Maximizing Accounts Receivable Performance With Order To Cash Solutions
Accounts Receivable Performance Review Examples
For executives seeking to determine how practices within their order to cash process may be impacting accounts receivable performance, there are several steps to take. As such, it is important to fully understand how the order to cash process affects customer payment behaviors. By studying the order to cash process and leveraging the right solutions, organizations will be able to better optimize AR performance, reduce costs, and improve customersatisfaction.
In this guide, we break down the key considerations of accounts receivable performance, illuminate key steps in the order to cash process, and discuss best practices for leveraging order to cash solutions. I. Considerations for Accounts Receivable PerformanceFor finance and accounting executives, it is essential to consider the various factors that have direct impact on accounts receivable performance such as accounts receivable processes, terms of payment, and customer data.
A. Accounts Receivable ProcessesIt is critical that organizations have robust processes in place within their accounts receivable departments, which enables them to efficiently collect payments. An effective accounts receivable process should identify delinquent customers, accurately assess account statuses and, when needed, initiate follow-up process. To streamline this process, organizations must have an automated accounts receivable system in place that can help track payments and analyze customer payment data.
B. Terms of PaymentBy offering terms of payment that are in line with customer expectations, organizations can ensure timely payments and optimize AR performance. Additionally, organizations should ensure that their terms of payment are compliant with both the companies payment policy and legal requirements. To do this, organizations should ensure that credit approval and purchase order management processes are active and that credit limits and payment terms are set in line with their processes.
C. Customer DataHaving an up-to-date customer data is essential for successful accounts receivable process. Customer data should include contact and billing information, such as billing addresses, invoice due dates and contact names and phone numbers. Additionally, organizations should ensure that customer data is updated regularly so that they can accurately track customer payment behaviors and determine how to optimize accounts receivable performance.
II. Steps in the Order to Cash ProcessThe order to cash process is essential for optimizing accounts receivable performance and improving the customer experience. To fully understand how the process affects accounts receivable performance, executives must become well-versed in the various steps that make up the order to cash cycle.
A. Order EntryThe first step in the order to cash process is order entry, when customer orders are processed. During this step, orders are verified, item availability is confirmed, and any missing or incorrect information is addressed. In addition, customer data such as contact and billing information should be captured and updated. This is crucial step for ensuring accurate and up-to-date customer data.
B. Credit and Risk ManagementThe second step in the order to cash process is credit and risk management. During this step, organizations should ensure that customers have sufficient credit lines and that payment terms are aligned with the companies policy and legal requirements. Organizations should use this step to monitor credit exposure levels and identify potential risks.
C. Shipping and DeliveryThe third step in the order to cash process is shipping and delivery. During this step, organizations should ensure that orders are shipped on time and fulfilled as expected. When orders are shipped, organizations should also ensure that customers have the correct invoice and payment details in order to accelerate payment.
D. Payment CollectionThe fourth step in the order to cash process is payment collection. During this step, organizations should leverage automation to track customer payments and ensure that payment terms are adhered to. Additionally, organizations should use their AR automation system to analyze customer payment data and identify trends that may require intervention.
III. Best Practices for Leveraging Order to Cash SolutionsTo maximize the effectiveness of an order to cash process, organizations must incorporate robust solutions that provide visibility into customer payment behaviors and streamline payment collection. As such, executives must analyze the current order to cash processes and determine best practices for leveraging order to cash solutions.
A. Automate Accounts Receivable ProcessesOrganizations should invest in comprehensive Accounts Receivable automation system that can track customer payments, provide visibility into customer payment behaviors, and accurately assess account statuses. Additionally, integrating the AR automation system with the companies accounting software will enable organizations to streamline their AR processes, ensure accurate data, and collect payments faster.
B. Monitor Credit ExposureOrganizations must leverage their order to cash system to monitor credit exposure levels, identify risks, and stay compliant with company and legal requirements. Automated credit limit isystems can help organizations quickly set limits and manage customer payment terms. Additionally, these systems can also automate credit reviews, which can help organizations identify delinquent accounts.
C. Offer Self-Service ToolsIn todays digital world, customers are increasingly looking for self-service payment options. As such, organizations should provide customers with self-service portal that can be used to view and pay invoices. Additionally, organizations should also invest in automated payment reminders that enable customers to pay invoices on time and improve the customer experience.
ConclusionExecutives seeking to optimize accounts receivable performance must understand how the order to cash process affects payment behavior and how to leverage order to cash solutions to collect payments faster and improve customersatisfaction. By analyzing the current order to cash process and leveraging the best solutions, organizations can streamline their AR processes, reduce costs, and ensure timely payments.
