Getting paid in a perfect storm: six benefits of an order-to-cash platform
With the pandemic creating financial uncertainty for many businesses, a total of $23.4bn is now owed to British firms. The UK government has introduced measures to protect businesses against insolvency for up to 40 days, plus a temporary extension to April 2021 of a ban on statutory demands and use of winding up petitions to chase commercial debts. With levels of business debt continuing to increase, 55% of UK businesses have reported an over 10% increase in their DSO rates. While these figures present a bleak picture, an integrated order-to-cash platform can help make the difference by providing a wide range of solutions, helping those working in credit functions to improve the financial standing of their business and facilitate a frictionless customer journey. To break down the considerations, below are six key benefits of an order-to-cash platform solution.
A key starting point for a business is assessing the level of financial risk that a potential customer or client poses at the beginning of a new transaction. A risk management solution in order-to-cash plays its role here through integration with credit reference agencies to help provide external data on the level of potential risk, whether it’s a complete credit report or specific data requirements. It’s also possible to create an internal risk strategy to determine how late payment from a customer can impact on the business.
While for some businesses a credit insurance arrangement may not be applicable as they feel that their current processes for debt collections are robust enough, previous lessons from the recession have taught many financial professionals to expect the unexpected and ensure that insurance is in place for the worst-case scenario. An order-to-cash credit insurance solution provides a facility for credit insurance management of current policies, driven by the expertise of a specialist insurance broker.
Despite advances in digital transformation, a significant portion of companies still send their invoices by post or fax. However, print-and-post during the pandemic has now become virtually impossible, and payment terms can be inadvertently increased by customers if they receive invoices later than planned. A quicker and more efficient e-invoicing method is now a necessity. An online portal can also allow customers to download their own invoices and statements for full clarity of any money that they owe, with the added benefit of any action taken being visible across the entire order-to-cash invoicing solution in real time.
A common issue with many systems is their failure to recognise when a customer has already paid, which can become a painstakingly manual task for finance professionals to match payments to a record of outstanding payment. This can have a knock-on effect to the collections team, where they can ultimately chase already-paid invoices from clients and damage the customer relationship. A cash allocation solution within order-to-cash can automatically match invoices and save valuable time for finance professionals.
Credit management, also referred to as dunning, involves the process of prioritising which outstanding debt to chase and when. A sophisticated credit management solution as part of the order-to-cash process can incorporate extensive workflows to lay out the strategy of how a certain debt will be chased, including analysing the risk factor of particular customers and segmenting them into different risk areas. Tailored debt-chasing strategies can then be devised from this information.
When a debt comes a bad debt, the collection tool of an order-to-cash solution can allow integration with debt collection agencies in order to collect the money owed. The capabilities of the collection solution can also play its part here in informing collectors on whether to chase a bad debt themselves or move this process to an agency depending on the circumstances. For effective collection, it’s crucial for finance professionals to take different approaches to different types of customers and industries, and this is where technology-driven smart segmentation comes in.
So, there you have it, six key areas in which order-to-cash platform can make a difference when it comes to getting paid in times of uncertainty. All solutions in the platform can be used however and to whatever extent you choose, based on your business objectives. Use the solutions effectively on their own or integrated together, giving added value and functionalities. To discover how to get more out of your finance department, take a look at our solutions page for more information.