If you’re selling product through a dealer/distributor network, a new IOFM white paper details how automation can transform your order-to-cash cycle.
Businesses have always needed to manage their cash flow. In this competitive, global, and constantly changing economic reality, that need has gotten even greater. Reducing complexity and friction in the process of turning orders into invoices into cash received is an essential step on the road to success. What stands in the way of achieving these goals is a reliance on paper and manual processes.
The Institute of Finance & Management (IOFM) has just published a white paper, “How Closed Loop Commerce Networks Transform the Order-to-Cash Cycle,” sponsored by Corcentric, which looks at this issue from the vantage point of businesses that operate with a network of distributors, dealers, or resellers, as well as Group Purchasing Organizations (GPOs).
The paper makes clear that these kinds of businesses and groups can leverage automated closed-loop B2B commerce networks to resolve their issues and answer four specific challenges.
Inefficient processes – Since nearly half of large corporations still receive B2B payments as checks, the reality is that paper is still a major factor in process slowdown. Automation improves efficiency by digitizing the exchange of documents across networks, normalizing the data, and allowing a single invoice to be transmitted to the buyer, which in turn should reduce invoice cycle time and speed up payment.
High operational cost – A PayStream Advisors report found that “businesses that process paper-based invoices experience costs over 150 percent higher than those that utilize electronic invoicing. Plus, processing costs are more than six times higher for paper checks vs. e-payments. As I noted above, in a closed-loop network, all sales are aggregated under a national account or GPO member and submitted in a single electronic invoice, significantly reducing the amount of time and cost of FTEs spend sending out multiple invoices and reconciling multiple payments.
Poor cash flow – Cash flow and managing working capital have never been more vital to a company’s well-being. Reducing Days Sales Outstanding (DSO) is the goal; almost one-third of businesses in the IOFM survey indicated that DSO is one their most important metrics. Manufacturers that sell though dealers or distributors and GPOs should look for a closed-loop network solution that includes a channel finance component. In this scenario, sellers would receive payment from the channel finance provider in a much shorter cycle and the channel finance provider would accept the responsibility of collecting the payment from the buyer.
Lack of visibility – You can’t manage your cash flow if you don’t have real-time knowledge as to the status of every invoice. If your processes still include primarily paper and manual intervention, it’s likely that you have extremely limited visibility. Almost one-third of businesses surveyed by the Institute of Financial Operations (IFO) in 2014 said that improving that visibility was the top driver for implementing AR automation. Closed loop commerce networks provide not only real-time visibility into invoice status; they also provide visibility into the transactional data needed to accurately forecast cash flow and make strategic decisions based on predictive analytics. Sellers can discover what, when, and in what quantities customers are buying their product. Plus businesses also can recognize trends that enable them to pivot to capture potentially new markets.
The wider and more complex your sales network or GPO membership, the more you should be looking at a closed-loop commerce network solution greater.
Download the white paper.