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The Invisible Step in the Order to Cash Process

What’s Missing?

Most interpretations of the steps in the Order to Cash process look something like this – can you spot the glaring omission?

order to cash process steps

There are two problems with this::

  1. It assumes that the process is all moving in one direction;
  2. It excludes exceptions processes.

That’s right. It fails to mention the time-consuming and often frustrating work involved in handling queries, claims, discounts and disputes.  Where does the credit note fit into this process? Where is the query or dispute step?  Of course, we would like to think that the O2C process goes smoothly all the time. However, in reality it does not and how an AR department handles queries and disputes is key determinant of its success. Get this right and your DSO will be way ahead of the industry benchmark, your reputation will be fantastic and your Credit Controllers will  be happy, not frustrated and drained at the end of the day.

The Invisible Step

Query and dispute handling, or exception handling, if you like, is all about removing the barriers to payment and resolving problems that could cause your buyers to think twice about where they source their next order. How do we know this is so important? Because we’ve seen teams before and after using our Disputes module and they have told us what a difference it has made to:

a) Job satisfaction

b) Aged debt

c) Days sales outstanding (DSO)

d) Written off debt

e) The reputation of the AR department within the business.

So here is what we think the process should look like:

 

What you can see here is that information has to flow back and forth in the O2C process. Query handlers need to communicate with people further upstream in the process to investigate queries and claims.  The AR team may need to put accounts on stop if the customer dispute drags on and the outstanding balance from all the invoices the customer refuses to pay until the matter is resolved, cause them to exceed their credit limit such that the account goes on stop.

Getting it Right

What Corrivo does really well is to handle invoicing and collections brilliantly using automation so that Credit Controllers have more time to focus on those all important barriers to payment in the form of disputes. What you may not know is that the disputes module in Corrivo then helps them with the tasks involved in resolving disputes. Instead of working off spreadsheets and lists, the Credit Controllers have a dashboard showing the number of open queries and disputes, and screens showing the tasks before them for the day. That’s right, it’s all scheduled for them.

Credit Controllers email stakeholders in the business or  third parties such as logistics providers to investigate queries and disputes. They do this within Corrivo and they are prompted to set the respondent a time limit. For example, a response is required within two days. In two days’ time if the response is overdue, Corrivo automatically escalates the query or dispute and the Credit Controller can then go up the chain to the person’s line manager.  Within a dispute, this escalation path can go on and on if nobody replies within the given timeframe.  Nobody wants to have their boss on their case because they didn’t respond to an email, and once it has happened once, the respondent’s soon learn to take these emails seriously and act promptly.

Faster Resolution

The net effect is that queries and disputes get resolved more quickly. This acts to remove the barriers to payment and leaves the customer with no excuse for not paying their invoice. That’s why really successful AR teams are red hot at handling queries and disputes: they’re on a mission to resolve disputes and get the invoices paid.

Credit Notes

So where do credit notes come in? Some of our clients working in B2B2C or FMCG have a fair number of people working on claims and disputes. The bigger customers, usually well known retailers, refuse to pay an invoice until a credit note has been issued. For this reason, we have designed a system that ensures that the credit note can be raised and – crucially – approved quickly, so that it can be issued to the customer.

The Acid Test of Success

At the end of the day, if you written off debt and aged debt are moving in the wrong direction, your AR team is going to come under fire.  Using a tool like Corrivo, however, can turn that around, making the AR team the heroes of the Finance department for bringing down aged debt, DSO and written off debt to levels that peers in the industry would be envious of.

To find out more about Corrivo and how the Disputes module fits in, contact me using sales@datainterconnect.co.uk or message me on Linked In. 

Jim Adams

Author Jim Adams

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