Softwareless Risk In Order To Cash Equations
DSO EQUATION
The management of order to cash (OTC) equations is cornerstone of financial operations for any company, large or small. Thus, forgoing software to calculate, facilitate, and track OTC equations could have major repercussions. It is risk not easily taken, nor should it be.
An OTC equation is mathematical formulation that determines the amount of time an invoice takes from when customer places an order, until that customer pays the invoice. The velocity of the OTC equation extends to accounts receivable. The faster business can collect payments, the more efficient the cash flow, and by extension the better the companies overall fiscal health.
Without software to automate the order to cash equation, there is an inherent risk of errors, inaccuracies, and decreased efficiency. Previously known as days sales outstanding (DSO), this equation requires the amalgamation of customer data, payments received, accounts receivable activity, and business processes. Software can simplify the equation, in addition to consolidating customer data and providing better visibility.
Given the need for precision when calculating order to cash equations, companies put their financial integrity on the line when they attempt to go it alone. it is particularly risky to not use software as todays OTC equations are often much more complex than in previous eras. An organizations processes and products are vastly different, and the customer life cycle is longer. Companies must to stay up to date with customer information, any customer negotiations or alterations, and fluctuations in the market that could affect receivables.
Manual data entry is incredibly risky and can be incredibly time consuming. Not to mention, manual efforts sacrifice any real-time visibility into customer payments and accounts receivable activity. Ultimately, manual calculation of an OTC equation leaves company in the dark, unable to take advantage of timely customer payment insights that influence cash flow, accounts receivable management, and customer retention.
A professional, automated revenue recognition solution can help companies manage OTC equations in systematic frameworks. Adopting the right software solution eliminates many manual data entry tasks, reduce chances of errors, and extends visibility across the OTC equation to shorten collection period. Not only does this allow for improved financial performance, but it also ensures businesses have the necessary transparency and accuracy.
By forgoing the use of software for OTC equations, company is running the risk of receipt processing errors or inaccurate dso calculations. The financial risks are simply too great, particularly in competitive marketplace. With sophisticated software solutions in place, finance executives can get accurate financial insights, heightened visibility, increased efficiency, and improved customer retention which all provide strong returns in the long run.
