Looking Beyond Traditional O2C Solutions: The Limits of Financial Services

By Eric Fay | December 18, 2020

With the current state of today’s economy, companies are looking to address their working capital and liquidity position more than ever.

One popular option to help address these challenges is for B2B sellers to hire a financial services provider, with the goal of eliminating credit risk.

Compared to the other classic categories of Order-to-Cash (O2C) solution providers that can provide a mix of outsourced labor and technology – financial service providers are the only ones, traditionally, that are willing to assume a financial role + risk in customer transactions.

Financial service providers can manage credit decisioning, extend credit to customers, manage incoming payments, and accelerate certain payments to business sellers.

Despite these offerings related to the financial aspect of O2C, the need to build or purchase other O2C technologies remains (invoice distribution as an example).

Here are some of the strengths and weaknesses related to financial services as a solution to O2C:

Strengths

  • Certain providers in this category, such as factoring providers, can selectively unlock cash from outstanding receivables.
  • Credit decisioning, and extension of credit to your buyers, are features offered by some providers in this category.
  • Providers in this category can offer a fee structure that incentivizes the provider to support business growth and positive customer relationships.
  • Many providers can offer the option of reducing or eliminating collections risk for select receivables in your portfolio.

Weaknesses

  • Many financial service providers have very stringent credit qualifications that could limit applicability to a supplier’s customer base.
  • Considerable integration is required between a seller’s ERP and/or invoicing systems to support these relationships.
  • Providers in this category can struggle to achieve dispute reduction objectives for the business.
  • A seller’s customers may perceive these providers in a negative light (e.g., a “collections agent”).
  • Fees for this type of O2C service are usually high and there may be a lack of predictability for future fees.
The Limits of Traditional O2C Solutions
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Corcentric Managed O2C Solution

The problem with opting for a pure financial services solution over the other two traditional solutions (SaaS applications or leveraging a BPO), is that at the end of the day, you, the seller, will still lack the essential components like tech and consultative services that are required and can immediately guarantee business outcomes such as reduced DSO, elimination of credit risk and on-time payments.

Corcentric’s solution is different and takes a comprehensive approach to O2C by combining technology, consultative and financial services. With the combination of these three, Corcentric’s Managed O2C solution guarantees business outcomes that will ultimately improve your working capital.

With Corcentric’s Managed AR solution, key seller’s business benefits include:

  • Guaranteed customer payments on terms of their choice.
  • Guaranteed elimination of Bad Debt.
  • Guaranteed elimination of Write-Offs.
  • Guaranteed elimination of Credit Risk.
  • Guaranteed immediate DSO reduction to sellers’ preference.

For example, if a seller engages Corcentric to reduce DSO on some, or all of its customers’ accounts from 60 days to 30 days, the seller will immediately begin receiving those customer payments on exactly 30-day terms – guaranteed and independent of when or if the buyer remits payment to Corcentric. Within this engagement, Corcentric would assume responsibility for assessing and extending credit to the seller’s customers, distribution of invoices to customers in their preferred invoicing format, complete administration of all dispute resolution activities, and complete administration of payment activities.

With guaranteed, on-time payments, DSO reduction, elimination of credit risk, and elimination of bad-debt, Corcentric provides sellers with complete working capital control that unlocks cash from receivables immediately for use anywhere in the business.

At Corcentric, the nexus of O2C technology, BPO advisory services, and Financial Services represents a highly differentiated and unique ‘managed’ O2C approach capable of addressing today’s ever-challenging B2B environment with guaranteed business outcomes no other O2C approach can achieve.

Download our whitepaper to learn more about the value of guaranteed O2C business outcomes and how Corcentric’s Managed O2C solution can help your company achieve its O2C goals.

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