Unresolved Risk: Exploring The Consequences Of Not Utilizing Order To Cash Software
DAYS SALES OUTSTANDING BENCHMARK
Productive and profitable enterprise cultures require organizations to constantly strive for operational excellence. In the area of order to cash, one of the greatest goals is determining the days sales outstanding benchmark. However, the most effective way of arriving at this benchmark is by using specialized software, and ignoring this tool carries significant, potentially devastating, risk.
Arriving at companies days sales outstanding (DSO) provides important insight into the effectiveness of the companies credit and collections processes and allows for the measurement of financial performance, working capital optimization, and cash flow. While there are ways of arriving at such benchmark without the use of software, this method is fraught with perilous consequences.
Manual tracking, even if supplemented with the limited use of spreadsheets, is prone to errors and inconsistencies. Even the smallest of errors can produce inaccurate estimates which hinder informed decision-making and misdirect resources, leading to unreliable estimates of economic performance. Without sufficient information, important financial investments may not be properly timed and prioritized, resulting in an inability to reliably predict changes in liquidity and working capital.
Failure to track DSO with precision also means an inability to assess debt and risk appropriately. Without an objective method of estimating creditworthiness, companies may be unable to effectively manage their customer credit and collection profile- the repercussions of which may impact overall financial performance. Furthermore, failing to use software may result in unnecessary costs driven by credit delay- and in certain instances, the need for alternative financing sources, such as expensive and time-consuming lines of credit- which may significantly impede progress.
Moreover, not utilizing software in this process can drive additional costs including the need for additional personnel, such as finance and accounting staff to supplement manual collection efforts, as automated order to cash software integrations can significantly reduce the time it takes to track and analyze credit risks.
Ultimately, the risks of not using software for DSO benchmarking greatly outweigh and undermine the potential rewards which can be gained from effective use of sophisticated order to cash solution. Companies who do not recognize this and fail to invest in the proper software run the risk of sacrificing long term gains for few immediate savings. Organizations seeking to succeed in the long-term must understand the importance of this risk and invest accordingly in order to uncover the insight needed for successful and sustainable growth.
