15 Best Practices For Optimizing Order to Cash Cycle Operations

Businesses always have trouble while management of high order volumes and their requirements in dealing with high-level deductions. The problems of optimization and understanding of trade promotions, for category success and consumer adoption, are always challenges for businesses. Other factors such as risk management in cases of credit risk, it is hard to be confident of the right credit levels even for trusted and long-established customers. All customers can be posed as a risk for understanding the deep trending and analytics. It is critical for businesses for ensuring efficient order to cash process for aligning their order to cash cycle operations as per their customer requirements. Incorporating necessary controls will also optimize revenue and margins, reduce risk, and improve working capital for your business. For optimization of the Order to Cash Cycle process, businesses must apply the right expertise in the right place in the appropriate manner. Blending the right mix of tools with analytics can give businesses insight into the particular process. OURS GLOBAL’s Finance and Accounting Services caters to end-to-end solutions for giving a comprehensive view of order to cash processes for driving improvement throughout it. Ensuring the whole order management process to be under control and centrally managed, we also commit to improving the bill-to-cash segment of the cycle. Thus we ensure in improving both operational and financial performance.

Benefits from optimizing the order-to-cash process

Boosting the efficiency of accounts receivable productivity is too complex along with disparate financial systems, low standardization, and too many manual steps. Quick resolution of issues from interruptions of these processes is required. As free cash flow is the single most important metric for determining business health, the AR department has a major part in the facilitation of cash flow. Shortening the time from purchase to order and invoice delivery will simplify the payment process with smooth cash flow. Assessment and adjusting of order to cash process address any cash flow challenges. 

Optimization of the order-to-cash process gives the following benefits:

• Revenue generation 

Streamlining the purchase and fulfillment process, with swift, accurate invoicing, and ease of payment enhances customer satisfaction and drives repeated purchasing driving positive impacts on sales growth.

• Customer experience 

Managing invoicing and fulfillment along disputes and credit collection promotes accuracy and timeliness, improving customer experience. 

• Cost savings  

Reduction or elimination of errors making it easier for supporting early payment discounts, bringing down overheads, operational expenses, and support operational leverage.  

Following Are The Fifteen Best Practices For Optimizing Order to Cash Cycle Operations:

1. Order Management

Managing customer order process with accuracy requires implementation of robust customer relationship management (CRM) tool, for ensuring up-to-date customer master data, and integrating them with comprehensive Enterprise Resource Planning (ERP) solution. This will enable streamlining of the ordering process and automate the ordering process without any errors and fraudulency. Supporting businesses for integrating orders, pricing, and other critical data, each customer order will inform every department ranging from manufacturing, inventory control, procurement, accounting to shipping. This will also ensure transparency across product configurations, order fulfillment, product warranty, and software registrations.

2. Invoice Automation

An efficient and automatic invoicing system will generate invoices for both customers and stakeholders for proper tracking and follow-ups. With ERP system-supported billing, businesses can incorporate third-party solutions such as e-invoicing for capabilities of speed, interconnectivity, and speed. Enhancing the collection process and reducing DSO, invoice automation can quicken invoice delivery without much manual intervention, quickening customer payment too. 

3. Credit Management and Collections

With sound credit management policies, businesses can streamline the ordering process, with consistency in billing and elimination of non-authorized terms. Streamlining the collection processes by automation of customer statements delivery without depending on just the account management interaction, can help in the delivery of account statements at predetermined intervals. Ensuring outstanding payments to be term and minimizing late payments, can also ensure proper management of customer relationships. Incorporating software as a service (SaaS) and Business Process Outsourcing (BPO) will enable the integration of other elements of the Order-to-Cash process. Discounts for early and electronic payments also improves the overall cash flow throughout the end-to-end process. 

4. DSO Reduction

Whether your organization offers services or manufactures a product, Days Sales Outstanding (DSO) is one of the most critical metrics any accounting team must manage. It is the average collection period for accounts receivables and refers to how long it takes for your organization to receive payment. A good ERP system or BPO solution can easily track and help manage an organization’s DSO, making the task much easier to master. Even without these solutions, tracking DSO on a monthly or quarterly basis, using the standard DSO calculation, and actively addressing those problem invoices directly should pay dividends at year-end.

5. Cash Application and Reporting

Businesses must have a thorough understanding of the cash management that comes in and properly reporting it. This is critical for the order to cash process amidst order fulfillment, invoicing, and payment. With hassles of numerous orders, invoices, and payments, frauds and confusion are more common. Businesses must have a thorough understanding of the amount of cash coming in and in making reinvestment decisions and time inventory fulfillment. Accurate reporting of quarterly and annual cash application accounts will eliminate guesswork and manual intervention. 

6. Awareness Over Customers

Customer awareness is a critical element of the order-to-cash chain. Giving worth to each customer and maintaining optimal relationships with solid and reliable information requires time-to-time updating and analyzing. This data will ensure the O2C function and ensure to have good oversight of customers. With customer profile analysis, businesses can identify potential customers who are due to a lot of returns and complaints.

