Finance and Accounting

Strategies for mitigating revenue losses through order-to-cash automation

Research shows that businesses lose, on average, 9% of their income due to revenue leakage. This is the money they should have earned as profits. Almost 42% of businesses have experienced this phenomenon at least once. Fortunately, optimising the order-to-cash (O2C) process can fix this and save 10-15% of earnings while mitigating revenue losses.

According to a recent report, 92% of CFOs are looking to automate their financial processes, of which O2C is a vital component.

This article covers signs of a broken O2C process, reasons for revenue leakage, and ways to fix it using O2C automation.

What is revenue leakage?

Revenue leakage is money that a business earns but does not retain or collect as profit. Customers pay this money, but businesses fail to retain it. Several reasons for revenue leakage include undercharging clients, inefficient processes, human errors, pricing and billing mistakes, and outdated billing systems.

Signs of a broken order-to-cash process

Businesses sometimes struggle to identify revenue leakage. However, the cure begins with the identification of the problem. Here are the signs to look for:

1. Excessive manual work for the finance team: Studies show that 70% of finance teams spend at least ten hours per week on manual processes such as invoice processing, tracking overdue, and reconciliations. Manual work increases the risk of errors, reduces efficiency, and causes revenue leakage.
2. Inept system integrations: Isolated or poorly integrated systems create a fragmented process that does not give real-time visibility of revenue. Native integrations that fail to meet the needs of a growing business hamper the efficiency of data flow. Creating manual workarounds to avoid out-of-the-box integrations can take months.
3. Lengthy approval processes: Studies show that 77% of buyers experience a lengthy and cumbersome buying experience. This impacts the sales cycle, frustrates customers, and lowers upselling opportunities. Delayed approvals cause bottlenecks in the overall order flow and limit business growth.
4. Security and compliance challenges: Operations that capture PII, store payment information, and process invoicing data must be secure and comply with the necessary regulations. Manual and complex O2C processes can make security protocols challenging to adhere to.

Reasons for revenue leakage

The reasons for revenue leakage may depend on the nature of the business. However, inefficiency in the O2C process and SaaS subscriptions are some of the main reasons.

1. Inefficient recurring billing: Operational inefficiency within SaaS product billing is easy to overlook but can cause significant revenue loss. It could be as little as the system sending the wrong bill, causing long-term revenue loss.
2. Discount coupons and credit notes: Too many discount coupons available online or through the sales team can directly impact the business’s bottom line. The system must track and shut down older codes to prevent revenue loss.
3. Manual accounts receivable: Manual follow-ups for unpaid invoices, especially in SaaS products, can take up significant resources and time.
4. Payment failures: Payments fail due to several reasons, and most often unintentionally. For example, the payment server not responding or the credit card declining could be extremely common and simple reasons. Such instances could terminate a healthy relationship with extreme prejudice. It is useful to have a backup payment method in the O2C system to prevent such payment mismatches and auto-cancellations.
5. Lack of communication: Lack of communication can cause the sales team to charge too low for a service or fail to offer add-ons. Ample and clear communication avoids these costly mistakes.

Strategies for mitigating revenue loss

With an automation platform, the finance team can reinvent the O2C process, eliminate manual tasks and gain valuable insights. Here are some of the revenue protection strategies to consider:

Automation of O2C process

Eliminate errors during data entry, avoid silos, and seamlessly integrate finance with sales. Deploy readymade O2C workflow packages to ensure data accuracy, invoice processing, PO matching, and reconciliation.

Greater efficiency of cash flow

A laggard billing cycle drags the cash flow and leaves customers with a bad experience. Automation reduces the time taken to process orders, collect payments, and send invoices. It sends auto-reminders to the customer before the due date and supports multiple payment methods.

Enhance visibility and control

Provide transparency to the customer throughout the buying journey. By automating order tracking and customer updates, you can better handle complaints through real-time data and diagnosis.
Plugging revenue loss within the O2C process is critical for financial loss prevention. O2C automation is the key to stopping revenue losses by reducing manual errors, enhancing visibility, and improving process efficiency.

How can Infosys BPM help you with O2C automation?

Order-to-cash automation drives revenue protection strategies. Process consolidation and harmonisation recognise revenue early, improve the day’s sales outstanding (DSO), and enhance customer satisfaction.
Read more about order-to-cash automation at Infosys BPM.