Scaling order-to-cash processes


Scaling order-to-cash (O2C) processes might seem like a nice problem to have. After all, the need to handle more orders and invoice more is driven by increased sales. Surely a good thing?

However, the importance of bringing cash in on time places significant pressure on the scalability of O2C to support cash flow, liquidity and operational viability.

Ramping up order management, processing, delivery, invoicing, and collections to meet demand has typically required investment in people, processes, and technology. Each step takes time to scale, as people are recruited and trained, and technology is deployed or extended to cope with new requirements. The more manual components there are in the O2C cycle, the more challenging scalability is due to the inherent bottlenecks in human bandwidth.

The last few years have seen a rapid digitalization of order-to-cash, amongst other business processes. This was driven in part by the rise in e-commerce and the requirement to deliver invoices electronically in order to reach customers more reliably during the pandemic lockdowns. It is also driven to meet a growing customer demand for electronic invoice data, which can be more easily consumed and processed by electronic accounts payable (AP) systems.

Becoming more digital isn’t always easy, requiring investment in technology, training, and process change. However, the more digital the O2C process, the greater the opportunity for automation and scalability.

Automation from order management to payment collection in the O2C Cycle

Automation across the whole O2C cycle makes scalability easier in principle, but each step in the process needs to speak the same language. Data management and solution architecture need to unite inventory management with the order management system, to ensure ERP system records are 100% accurate (ideally in real-time). Order shipping, packing list, and invoice delivery should then flow seamlessly from the same sales order data, before payment collection connects payments with the order processing system, updating records in the ERP system and closing the cycle. Every step has the capacity to influence cycle time, so automation and smooth connection between steps is essential to optimize performance and allow for scalability when needed.

Older order-to-cash processes, with manual order entry, processing, invoicing, delivery, and/or payment collection run the risk of human error at every step. Bottlenecks and inventory management risks can compound inefficiencies if left unchecked. And for every additional layer of workflow to validate manual processes, overheads in staff and systems contribute to challenges down the line when these processes need to scale.

How paper invoicing slows scalability in the O2C process

Traditional invoicing processes, where invoices are printed and posted, are limited in their output by the physical constraints on how many invoices can be printed, folded, and inserted into envelopes in a day. These processes rely on machinery to print and automate the preparation of each invoice for post. Scaling these processes would require investment in more machinery, as well as the associated power, materials, maintenance, and management costs.

Wherever paper is involved in accounts receivable processes, as with the equivalent processes in accounts payable, there are limitations on how completely the process can be automated. Requiring staff to manage the process and plug any gaps often results in repetitive manual tasks and the unavoidable risk of human error.

As paper invoicing has fallen out of favor due to the efficiency, accuracy, and reliability gains from e-invoicing, businesses have been able to free up AR staff from manual processes, reduce their reliance on machinery, and allow for greater flexibility in how customer invoicing can be scaled up (or down) to meet changes in demand.

Electronic invoicing and O2C scalability

The promise of electronic invoicing implies greater automation and therefore ease of scalability. However, this isn’t always the case.

Poorly implementing e-invoicing processes may result in electronic processes that are just as manual as their paper-based equivalents. Creating invoices as electronic documents and/or delivering electronically can still be done in a very manual way – e.g., sending invoices as PDF attachments to Outlook emails.

Businesses which have taken the time to streamline and migrate over to well-structured electronic invoicing presentment and payment (EIPP) platforms will find scalability far easier than those who are essentially replicating paper invoicing production and delivery processes on digital platforms.

As more customers move AP systems to ingest e-invoices, this has pushed the requirement on to sellers to supply invoices electronically in a format their AP systems can process. In some cases, this has led to customers requiring suppliers to upload invoices to their AP portals – which can involve file uploads, copy-pasting information or even rekeying information into these (and all the human error this risks at every stage).

Some suppliers now have AR teams who spend hours each day logging into multiple different AP portals to deliver invoices. Electronic and digital doesn’t always mean streamlined and automated. Scaling these kinds of inefficient electronic processes can be just as challenging as scaling traditional paper invoicing processes.

Employment challenges in O2C scalability

Scaling up O2C processes normally requires an additional investment in people, even when processes are highly digitalized and automated. The scope of the recruitment and training for scalability will depend on how automated your processes are and whether you leverage external partners to provide managed services as part of your overall O2C process.

Since the disruption of the coronavirus pandemic and socio-economic ramifications of this, compounded by supply chain and political factors across the globe, many businesses have struggled to recruit staff as easily as before. Scaling O2C processes can require specialist skill sets which are in high demand, as well as presenting training, management, and retention challenges beyond the initial recruitment stage.

