What’s Next for Order-to-Cash?

April 29, 2021

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We weren’t the first and won’t be the last to say it, but we’re whom you’re reading right now so stick with us here for this gem: A company’s order-to-cash processing is critical to its success, yet until foisted upon them by the economic fallout of the COVID-19 pandemic, executives rarely paid close attention to that part of their business.

They do now.

The collection of activities following the receipt of an order through its processing and reciprocal payment has never been more closely examined than it was in the year 2020 and with good reason. Critical yet complex, the order-to-cash (OTC) process was kept at executive arm length due to its very complexity - and a lack of end-to-end, out-of-box fix-all solution, but more on that later. Our ongoing global crisis forced the need to examine everything not only to maximize liquidity and curb expenses, but simply to survive.

Pretty sure we mixed our metaphors there, but you get the idea. OTC has always been incredibly important. It took a global reckoning for everyone to realize it.

Now under the microscope, what does the rest of 2021 and beyond hold for order-to-cash processes?

The modern OTC process is now squarely in the digital transformation age, that’s what. In fact, given the aforementioned added attention, this segment of a company’s operations is leading the charge toward where most business processes are moving these days.

The emergence of new platforms capable of optimizing the operations of so many involved departments - from sales to marketing, pricing, contracting, collections, warehousing, finance, customer service and more - into a more seamless, efficient operation can pay dividends for years to come.

In an article last year touting the urgency of OTC digital transformation for business viability, business strategists at Boston Consulting Group (BCG) said results could include boosted sales figures, improved customer satisfaction, reduction of costs and indirectly make life easier for employees and customers alike.

“Indeed, the benefits of transforming the process accrue in both the short-term and the long-term,” the article notes. “Over time, companies that deploy OTC platforms and re-engineer the process boost revenues by 1% to 3% a year.”

Pain points of many present and quite insufficient OTC processes include siloed operations, lack of data and rigid legacy systems. On the other end of the microscope after this year, executives are no longer content to rely on a collection of discrete processes to oversee activities as important as making a sale and realizing its revenue. Financial leaders have expectations for the modern OTC process and it involves coherence, transparency with real-time data and performance availability 24/7. 

The BCG article offers the following three measurable goals in optimizing an OTC process by deploying such a modernized platform:

  1. Reduce the process cost per order, as measured by the number of orders per employee or the labor cost per order, as well as the share of automated transactions.
  2. Reduce the number of days’ sales outstanding, by shrinking the processing time and dispute-resolution cycle and avoid mistakes in pricing, delivery and invoicing.
  3. Increase customer satisfaction, by reducing the deductions per order or invoice and increasing payments received on time and in full.

The new OTC platforms available can help bring harmony to disparate systems, increase efficiency and expand the level of insight which in turn improves organization decision-making.

Measurable results vary depending on organizational input and expectations, but the common theme is improved time and efficiency. Leveraging automation can help facilitate orderly management of a 25% increase in revenue with no additional headcount required. Removing the manual processing in favor of a monetization platform could trim two days off the closing cycle and 70% (2,000 to 600) of the required records kept. 

Cutting down on the time to close is a highly sought-after metric and as individual as the company in question. Utilizing these modern tools available can help reduce time required for the order-to-invoice cycle by more than 50%. Or even more drastically, by consolidating all contract terms, pricing and amendments within a single platform, the time required to produce invoices gets slashed by 94% (120 days down to 3 days or less).

It’s no wonder finance leaders the world over agree the application of OTC automation tools, when implemented properly, can help improve such processes radically. 

Consider these and other benefits being leveraged via OTC automation tools when considering how to apply to your organization:

  • Reduction in days sales outstanding which is essential in improving a company’s cash flow
  • Reduction in the order to payment cycle time, enhancing the working capital
  • Greater visibility into the process with faster dispute resolution and minimizing cash flow interruptions
  • Improved accuracy of invoicing, collections and cash flow reports and quicker identification of unpaid invoices
  • Accurate revenue recognition and seamless partner payments

Contact us today for an OTC assessment and to learn more about how we can help deliver on your organization’s digital transformation goals.

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