The Pitfall Of Not Utilizing An Order-To-Cash Software For Cash Collection
CASH COLLECTIONS FROM CUSTOMERS
The issue of cash collection for businesses is one that Finance Executives must address with great thought and attention; if handled improperly, cash collection can damage companies reputation, financial health and customer relationships. Going without specialized Order-to-Cash (O2C) software, to manage cash collection, presents significant risks that should be considered.
Organizational risks can occur when O2C software is not employed. First and foremost, using manual processes greatly decreases cash visibility, leading to potential cash leakage. With manual processes, there is heightened risk of mismanagement of receivables, such as invoice delays and denials, without robust analysis and control over the process. This can result in fall in positive cash flow that can become an issue and place the business in financial jeopardy. On the whole, manual processes are slow, laborious and lack scalability, meaning that it would be considerably more difficult for an organization to respond to market conditions or changes in customer behavior.
Operational risks should also be weighed. Manual processes can lead to errors and inefficiency, resulting in unsatisfied customers, missed SLAs and penalty charges as well as suboptimal revenue recognition. Again, inexperienced or poorly-trained personnel may lead to lack of compliance with regulation, resulting in fines and potential criminal charges.
Fiscal risks inherently stem from having less visibility and control over cash collection. Without accurate calculations of receivables’ due dates, the organization could potentially miss payment opportunities and be exposed to missed payment penalties. Essay pricing may also lead to loss of profitability if the organization is unable to effectively monitor pricing policies.
Finally, these risks must be viewed in the context of customer loyalty and retention. Customers do not always enjoy the prospect of being invoiced, so minimizing mistakes and delays will magnify customer confidence and ensure customer satisfaction. Going without an O2C software program could leave the organization exposed to customer dissatisfaction and churn.
When faced with the need to address cash collection in the Order-to-Cash process, Finance Executives should employ specialized software to optimize the economic, operational, organizational and fiscal performance of their organization. Leveraging such software provides benefits in the form of improved customer relations, efficiency, compliance with regulatory obligations and cash flow management. It is critical to weigh the risks of not utilizing an O2C software when handling cash collections and make decision that best serves the organization.
