If a problem arises in the Order to Cash (O2C) process when a client is on the precipice of making a payment, it will impact the downstream process. Client issues, including issues related to sales, goods, and quality, are usually handled by the deferred revenue department, which handles all customers’ complaints. The more severe problem is that these issues may lead to the loss or late payment, increasing the DSO and the risk of bankruptcy…!

Due to O2C’s upstream issues, customers may be unable to make a payment even when they are ready to do so. The receivables department typically handles all customer complaints, including sales, goods, and quality. In the worst-case scenario, payments may be delayed or skipped, resulting in an increase in Daily Sales Outstanding (DSO) and a decline in working capital.

Consider a hypothetical scenario wherein one of Michael’s Gadget Store’s most important suppliers is sanctioning the sale of a product. The sales representative, Olivia, meets with the company’s owner Michael for the first time today. Olivia won’t meet her annual goal and won’t be eligible for her bonus if she doesn’t make a sale from Michael’s store today. Michael needs a little sanity in his life because the economy is sluggish. To compensate for further disappointment, Olivia offers Michael a 5% discount on purchasing three times as much. Michael comes around to the idea after some deliberation.

Regrettably, however, Olivia discovers that she missed the discount after having submitted the sale via fax, so she must return the transaction. ‘Oh well,’ she mumbles to herself. “A/R will find the mistake.”

After two weeks, Michael receives his invoice via mail. To his dismay, he finds that the quotations on the invoice are incorrect. In a fit of rage, Michael tosses the invoice aside, muttering to himself, “I can’t waste my time pointing out their mistake. If they want their money, they can fix it themselves.”

Tyson, from Accounts Receivables, while checking Michael’s account, notices that it’s overdue.” For a brief moment, Tyson ponders over the situation. “It’s got to be a cash application issue; they’re always late.” Rolling over the account for next month’s audit, Tyson moves on without giving it much thought.

A month later, Michael’s account is reported as overdue to the consumer credit check department. While going through the submitted accounts report, Tyson finds out that Michael’s account has also been reported. Seeing this, Tyson gets in touch with his manager, Miss Paulson. “Why did we report Michael? Isn’t he supposed to be one of the good customers?”

“His account is overdue,” Miss Paulson retorted. “If an account is 30 days past due, the credit reporting agency will be notified.”

On returning to his desk, Tyson discovers that Michael had called him. Apparently, Michael was turned down for credit at another company because of the alleged debt. “Why am I getting reported for your mistake?” Michael howled. “Fix this ASAP!”

Having learned that it was Olivia who initially offered a discount, Tyson quickly gets on a call with her. “Olivia, we need you to sort this out. Send an email, so we can rebill this invoice.”

Olivia, realizing that she had no authority to sanction the discount in the first place, decides to ignore the issue and Tyson’s repeated requests, ultimately resulting in Michael escalating the issue to her superior.

A look at a few of the issues is in order. Initially, Olivia didn’t tell order management that she was offering a discount because she didn’t think it was important enough. The fact that she wasn’t actually authorized to offer the deal was discovered later on. As a result, Tyson could not contact Michael regarding the outstanding debt. Tyson’s decision to avoid looking into the issue any further was based on his familiarity with the client and his experience with cash application processes, which had a reputation for being drawn out. The decision to implement a credit reporting system was made without considering all possible consequences.

Despite what Michael could have done, it isn’t up to consumers to point out discrepancies in their vendor’s business. Unreported discounts, price inaccuracies, and invoice irregularities lead to unhappy customers and delayed payments. Realistically speaking, Michael may as well shift his business to the vendor’s biggest rival. The consequences are far more severe than the loss of a single customer. There may also be internal issues and a damaged brand image due to a decline in operating capital.

It is possible to save many of these issues by digitizing accounts receivable operations in various ways which result in improved DSO (Day Sales Outstanding) and increased customer satisfaction. Receivables can be automated to help businesses manage their cash flow, which can help avoid future issues. A customer portal where invoices can be reviewed digitally, make payments, and customers being able to raise disputes can be a game changer.

Upstream and downstream issues are expected to reduce when making a change, like digitizing accounts receivable. By digitizing the process, businesses can save up to 25 percent of the time it takes to process a transaction. Furthermore, the lack of human error makes automated systems more precise. Because of this, better cash flow and lower expenses linked to non-payment or late payments are a given.

SpurtCloud digitizes your A/R department, and the staff is relieved of their burden, assuring accuracy and risk management while also reducing the workload. Prioritizing an organization’s core competencies can lead to greater success!