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In my last post I began exploring the typical complaints you might hear within a finance department if staff are being hampered in doing their jobs by having to follow manual, paper-based processes. There are two reasons why this might be an important and revealing exercise. First, analyzing complaints and grumbles within an organization can provide good insights into what is really going on - which may be very different from what senior managers think is happening. Second, overreliance on paper and a lack of automation within the finance operation stops people from doing their jobs efficiently, with more chance of errors and higher costs – which has a negative impact on cash flow.

My earlier post focused on the complaints you might hear within the invoicing and sales order processing teams. In this article I will continue the theme by looking at the difficulties that might arise in the two remaining parts of the order to cash process - credit control and cash allocation (or cash application in the US).

Typical grumbles in credit control:

  • “We need a bigger credit control team.”
  • “I’m frustrated about customers continually delaying payments because their invoices or signed proof of delivery documents have gone astray."
  • “If we really want to be seen as a company that cares for the environment, then we should not be sending all these paper invoices out in the mail.”

If this is similar to what you’ve heard in your credit control team, then it could be time to think about introducing more automation into this area. Document management software can simplify the credit control task by providing on screen access to invoices, proof of delivery notes and related documents, allowing credit controllers to easily resolve payment disputes. Copy documents can be emailed or faxed to customers while on the phone in order to obtain a swift commitment to pay. All relevant documentation is easily accessible online, so staff can do their job quicker – and during peak times it is easier to share the workload between teams in different locations because you are not restricted by the location of physical files.

Typical grumbles in cash allocation/application:

  • “Delays allocating cash are distorting our DSO and aged debt figures.”
  • “At month end we reach crisis point and have to bring in extra staff.”
  • “We end up chasing, and annoying, customers who have already paid.”

If you want to avoid the pain of cash allocation bottlenecks and their negative impact on key financial performance indicators, then automated cash allocation can make a big difference. It creates a faster, more reliable process by capturing key data from payment files and scanned cheques and automatically matching inbound payments (whether cash, cheque or electronic) with outstanding invoices.

Automated cash allocation relies on invoice matching rules that can be ‘learned’ easily by the system, so even seemingly obscure matching processes can be handled without manual intervention. At the end of the process, payments are uploaded into the SAP FI (finance) module automatically, for a 'clean' ledger. Manual effort is reduced and performance improved against key measures such as day sales outstanding (DSO), aged debt and unallocated cash. Fewer people need to work full-time on cash allocation and there is no need to bring in additional staff to cover workload peaks at month end and year end. As allocation delays are avoided, credit controllers can quite clearly see which invoices are outstanding and can therefore focus their efforts on genuine late payers, which is much more efficient - and keeps the prompt payers happier.

How automation can ease order to cash grumbles

By moving from paper to electronic documents and introducing greater automation you can increase speed and efficiency and generate important benefits both for the finance department and the company as a whole. Cash flow, DSO and other key indicators are improved and there is a significant reduction in costs, while people and resources are freed up for other tasks. At the same time, delivering invoices and other financial documents electronically is good for the environment and generates significant savings thanks to lower printing, paper and postage costs.

The benefits extend to customer retention and revenue protection. Customers feel happier and are less likely to defect to the competition because they find the company easier to deal with: their orders are processed faster; they are no longer chased for invoices they have already paid; and they can receive invoice documents and data electronically, with the additional benefit of being able to upload it directly into their finance systems to eliminate re-keying.

For the majority of organizations, finance remains a paper-intensive business function, with plenty of potential for automation. If you are not sure just how much your own finance team relies on paper, now might be a good time to find out, by eavesdropping on the things they are complaining about!