Optimising financial processes

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Cutting Your Losses in the Order to Cash (O2C) cycle?

The demise of “free money” has been painful for many.

Debt ratios, interest rates and cost pressures have conspired to put cash center stage again.

Cash is recrowned King.

The Customer Demand/Order to Cash (D2C/O2C) cycle is at the core of this renewed focus.

An interesting article from Dean Kaplan in CFODive “hit the nail on the head” for me.

Some 50% of all business invoices were paid late in 2023, according to the latest Atradius Payment Practices Barometer. Dun and Bradstreet reports that one-third of all payments in some sectors running at least 91 days late!

“Late payments mean your company is effectively loaning money at zero interest.”

It’s time to re-examine this “tip of the spear” Global Process and tighten your approach to credit, billings and collections.

The article suggests 6 key recommendations to explore with your sales & finance leadership, D2C/O2C process community and Global Process Owner:

  1. Know the full scope of your AR exposures, DSO, AR aging and collection trends.
  2. Reevaluate your billing and collection processes, policies and systems. 
  3. Scrutinize the billing and payment language in your customer agreements
  4. Think “end to end” and assess how silos inside your organization contribute to defaults
  5. Reframe billing and invoice accuracy as a crucial part of customer care.
  6. Take action when accounts fall behind, past-dues anywhere beyond 30 days.

 This is not “rocket science”, but a timely New Years resolution to focus on the cash!

You can read Dean’s article in CFODive “AR sobriety: How to cut your losses” here . . .

Thanks for reading . . .