The Cost Of Not Using Order To Cash Software
BEST POSSIBLE DSO
Cash flow is essential to any thriving organization. To manage cash flow, finance executives and other professionals need to track and oversee accounts receivable to ensure funds are handled in timely and efficient manner. Without properly managing Accounts Receivable (AR), companies risk damaging relationships with their customers and damaging their own revenue streams.
Accounts receivable departments have traditionally used software to track and manage AR, so it ishould come as no surprise that with todays focus on technology, many companies are turning to software solutions to manage their AR processes and mitigate the cost associated with not using software.
Using software to support the order to cash process can save costs in many ways, from more efficient data analysis to reducing manual errors in billing and collections. The insights and control it provides to financial teams can drastically improve the rate of cash flow. For example, company might be able to identify invoices that were paid late, stop any remaining outstanding payments, avoid duplicated billing, and then quickly reallocate those funds to where they need to be. While these cost savings, in terms of time and labor, should be calculated into the overall accounting software budget, here we will focus on the cost associated with not using software during the order-to-cash process.
What is DSO?
The Days Sales Outstanding (DSO) metric is key performance indicator that is widely used to measure the timeliness of payments by customers of business. It is calculated by taking the total Account Receivable (AR) from the current month and dividing it by the total sales from the same month, and then multiplying that figure by the number of days in the month. It provides an indication of how well company manages collections and gives snapshot of companies overall financial health.
The Risk of Not Using Software for Best Possible DSO
The risk of not using software for best possible DSO is that business could be depriving itself of critical insights and control to make better decisions. Studies have shown that when companies do not use software to manage order to cash processes, they experience much greater amount of delayed invoices and reduced AR turnover. That puts them in vulnerable position financially, reducing the value of their assets and increasing the risk of cash flow problems.
Using software to manage order to cash processes can also make communication between finance teams and customers much more efficient. businesses can negotiate terms with customers, automate collections of overdue invoices and payments, and ensure they are not taking too long to collect on payments. This level of control and oversight can result in significantly better DSO performance.
Conclusion
In summary, an effective order to cash process is critically important for generating cash flow, keeping customers and vendors happy, and maintaining financial health. The cost of not using software for best possible DSO can be great, as businesses may find themselves increasingly vulnerable to cash flow problems and unable to take advantage of the many cost- and time-saving benefits of using software. Finance executives should carefully consider the cost of using order to cash software, on the other hand, particularly if their current AR process is manual, complex, or error-prone. Making the transition to software can save times and money (as well as anxiety) in the long run.
