finance and accounting functions.
  • This results in technology gaps within the end to end order to cash process framework, which impacts tech ROI.
  • While companies might choose to invest in automation, there might still be certain repetitive processes, such as ‘sending payment follow-up emails’, which will be manual.
  • Also, technology needs to break down silos so that there is more awareness about the state of the O2C cycle.
  • For example, once the payment is received, it needs to be immediately matched with the open invoice, which is then closed in case of a match or a dispute immediately opened with the customer.
  • Traditional technologies might be unable to streamline this process, leading to excessive delays, long dispute-resolution processes, and unhealthy cash flows.

The Answer Lies in Order to Cash Process Outsourcing

If you are looking for a simple yet effective way to minimise the risks to O2C, end-to-end order-to-cash outsourcing services are your answer. Here, you will be leveraging the talent and technology footprint of a third-party O2C services provider to support your O2C needs. Besides labour arbitrage, you also benefit from a more standardised O2C cycle bolstered by the latest accounting technologies that harness the power of automation and AI/ML to accelerate the O2C cycle and deliver reliable and outcomes-focused insights. The QX partnership approach for its O2C services was developed to help companies build stronger cash flow over the long term and drive reliable and meaningful customer relationships.

Originally published May 30, 2024 09:05:32, updated May 31 2024

Topics: Finance and Accounting Outsourcing Services, Order-to-cash cycle

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