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Guide: Order to Cash Best Practices

 
Amalto resources

O2C best practices to follow and improve business performance.

What does Order-to-Cash entail? In basic terms, it is the process of receiving and processing customer sales to include entering the order, defining the price and availability, shipment of the goods, and the transaction made for receiving the payment. This process can be divided into two key steps:

  • The Order Management Process: how an order is written, submitted for processing, and fulfilled
  • The Bill-to-Cash Process: how payment is invoiced and received

This guide will serve as a how-to for improving the performance of your Order-to-Cash cycle, which will help your organization expedite cash flows and increase available working capital.

1. Optimize Order Management Process

Signs that your order management process is not running smoothly will be obvious. There will be day-to-day issues such as customers not receiving what they ordered, order delays, and lack of inventory information resulting in backorders. Streamlining this process and eliminating inefficiencies can be done by getting to the root of the problem.

If you are utilizing outdated processes such as written order forms, sending orders via fax, and having a dedicated team for data entry then several of your issues can be solved by automating systems. An updated CRM will minimize the need for manual intervention, eliminate the need for order re-entry with digital order writing solutions and remove legacy software systems or complex workarounds that bog down the fulfillment process. A comprehensive Enterprise Resource Planning (ERP) solution will allow your organization to streamline the ordering process while upholding a personal touch with your customers. Also, make sure to provide your sales reps with inventory and customer information during the sales process so they can sell more tactically and avoid backorders.

2. Move Toward Invoice Automation to decrease errors

An ideal billing system will automatically generate an invoice and deliver it to the customer for proper tracking as soon as your sales team or online portal accepts an order and delivers it. The faster an invoice can be delivered to the customer, with the least amount of manual intervention as possible, the faster sooner the customer can begin the payment process.

3. Managing Billing and Collections

Implementing a credit management system will help to modernize the ordering process and guarantee consistency in billing. The goal is to make sure outstanding payments are made swiftly and minimize late payments while maintaining healthy customer relationships. This can be achieved through streamlining the collection process by automating when customer statements are delivered. Credit incentives can also be beneficial to this process. By offering discounts as low as 1% to 2% for paying electronically and ahead of time, you will see an improvement in collections and cash flow.

4. Reducing DSO

Day Sales Outstanding (DSO) refers to how long it takes for your organization to receive payment and is the average collection period for accounts receivable. The longer it takes for a customer to get receive an invoice, the longer it takes for them to pay it. An automated tracking system, such as an ERP or BPO, can help manage and track your DSO. By automating your billing process, you may be able to reduce billing time to three days or less, shaving precious time off of your DSO.

5. Payment Management and Reporting

Inefficiencies such as quote errors, billing inaccuracies, and customer disputes can be a result of an outdated billing management and reporting process. Similar to the order management process segment, above, improving the bill-to-cash process can be done by eradicating manual processing. Start by maintaining a single point of contact for your accounts to avoid miscommunication and confusion. Then utilize a sales order management solution during the ordering process to automatically apply customer specific discounts to avoid quote errors. It is beneficial to centralize and integrate your invoicing and payment data as well. Use real-time reporting and analytics to improve financial forecasting and proactively resolve delinquent accounts. An innovative way to maintain customer interaction is to implement a vendor portal to give them electronic access to invoices and have the ability to pay online.

If these sound like processes that could benefit your business, contact Amalto for more information. We can help you reduce errors, improve customer service, and get paid faster by optimizing your Order-to-Cash process.

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