The order-to-cash (O2C) function is a vital component of any successful business. It impacts revenue, customer interactions, customer retention rates, and overall business growth. Before we delve into the different ways in which a business can optimise its O2C function, it’s important to understand what exactly the order-to-cash process entails.
What is O2C?
Simply put, the O2C process deals with receiving and processing customer orders. This includes shipping, payment collection, invoice processing, and reporting on data collected.
Why is it important?
Optimising the O2C cycle can enable a business to unlock significant benefits, including:
Enhanced cash flow and reduced operating costs
Smoother and improved customer relations
Ability to devote more time to strategic functions
How can your team optimise the O2C process?
We’ve compiled a list of 7 best practices that can help your organisation to optimise the O2C cycle.
1) Automate administrative tasks: Manual processing can lead to errors and inefficiencies. Automation increases both efficiency and accuracy of tasks. Some tasks that can be automated include billing, invoice collection, payment collection, and credit management.
2) Standardise O2C processes: Exhaustive documents outlining clear steps on how to tackle different activities should be drafted and shared with relevant employees. This enables them to get up to speed more quickly and perform tasks precisely. Additionally, standardisation clearly outlines who owns which task and leads to more accountability.
3) Send electronic invoices: Manual invoices are becoming a thing of the past. Electronic invoices, on the other hand, speed up the O2C process, thereby enabling businesses to increase customer satisfaction, reduce days sales outstanding (DSO), and receive payments faster. Organisations should aim to go paperless partially or fully, to maximise their benefits from digital technology.
4) Re-evaluate credit policies: It’s a good idea for businesses to maintain a credit policy that outlines various steps and procedures on how to optimise resources, reduce credit risk, and improve cash flow. According to a survey by Aberdeen, 21% of best-in-class companies make adjustments to their credit policies to minimise outstanding accounts receivables (AR) and bad debt.
5) Reduce any delays in billing: Customers usually prefer to receive bills immediately as it enables them to flag any discrepancies earlier in the O2C cycle. Real-time billing and troubleshooting also improves customer satisfaction and process efficiency.
6) Automate Accounts Receivable (AR): The Aberdeen survey also found that 34% of best-in-class organisations are investing in A/R automation. AR automation permits businesses to centralise all information and activities related to the accounts receivable process under one roof. Some time-consuming AR tasks that can benefit from automation include scheduling phone calls, sending payment reminders, archiving customer responses, enabling online payments, settling disputes, etc.
7) Optimise data management: Master data management enables businesses to obtain consistent data across all the sub-processes of the O2C cycle. Availability of this data in turn leads to greater transparency, improved decision-making, and facilitates integration of systems.
O2C is a complex process that requires continuous monitoring and transformation. By implementing some of the best practices mentioned above, businesses can take a step forward in their journey towards transforming their order-to-cash function.
How QX Helps
QX is a UK-based finance and accounting outsourcing service provider with rich experience in streamlining credit control for clients spread across industries & geographies. Ever since its inception in 2003, QX has continued to leverage best practices, process excellence and intelligent automation to optimise cash flows for recognised players in industries like recruitment, student accommodation, and manufacturing amongst others.
Speak with our experts to know more about how QX can help streamline accounts receivable and credit control for your business and deliver customised solutions to meet your specific organisational needs.