Topics: Finance & Accounting Outsourcing, Order-to-cash cycle

The Most Asked FAQs on O2C Outsourcing: A Go-to Guide for Maximising Order to Cash Deliverables

Posted on November 21, 2023
Written By QX Global Group

O2C Outsourcing: Top FAQs Answered

The order-to-cash (O2C) process is one of the most critical processes in the finance and accounting department as it helps manage a company’s cash flow. It begins when a customer orders a product or a service and ends when the customer pays for the product or services received. Between placing this order and fulfilment, O2C is a complex multi-step process that includes critical subprocesses like accounts receivable, credit control, and more that must be managed optimally if the O2C cycle has to deliver value and result in an improved cash flow.

The problem is that its inherent complexities and companies’ reliance on a manual approach can result in errors, which triggers finance leaders to make focused improvements in this process. A popular solution is order to cash process outsourcing. The global finance and accounting outsourcing market is projected to be worth $93.2 billion by 2028, which gives you an idea of the critical role outsourcing plays in strengthening finance and accounting departments. Let us touch upon a few frequently asked questions about order to cash and outsourcing.

Questions about O2C Process 

Before covering the essential questions related to outsourcing O2C, let’s discuss a few questions about O2C to get a better perspective.

What is the End-to-End Process of O2C? 

The order-to-cash cycle or procedure covers the length and breadth of a company’s order-processing system. The cycle starts when the customer orders and the company accepts this order. The order, whether a product or service, then undergoes a process of order fulfilment, which includes shipping the order to the customer. The accounts receivable team then comes into play, creating and sending the invoice to the customer, and the payment is collected as scheduled. The payment terms depend on credit terms extended to the customer, defined, managed, and enforced by the credit control function. The customer pays the company by the due date, and this payment is recorded in the general ledger. This is an overview of the O2C cycle. The O2C cycle covers the following listed processes, and within each sub-process, many activities need to be performed optimally to ensure proper cash flow management.

  • Accounts Receivable 
  • Credit Control 
  • Billing 
  • Customer Helpdesk 
  • Customer Master Management 
  • Month-end Closing

What are the Challenges in Order-to-Cash Process?

The biggest challenge in any order-to-cash process is managing all the activities within this process efficiently. Companies that rely on a largely manual approach to O2C will find themselves battling errors and actions that are not completed on time. This results in a mismanaged cash flow that can directly impact their reputation and business growth. Another big challenge is scaling their team to meet the O2C demands of a growing business. The accounting industry suffers from a shortfall of accountants, and building accounting capacity is time-consuming and expensive. 

How Can I Improve My Order to Cash Process?

Two foundational aspects of a significantly efficient order-to-cash process are the ‘team’ and ‘technology’. These are the two ‘Ts’ that can improve your O2C cycle. The team refers to having enough accountants assigned to the O2C process and ensuring these accountants have proven skill sets across all O2C processes. The technology aspect involves leveraging a tech-led approach towards O2C, wherein your company can automate some of the repetitive processes, minimise errors, and improve productivity and efficiency. 

But this is easier said than done and requires the ability to scale on-demand when building a team. From the technology perspective, it requires the capacity to invest enough money and time in the right technologies. 

This is where order to cash process outsourcing is seen as the answer to capacity building and harnessing the potential or cutting-edge accounting infrastructure. According to Gartner, only 55% of finance leaders are confident that their digital transformation initiatives are on the right track. Outsourcing these initiatives is an excellent solution to bring these initiatives on track. 

Frequently Asked Questions on Order to Cash Outsourcing

Why should I consider order to cash outsourcing for my business?

The answer to this question lies in your need to drive O2C efficiency through cost optimisation. As a key decision-maker in the finance and accounting function, you will be tasked with improving the efficiency and productivity of the department and, at the same time, controlling overheads. You will also want to improve the tech stack to optimise the O2C process. Another ask will be to scale the accounting department to align with the company’s growth.  

Outsourcing is the best solution for all these needs as you can build capacity, meet your finance function transformation goals, and cost-effectively increase efficiency and productivity. However, cutting costs is not the main reason for outsourcing. There is a shortage of skilled talent in the UK, especially in the accounting and IT domains. Regarding IT, a third of UK businesses are choosing to outsource IT for want of talent. Similarly, outsourcing emerges as the right solution for organisations looking to implement digital transformation initiatives in the F&A department to achieve pre-determined transformation goals. 

