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The order-to-cash (O2C) cycle is a complex process involving various cross-functional activities. Despite advancements in ERP software and emerging technologies like robotic process automation (RPA) and AI, there is still room for improvement in B2B processes.
Companies can strategically realign their order-to-cash processes and leverage new technologies to optimize their performance and improve the bottom line. Optimization involves integrating data from business customers, automating activities, improving workflow, and analyzing deductions. By treating O2C as a unified challenge and breaking down departmental silos, companies can improve cash flow, deduction recoveries, and customer satisfaction.
Integrating the invoice-to-payment process is a critical aspect of O2C optimization. It involves linking stages from invoice generation and submission to validation, dispute resolution, payment processing, and reconciliation. While there may be industry-wide solutions like blockchain in the long term, current solutions involve implementing robotic (RPA) processes, leveraging bolt-on software applications, and optimizing ERP systems. Some areas in which these current solutions can be deployed are credit, accounts receivable management, collections, and deductions.
Credit management is a crucial aspect of the O2C cycle. B2B credit scoring and credit line monitoring help companies assess the creditworthiness of their business customers and manage credit risk. Effective credit management reduces the risk of defaults and improves slow payments. Automated credit application software has gone a long way to accelerate (and improve) new customer onboarding processes, often cutting order approvals from several days to 24 hours. The result leaves credit managers with more time to manage high-risk customers.
Accounts receivable (AR) management includes cash application, where incoming customer payments are matched and applied to open invoices. Traditional cash application processes can be time-consuming and prone to errors. However, software solutions can automate the cash application process using optical character recognition (OCR) technology, employing machine learning algorithms, and providing real-time adjustments based on pay terms and special conditions like tolerance write offs or early pays. By integrating with payment gateways and accounting systems, data analytics and reporting capabilities are also optimized. These enhancements streamline cash application processes, reduce errors, and improve operational efficiency to ensure cash closes quickly, disputes are handled sooner, and collectors have accurate views on true open invoices.
Collections management is another area where software can improve the efficiency of the O2C cycle. Software can automate collection tasks, handle dispute resolution, and provide reporting and productivity analytics. By integrating with accounting, third party bureau data and CRM systems, software solutions also utilize predictive analytics to identify high-priority activities and manage them through workflows, better facilitating multi-channel communication, collaboration and documentation automation. By leveraging software, businesses can enhance productivity, improve customer communication, and make informed decisions to accelerate the payment cycle and improve cash flow.
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