Improving Operational Performance With Order To Cash Software
Collection Effectiveness Index Example
As financial executives know, the order to cash (OTC) process is the critical flow of resources and capital in any organization. Without an efficient OTC process, companies could find themselves wasting valuable time and money managing orders, filling orders, and collecting payment. Fortunately, software advances have made it possible to optimize the OTC process, driving operational performance and overall effectiveness.
In the realm of order to cash software, the collection effectiveness index (CEI) is an important tool for evaluating performance and making improvements. Through theCEI, organizations are able to track and analyze the success of their collections operations, revealing opportunities for improving overall effectiveness. This article will guide finance executives through the CEI, allowing them to measure and improve the efficiency of their OTC process.
Defining Collection Effectiveness
Collection effectiveness is the measure of how quickly and efficiently an organization collects payments from customers. It is the efficiency of the OTC process, from the moment the customer places an order to the moment the organization receives payment. CEI collects data from the entire collection process, from customer metrics to payment behaviors, and presents score from 0-100. This scoring system is broken down into four categories: customer C-score, customer delinquency rate, average days sales outstanding, and total charge offs.
Using Collection Effectiveness to Optimize Performance
CEI provides finance executives with comprehensive understanding of their OTC process, from how quickly invoices are sent to how quickly customers respond. By gathering detailed metrics on each customer, financial executives can determine which customers have the highest charge offs, which have the longest deadlines, and which need the most attention. Armed with this information, executives can identify ways to optimize their OTC process and improve collection effectiveness.
For example, if executives find that customers with higher total charge offs also have long payment deadlines, they may choose to ramp up communication with those customers to ensure invoices are paid on time. Or, they may decide to reduce the time allowed for payment, sending out invoices earlier and communicating more consistently with customers to ensure payments arrive on time. Through the CEI metrics, executives have the data they need to make informed decisions that will drive operational performance and improve the OTC process.
Leveraging Order to Cash Software
The collection effectiveness index is the perfect tool for executives seeking to improve operational performance and optimize their OTC process. However, without the right software, drafting comprehensive CEI report can be time-consuming, if not impossible. Thankfully, order to cash software makes it easier than ever to manage customer payments, streamline collection processes, and generate comprehensive CEI reports.
Order to cash software enables organizations to track customer information, set payments preferences, and send automated emails at regular intervals. It also provides single source of truth into the customer payment process, making it easy for finance executives to collect, analyze, and act on customer payment data.
Combining the CEI and OTC Software
The combination of collection effectiveness index and order to cash software makes it possible for organizations to maximize their operational performance. By leveraging the CEI metrics, finance executives can identify areas for improvement and adjust the OTC process to increase the speed and accuracy of customer payment. By leveraging OTC software, organizations can ensure collections processes remain compliant and that customer payments are collected on time and in full.
These tools make it possible to improve operational performance, reduce expenses, and drive organizational growth. By equipping finance teams with the right technology and systems, companies can maximize their cash flow and ensure their customer payment process remains efficient.
