The order to cash cycle is what keeps a business running. It is literally the process in which all for-profit businesses work off of. From when an ordering process starts until the cash is made, a business is employing all departments including marketing, sales, manufacturing, distribution, accounting and customer service. When the order to cash process isn’t working the way it is supposed to, it can have extremely negative effects on the business. In simple terms, you wouldn’t be making any money.
It’s best to identify that the order to cash cycle needs help before you start to struggle with cash flow. The easiest and quickest way to do that is to keep an eye out for these signs that your order to cash cycle is broken.
- Rogue sales practices and processes as well as unapproved discounts and deductions.
- Credit management problems such as unapproved credit extensions and customers exceeding credit limits.
- Incorrect quotes
- High order-taking errors that result in inaccurate sales orders.
- High levels of billing errors and time spent reviewing/correcting them
- High order fulfillment error rates
- High error rate on order fulfillment- late shipments, incomplete shipments, etc.
- Inefficient/ineffective collection processes made evident by high days sales outstanding and increased bad debt write-offs, a need for invoice factoring, legal action, etc.
- High levels of invoice disputes
- High cost of dispute resolution
- High levels of customer complaints and inquiries
- Longer than average call times to manage customer inquiries
- Significant amount of time spent on rework and data re-entry throughout different processes
- Long term loss of customers due to frustrating billing/payment processes or poorly managed sales processes.
A majority of these signs are often a product of having no set process in place. Without a cohesive working environment, the order to cash cycle will often have holes that lead to never collecting your full invoices. In order to fix these signs, it is helpful to come with a working plan for each department.