Finance and Accounting

Adopting best practices in order-to-cash automation

Leading businesses are leveraging the power of order-to-cash (O2C) automation to not only boost profits but also enhance customer experience. These processes, which typically account for 1 to 5 per cent of the total revenue, span across various functions such as finance, sales, legal, and customer support.

As per a study by a leading management consulting company, the bar for O2C processes is being set higher by stakeholders. For instance, they now anticipate that over 80% of orders should have standardised offerings, pricing, and contracts. This underscores the growing need for O2C automation.

This article covers the steps to improving order-to-cash processes and the best practices for implementing automation.

Steps to optimising the order-to-cash process

Redesigning the O2C process starts with recognising the value within and then implementing automation to impact top-line growth with cost-cutting. Here are the steps to optimising the O2C process:

Investigate the underlying data

>The first step is to fully understand the underlying data and extract the insights necessary to optimise the order-to-cash process. This could mean using process mining to analyse the process. Once you know the consistent pattern of errors, revenue leakage, rework, and customer-experience issues, you can implement the optimisation that was previously difficult to achieve. Some of the parameters to observe are:

• Unfulfilled or on-hold orders
• Average hours/days for confirmation
• Right-first-time orders
• Order delivery updates
• Average days to issue an invoice and corresponding errors
• Short payments that are shown as bad debt

Deploy tech fixes within internal processes

O2C optimisation is a strategic approach that measures the parameters discussed above and implements tech-based solutions to fix the process. Some of the countermeasures to the problems discussed above are:

• Use AI systems to detect short payments proactively
• Streamline order intake by using an e-commerce portal or API-based e-catalogue
• Negotiate the contracts on multiple payment terms
• Use credit card and collection tools to identify high-risk customers

Several tech-based measures a business can implement to solve its O2C process challenges are:

O2C process digitisation

When you design, test, and implement a robust e-commerce portal, it can handle most of the orders, and customers are willing to switch to online ordering rather than using analogue sales channels.

Implementing robust validation

By optimising the credit-monitoring process, a business can minimise delays and reduce the order and credit holds.

Streamlining the order-hold and credit-checks

By monitoring short payments and credit notes, organisations can set optimal write-off thresholds and identify unnecessary write-offs, thus recapturing up to 60% of revenue leakage.

Set O2C process standards

Order-to-cash automation must rely on clear standards and processes. This allows the teams to know what to expect, identify and rectify bottlenecks, and remedy the processes whenever necessary. Monitoring and optimisation are continuous processes that require both human analysis and technology.

Best practices for order-to-cash automation

Here are some of the order-to-cash best practices to help process owners and treasury leaders manage operations in a rapid and uncertain economy:

Analyse the O2C process

Before fixing the problem within the order-to-cash processes through automation, you must know where it resides. To do so, you must analyse the existing processes to find bottlenecks and manual tasks. Consider using automation to fill these gaps where there could be revenue leakage.

Integrate the systems and leverage technology

Technology, in itself, is not the solution. How you implement it resolves the existing problems within the O2C process. Use an automation solution that integrates with your existing systems, such as ERP, so that you do not lose existing data.

Explore tech-based solutions for manual credit applications, remittances, processing manual entries, and lock box images. An integrated accounts receivable (AR) solution that supports collections, deductions, and cash application should be a part of the O2C solution.

Use a data-driven O2C strategy

Ensure end-to-end visibility of the customer credit portfolio and assess the overall risk. Factor in any crises within the industry, region, and country, and set triggers that monitor, manage, and refine enterprise credit risk. Ensure tighter control on credit line granting for every new and extension for an existing customer.

Tighten upstream processes

Use order placement and billing automation to minimise billing errors and avoid cash flow leakage. An integrated accounts receivable automation system can help you understand the root cause and minimise the problem. Some examples of technology are self-service portals, online payment gateways, customer information portals, and dynamic discounting.

How can Infosys BPM help with the order-to-cash process?

Infosys BPM helps you drive O2C process consolidation, harmonisation, and process automation to recognise revenue early, improve the day’s sales outstanding (DSO), and enhance user satisfaction.

Read more about order-to-cash automation at Infosys BPM.