The order-to-cash (OTC) process is fraught with complexities.  From multiple points of interaction between participants to all the transactions that must take place, there will almost always be room for process improvements to achieve true OTC efficiency.  Many fail by still relying on manual processes and a dependency on paper.  Others have a lack of systems integration to create a smooth passing of transactional information back and forth.  Both of these roadblocks create inefficiencies, add costs and with growing volumes can hinder streamlining efforts even more.  The chart below also shows how many documents and exchanges are required to process one transaction in its entirety.

 

Typical AR Documents and OTC Process

 

Because of this, paper documents have continued to be used throughout the OTC process to provide connections with customers and third party service providers and therefore continue to perpetuate performance challenges.  Despite almost 50 years of computerized receivables, most internal systems that support the OTC process also lack integration and rely on paper and manual processing.  Why? Initially these systems were designed to pass accounting information back and forth and little else – typically sales, order processing, inventory, shipping and receivables. All other internal functions have remained largely disconnected. When an intermediate process involving input from a customer or third party it required, it makes things even worse.

The biggest challenge to true efficiency is how manual tasks are still widely used to connect the functions that support the OTC process and especially those that involve external parties.  This continues despite the evolution of accounting software into Enterprise Resource Planning (ERP) systems, which have been designed to provide even greater integration than ever before. As a result, credit and collections are still spending a greater proportion of time and labor on manual tasks than should be appropriate in this day and age of technology and automation.  Also, with manual tasks comes the re-keying of data from one document to another in order to update the next process in the system, and we all recognize that this creates repetitive operations that are ripe for mistakes.

To achieve OTC efficiency, you must build links that connect all your internal systems in order to increase automatic processing.  The downside is that unfortunately this is still relatively expensive and can cut into budget dollars that may be set aside for ERP or other software upgrades. It may also require rewriting all your interfaces as these systems are upgraded.  Take the history of Electronic Data Interchange (EDI) as a cautionary tale – despite its promises, EDI has had trouble expanding beyond large trading partners due to the resource commitment required for upgrading hard-wired interfaces between trading partners.

Fortunately, cloud-based solutions are increasingly addressing the challenge of creating interfaces between the systems used by various trading partners and their third party service providers.  The biggest advantage a cloud-based solution is that it provides a common interface which ensures connectivity with all participants.  It is also a more affordable option than a licensed or hosted solution.

Download my whitepaper: The Imperative for Eliminating Paper from Receivables and Credit

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