Maintaining sufficient cash flow to support operations is critically important to most companies. But even in cases where negative cash flow is built into the business plan, such as a software start-up, controlling cash burn is still a top priority. Although issues like seasonality, economic conditions and political tensions can affect cash flow and are beyond any company’s control, there are many internal factors that, if managed effectively, can help organizations improve cash flow.
When order-to-cash runs smoothly, companies are better able to forecast revenue and cash flow. A slight miscue at any point, however, can delay the process, extending the length of time between order entry and receipt of payment. Such delays, if they happen frequently, not only make accurate cash flow projections difficult, they also affect customer satisfaction. And poor service often results in late payments, further disrupting cash flow.
While no process runs perfectly all of the time, the order-to-cash cycle is particularly susceptible to problems because it requires coordination among multiple internal departments and, in some cases, external partners as well. As a result, there are several potential points of failure. While partners can be difficult to work with at times, internal issues are more likely to cause problems.
Start analysing your Order-to-Cash steps:
1. Order Entry
6. Payment Processing
7. Reconciliation & Reporting
5 Common Challenges Arise from these 7 Steps to be Tackled in the Order-to-cash Process:
Everything that happens in order, from capture to shipment, has a direct impact on the order-to-cash cycle. After all, the faster orders are filled, the sooner they can be invoiced. Internal disconnects can disrupt the process, extending the lag time between taking an order and getting it out the door.
For instance, sales and customer service teams often use one system for order entry, while warehouse personnel use a different system to manage fulfilment. A lack of integration means orders are emailed from one department to another, or worse, printed out and either hand-delivered or faxed to the warehouse, where they sit in someone’s inbox waiting to be filled. If orders must then be entered into another system, to generate pick lists for instance, there is an additional delay.
A similar delay may occur once the order reaches the loading dock, as information must once again be entered to create a shipping manifest. The use of disparate systems prevents the information from moving efficiently between departments, extending the order to cash cycle.
Learn from 3Doodler/Wobbleworks’ successful disposal of Google sheets and how efficiency is maximized.
A lack of insight into inventory levels can result in orders being entered for items that are out of stock. This has a direct impact on the order-to-cash cycle because orders that can’t be shipped can’t (or shouldn’t) be invoiced. More importantly, it affects the customer relationship, especially if they aren’t notified of the situation promptly.
The use of multiple, disconnected systems also creates data quality issues. Data entry is an inherently error-prone process. The more times a given bit of information is entered, the greater the risk that an error will occur. Maintaining data in more than one place also makes it difficult to keep information in synch. Even with integration, editing a record in one system may not update every other application where the data is stored. For instance, changing a contact’s mailing address in a customer relationship management system won’t ensure orders are delivered on time if the change isn’t captured in the shipping system as well.
Manual processes, like data entry, not only increase the risk of errors, they are also time-consuming and inefficient. Manual billing processes, for instance, are a significant drag on the order-to-cash cycle. Simply printing, stuffing and mailing invoices can take anywhere from one day a month to a week or more, depending on the number of customers. Complex billing scenarios, such as invoicing customers based on project milestones or completion percentage, take even longer.
Ideally, customers should pay on time every time. Since that’s rarely the case, however, companies need a process for collecting delinquent accounts. Unfortunately, collections efforts are often performed ad hoc and only focus on accounts that are long-past due, making it much more difficult to secure payment. More consistent collections efforts can significantly reduce days sales outstanding (DSO), which ultimately improves cash flow.
How your peers find the right solution to resolve these operational issues?
Download “ Evaluating the Essential Factors in Choosing the Right B2B Solution”:
NetSuite Automates Order-to-Cash
NetSuite’s order management capabilities help streamline your order processing by eliminating manual bottlenecks, preventing errors and establishing a smooth flow from sales quote to order fulfilment ensuring timely invoicing and payment. NetSuite’s order and billing management capabilities integrate your sales, finance and fulfilment teams—improving quote accuracy, eliminating billing errors, strengthening revenue recognition processes and driving fulfilment accuracy and efficiency.
NetSuite improves visibility across the organization. Sales and customer service representatives can quickly check inventory levels before before taking orders. If an item is out of stock locally, they can check to see if it is available for fulfilment from another location. A unified data platform connects all departments, so information added by one person, such as a change of address, is instantly available to the rest of the organization. This reduces the risk of errors by avoiding duplicate data entry.
The combination of shared data and automated workflows eliminates the lag time between order capture, fulfilment and invoicing. Each step in the process flows smoothly from one department to the next. And because NetSuite also eliminates time-consuming manual billing and collections processes, accounts receivable becomes much more efficient, further compressing the order to cash cycle and reducing days sales outstanding
At ONE Pacific, we understand each business is unique in your business revenue models and order-to-cash cycle. Our experts will analyse with you the financial impact of your end-to-end business cycle and strategize the automation step-by-step for smooth and rapid transformation.