What are the O2C activities that can be outsourced?

You can outsource all the sub-processes that make O2C and which are an integral part of your overall finance and accounting function, including:

  • Accounts Receivable 
    • Customer set-up and maintenance
    • Credit checks
    • Set up an AR follow-up mechanism
    • Raise invoices based on occurrence and send for authorisation
    • Customer queries resolution
    • Invoice chasing, escalation, and resolution
    • Maintain sales ledger accurately
    • Invoice discounting reporting and reconciliation invoice discounting reporting
    • Customised AR reports
    • Cash allocation for receipts 
  • Credit Control
    • Pre-invoice check
    • Invoicing
    • Post-invoice verification
    • Chasing via telephone, email, fax
    • Follow-up for invoices and payments promised
    • Dunning letters and statements
    • Update remittance advice and receipts from bank statement
    • Cash allocations
    • Debt collection against previous aged debtors’ report
    • Liaise with legal & and compliance department for legal action
    • Credit control MIS reports 
  • Month-End Closing
    • Customer accounts reconciliation
    • Review of exception items 
  • Reporting
    • AR aging report
    • Cash collection trend
    • Number of new customer accounts set up
    • Number of customer accounts amended with reasons
    • Number of outbound emails
    • Number of statements printed
    • Number of inbound and outbound calls
    • Trend showing sales analysis (monthly)
    • Trend showing the number of sales invoices raised (monthly) 

This is not an exhaustive list. Additional activities or tasks can be outsourced according to the needs of companies.

What are the qualities I must look for in the O2C outsourcing firm? 

The essential qualities are expertise and experience – mainly a demonstrable history of successfully catering to the order to cash process outsourcing needs of businesses in your domain. Advanced infrastructure and cutting-edge accounting technology are yet another quality reputed providers have, and they can help you leverage the best technologies to further drive improvements in the O2C cycle. The provider must also adhere to strict security protocols enshrined in the GDPR compliance. More importantly, they must also be able to conform to stringent SLAs that cover accuracy and on-time delivery.

What are the qualities I should look for in the outsourced accountants? 

The accountants must be well-qualified and well-versed in UK accounting practices. Ideally, you must interview them and evaluate their proficiencies for yourself. They must also have hands-on experience working on all popular accounting software, including Xero, QuickBooks, Zoho Books, and more. 

What security protocols must I look for in the ideal O2C outsourcing firm? 

Data security is an essential parameter of choice. Therefore, your outsourcing partner must implement and enforce stringent security protocols that ensure data can be accessed by authorised users only and appropriate security controls are in place for all client data. For the UK, it is imperative that all processing is GDPR compliant. 

What are the success metrics for outsourcing? 

Ideally, the success metrics should be pre-determined before you engage the outsourcing provider. If you are looking for improved productivity, put a number to the tasks you want to accomplish on a daily, monthly, or quarterly basis, e.g., the number of invoices that must be processed in a day or reports that must be delivered in a week or more along these lines. Another metric is the standardisation of the process and a move from a manual approach to process automation. The idea is to pre-define the parameters on which you want to measure the success of order-to-cash outsourcing. 

How do I look for an outsourcing partner?

Ask for references from your peers. Another easier way is to conduct an online search, go through their website and talk to providers who you think are best suited to answer your needs. Many providers attend conferences in the UK or host meetups to promote their services. You can connect with them at such events or join various associations, which can point you in the right direction.  

To Conclude 

Order-to-cash process outsourcing is one of the easier and more strategic ways of improving the O2C cycle. You get the benefit of immediate capacity building with the right talent, tech-led finance transformation, and cost-effectiveness with outsourcing. However, to experience these benefits, you must work with the right partner.  

With QX Global Group, your company can work with a leading finance and accounting service provider with proven expertise in working with businesses in the UK on their O2C functions. We leverage people, processes, and platforms to usher in an era of finance transformation for clients. 

Contact QX to know more about how the company can help you achieve new efficiencies in O2C and the overall finance and accounting process. 

Originally published Nov 21, 2023 06:11:38, updated Jan 29 2024

Topics: Finance & Accounting Outsourcing, Order-to-cash cycle

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