Few businesses have escaped the uncertainty and volatility of demand in recent years, and are likely to experience ongoing fluctuations as environmental and political factors impact international trade, regardless of whether the recent pandemic is brought under control. This means that businesses must be prepared for O2C scalability both up and down at relatively short notice.

Scaling O2C processes down tends to result in inefficiency, as O2C resources are underutilized while payroll, licensing and other business costs for these remain static.

Scalability isn’t always about volume

Scalability doesn’t always refer to a challenge of supporting changes in volume of demand; it can also refer to scaling existing processes out to more regions and supporting the nuances of doing business in these regions.

Scaling O2C processes to support rising demand in new regions can be even more challenging than supporting growth in one region. Invoicing, communications, collections, and payments may well need to adhere to a range of different formats and protocols, depending on the region.

If your business needs to expand into a new region, you may be faced with rapidly getting up to speed with the regional requirements for invoicing and associated communications. How well can your existing processes adapt to these needs?

Customer experience across the order-to-cash process

recent study conducted by Forrester Consulting on behalf of Corcentric  shows that customer experience improvements ranked even higher than revenue growth as a business priority. Even businesses with less of a focus on customer experience will still do well to ensure customer relationships are preserved to retain business.

Customer satisfaction is a priority for any business, measured with metrics such as Net Promotor Score, so any changes to the O2C process which might impact this are important to optimize in favor of improved customer experience.

Scaling O2C processes inexpertly can pose customer experience risks, from customer orders to order fulfilment to payment processing. Care and attention to the customer experience at every intersection between O2C and the customer lifecycle is extremely important.

Customers need to feel the entire order and fulfilment process, through to collections, treats them with the respect they deserve. Access to previous order details and the ability to download or print information pertaining to these, means that customer data needs to be at the heart of any O2C scalability initiative.

Scaling data management across the cash cycle

It’s not just customer data which needs to be carefully managed when scaling O2C processes. The real-time flow of order management and inventory data can be used to ensure optimal supply chain management to drive pricing optimization and maximum commercial competitiveness as you scale.

More orders and the associated impact on inventory management shouldn’t be seen as a negative when scaling up. The fact that you need to place more orders to fulfil your customers’ orders can be used to improve purchase pricing when renegotiating supplier contracts. However, this will only work if two conditions are met: 1) Data management across your O2C processes scales seamlessly with respect to your ERP system, and 2) provides procurement with the data they need for strategic sourcing and ongoing purchasing to meet growing demand.

Solutions to O2C scalability challenges

While scaling the full O2C process is far from simple, scaling the accounts receivable process – from invoice generation, through to delivery, collections process, and payment handling – can be greatly simplified.

Managed service providers, such as Corcentric, take scalability to another level with the ability to apply extra people, process, and technology at short notice to manage rapid growth or seasonal fluctuations.

Managed Accounts Receivable (Managed AR) from Corcentric provides a fully-managed accounts receivable service as an extension of your accounts receivable team. This means you can immediately scale up or down, and send invoices and collect payments from new regions.

Credit management and risk mitigation when scaling

Scaling the accounts receivable aspects of your O2C process through a managed service offering can have benefits beyond reducing risks to cash flow and customer experience.

Even more compelling, for some businesses, is the ability to use Managed AR to guarantee payments for invoices. You can stipulate the timeframe you want invoices to be paid and Corcentric will ensure you receive 100% of your payments on time.

Corcentric funds the invoice payment and manages the collections process with your customers. It’s a little like invoice factoring, except that this works as a white glove extension of your AR team, without any heavy-handed collections processes and associated potential impact on customer experience.

By setting a specific payment timeframe, this allows you to control your days sales outstanding (DSO) and take cash flow forecasting to the next level. Suddenly, payment terms or late payments do not have any bearing on DSO and you are able to liberate working capital for investment elsewhere through the reduction in DSO.

By working with Corcentric to leverage a managed accounts receivable service, you can offload not only invoicing and collections overheads, but also reduce time invested in the approval process the first time new customers sign up. Corcentric can work with you to ensure credit setting and credit management for new customers strikes the right balance between risk and reward, underwritten by the assurance of guaranteed invoice payments for these new customers.

Scaling order-to-cash processes can be pain free if you have the right partners to optimize and streamline the journey. Find out how Corcentric can help you put the steps in place to prepare for future scalability demands today.