Risks Of Non-Automation For Order To Cash And Budget Accounts Receivable


A highly successful level of cash flow management requires effective budgeting and accounts receivable (A/R) automation. failure to deploy software systems that facilitate accounts receivable, budgeting, and cash flow management results in plethora of financial risks to an organization. C-Suite executives of companies, whose current manual system of cash flow management and order to cash processes, should review these risks to determine the right course of action for their organization.

Budgeting presents risks to an organization if done manually, inefficiencies result from this practice and could prevent accurate cash forecasts and ultimately cause the organization to miss payment deadlines. This risk is unlike any other, as the organization may invest resources of money and human capital to complete relatively simple tasks their returns, dire.

Cash flow problems may arise due to delays in the accounts receivable process. Inability to quickly and accurately generate invoices, send payments, and allocate funds to correct accounts escalates the likelihood of financial loss. Further, tracking unpaid balances of customers/clients is imperative as these often signify debts to the organization.

Inaccurate recordkeeping is burden companies bear when manual systems are utilized. Manual order to cash processes are error-prone, leading to costly losses due to mismanagement of invoices, customers, and pricing. Records generated by manual systems are often not disciplined and can present myriad of issues when errors are encountered. Without uniform structure, errors cannot be readily identified or corrected.

Non-automation of order to cash processes increases days sales outstanding, or the average number of days between sale/invoice and the receipt of payment. This length of time translates to reality that cash flow will be restricted and thus restricts the organization from further business investments. Missed opportunities could manifest if funds remain inaccessible due to backlogged accounts receivable.

The risk for forgery and fraud can occur with manual systems. An inherently rigid structure renders it difficult to monitor the accuracy of each transaction, leading to an increased risk of wrongdoing. Fraudulent activities may result from lack of internal control and account inconsistencies. This can turn into compliance issue as well; as it becomes more difficult to keep track of errors.

In conclusion, C-Suite executives must consider the risks associated with using manual and non-automated A/R and budgeting systems. Failing to consider these issues can lead to potentially disastrous cash flow problems, problems that are easily avoidable through the use of software systems that offer solution to their risk management. Investing in software systems will not only help reduce the financial risks associated with manual systems, but also offer multitude of additional benefits, while allowing an organization to focus on competing in the marketplace.