7. Proper Knowledge Over the Risk

Keeping updated with customers requires proper knowledge of the risk involved in it. With a proper understanding of the risk and exposure, businesses can easily strive during even the economically straitened times and ensure efficiency across the order to cash process. With proper guidance over identifying and mitigating against growing risks and proper application of O2C, businesses can reap more benefits from their Order to Cash Cycle processes. Driving a comprehensive full health check regularly can help in effectively managing risk. 

8. Training Sales Team With Risk Solving Practices 

The sales floor is the most critical part of a business, testifying it won’t bring any harm. Even with tiring situations and when getting deals are harder than before, businesses must make sure their sales team cripple the rest of the company over the customer agreements. Sales managers must assign their teams over payment terms for ensuring a smooth O2C process. Making sure the sales force of not giving payment terms in an uncontrollable manner and on selective terms turn out to be benefitting. 

9. Adherence to Risk Policies

A perfect Order to Cash Cycle Process that is devoid of any errors must be smooth for both clients and business organizations. Ensuring the sales team to stay parallel to these policies making every element of the process be stay in adherence as well. With a unified coherent risk plan and ensuring its end-to-end application optimizes the priority of credit checking. Implementation and monitoring of issues will ensure credit limits in check against credit-worthiness ratings, internal evaluations, invoice payment performance, etc. Dynamically setting new limits without the requirement of any manual interference, risk policies help businesses to stop the order. 

10. Smooth Collection Process

Making the sales team responsible for the collection from the front side of the sales processes bettering the rest of the system. Businesses should make a success out of their team efforts in following up the cash to secure their contracts with suitable incentives. Setting up KPI’s on cash collection/DSO for sales teams is critical for setting appropriate KPIs for stakeholders involved in the order-to-cash processes and designing appropriate rules over whom to contact for what profile of customers. This enables businesses in handling clients who cause blockages and on treating the ones who give seamless cash flow. 

11. Practicing Diplomacy 

Jittery markets cause panic over debtors and personal contact making it much more critical. Being aware of an awful lot of customer responses and the execution of simple and non-provocative steps will lead to a mutually satisfactory conclusion. With proactive collection calls to clients, businesses can help highlight disputes much earlier and effective aid for early signs of customer risk. Reviewing the quality of outbound calls to customers is advisable. Training collectors for dealing with difficult customers will also turn out to be beneficial. 

12. Effective Dispute Management

Some disputes are unavoidable and businesses can’t avoid many fallout.  Making sure to not make any stupid decisions and executing a formalized and rigorously stress-tested dispute management process will help businesses in solving disputes effectively. Being one of the most sensitive processes within the order-to-cash cycle, businesses must have a clear understanding of the rules for handling this with well-defined roles and responsibilities for establishing efforts for regaining and maintaining good future customer relationships. It is also critical for businesses to make their processes transparent for both customers and stakeholders. As dispute management is time-consuming and hassle-filled, businesses must identify the causes of common disputes and avoid processes to suffer from such incidents. 

13. Effective and Strict Dunning Cycle

Keep robust and transparent communications with customers through clear and compliant dunning procedures by starting and testing the system regularly. Ensure the team as well as software work ideally and be aware of the best practices at each stage. Recording all pay and following up when not fulfilled, escalation of processes is critical for keeping promises. An effective and strict dunning cycle can be helpful to deal with unreachable customers.  

14. Collaborative Approach for Sales

Collaborating selling with the sales team and individual clients can drive more success. Helping sales managers and other business leaders to improve customer relations, businesses don’t have to compete on price or products. Differentiating themselves with their customer experience. Collaborative selling builds smooth relationships with leads and customers, by inviting customers into the intuitive sales process, in turn improving relationships and sales. Taking advantage of the individual skills and expertise of sales teams, guides clients to choose the right solution for their issue or requirement. With customer’s active and decisive role in the sales process, they can implement their insights in the purchase process too. Later these clients will turn into brand ambassadors, telling colleagues and peers of the company, product, and service.

15. Buying-in

With collaborative working within business organizations, businesses must have senior sponsorship for effectively leveraging it with true support from all stakeholders. Maintaining proper communication and change management with an end-to-end perspective can deliver comprehensive engagement. Adding in customers as stakeholders, consultation about possible transformation or general customer relationship management will lead to inputs that result in the optimization of order to cash cycle operations. 

The best practices outlined above are the best practices for optimizing the order to cash process that caters visibility for application and enhancement. Ineffective OTC processes negatively impact the organization’s performance delaying payments, shipping errors, and delays. By execution of the above said OTC best practices, businesses can optimize their results. optimizing Order to cash processes can alleviate frustrations experienced by business organizations and eliminate OTC issues freeing up resources and staff from challenging and time-consuming tasks. OURS GLOBAL’s Finance and Accounting Services takes part in each client businesses order to cash processes and automate for effective order to cash processes without working against them. Businesses who are looking forward to optimizing their order to cash operations can ping us right away!