Risk-Based Reasons For APplying Automated Deduction Management System In O2C Processes


Organizations are continually searching for ways to optimize their order-to-cash processes, reduce the risk of financial exposure, and streamline the workflow. Automated deduction management system (ADMS) is useful tool that can help meet these needs. The benefits of ADMS improvements are often discussed, but there are also risks associated with not implementing this software. Finance executives understand the importance of minimizing risk and should take the time to understand the potential pitfalls of not utilizing an effective ADMS.

The primary risk of not implementing an ADMS is that revenue collection may suffer. ADMS helps to reduce the amount of manual time required to review, process, and complete deductions by auditing data and validating invoices and payments. Without the assistance of an ADMS, finance teams typically need to put more effort into locating outstanding payments and resolving deductions, which means it takes longer to receive payment from customers. This can put cash flow under pressure, especially if the finance team is not able to access the data fast enough to keep up.

Another risk associated with not having an automated system is that deductions may not be properly approved before payments are released. This can lead to deductions not being taken from the customer’s accounts, resulting in costly losses for the organization. In some cases, customers may take advantage of manual system and manipulate the approval process for their benefit. An automated system can ensure that all deductions are properly reviewed and approved before payments are released, helping to reduce the risk of non-payment or deductions being taken improperly.

Lastly, not utilizing ADMS can also lead to lack of visibility into the organizations accounts receivable portfolio. An automated system can provide detailed reports and analytics into the accounts receivable portfolio, allowing the finance team to identify potential problem areas. This information can then be used to create processes to reduce the risk of future deductions and improve the process of collecting payments.

The risks associated with not implementing an appropriate ADMS solution should not be underestimated. ADMS improves the accuracy and speed of the deduction process, which reduces the total time to receive payments and mitigates the risk of non-payment or improper deductions. Finance executives should consider the potential risks of not using an automated deduction management system as part of their order to cash processes and recognize the significant advantages it can bring.