Best Ways for Credit-to-Cash Process to Collect Cash Faster

May 28, 2022

Do you need to collect cash faster from your customers? If so, you’re not alone. One Forbes article suggests that 60% of small businesses struggle with cash flow problems. Luckily, you can use several methods to speed up the credit-to-cash process. Get paid faster and reduce the time you spend chasing unpaid invoices.

Understand the Order to Cash Process

This term sums up the chain of events that begins with the initial ordering of an item and ends when the company receives payment. There are seven main stages that everyone handling the process should come to know:

1. Order Placement and Management

Make it easy for customers to place and track their orders. The company also needs the right tools on the backend to quickly and effectively manage and process orders. How quickly you get this done directly impacts how fast the customer receives the ordered item and, therefore, how soon you receive payment.

2. Credit Review

The credit management team’s job is to ensure you’re not extending too much credit. The team determines a customer’s level of risk and sets credit limits accordingly. Doing this directly impacts your collections, especially regarding high-volume B2B credit management.

3. Inventory Management

You need to ensure you have adequate items or labor hours to meet customer demand but not so much that you’re tying up too much cash flow in stock. Customers should know upfront what is available and receive a notification when items they purchased are delayed or no longer in stock.

4. Order Shipping and Delivery

Once you’ve managed the order and have the inventory on hand, it’s time to get the product to the customer. This process needs to be as efficient as possible to keep customers happy and reduce wastage. Choose carriers wisely and ensure you request and retain a bill of lading and proof of delivery.

5. Billing and Invoicing

At this stage, you send an invoice to the customer for payment. It’s essential to get this right the first time to avoid delays in payment and disputes over errors. Make sure you’re clear on the terms of payment. Include all pertinent information on the invoice, and send it promptly.

6. Collections

At this stage, your team follows up with customers who have not paid their invoices on time. It’s essential to have a collections policy in place and to follow it consistently. The goal is to get paid without damaging the relationship with the customer.

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7. Account Reconciliation and Recordkeeping

Updating your books is critical to ensure compliance and accurate records when you receive payment. Ideally, you automate this process and still retain a professional to check for accuracy.

Monitor the Right KPIs

Don’t wait until you’re struggling to make payroll and cover loan obligations to address cash flow concerns. Prioritize this from the very start. The only way to know if a cash flow problem is looming ahead is to monitor the key performance indicators that can warn you.

Here are some of the most common metrics tracked by the best accounts receivable teams:

Days credit sales outstanding: This measures how long it takes you to get paid after making a sale. Keep this number as low as possible.
Billing and invoicing cycle time: It tells you how long it takes you to generate an invoice after a customer purchases. A shorter billing cycle means you’ll get paid faster.
Accounts receivable aging: This report shows how much money customers owe and how long invoices remain outstanding.

Prioritize In-House Management

A good accounts receivable management company will have experience working with businesses in your industry. Even so, an internal team provides the following benefits:

You can maintain complete control over the accounts receivables process.
Your workers can respond more quickly to unexpected changes.
Your AR team will feel more empowered to find and implement creative solutions to complex problems.
You eliminate much of the bureaucracy that comes with outsourcing services.
You reduce the number of entities with access to your business and customer financial information.

Use Technology to Your Advantage

Leverage fintech to make the credit-to-cash process more efficient. Automated accounts receivable is often the best approach here. These are some of the many tasks it can handle:

Providing real-time updates of your cash balances
Providing real-time calculations for chosen KPIs
Automating correspondence with clients regarding credit and payments
Facilitating a wide range of payment options
Integrating with existing accounting software

Choose Gaviti as Your Solution for Order to Cash Accounts Receivable

Gaviti helps you get paid more quickly by automating your entire accounts receivable process from order to cash. Fast payment is essential for small businesses with fewer resources and more significant cash flow concerns. It also plays a crucial role in a company’s ability to keep accounts receivable processes in-house.

Do these look like the benefits you’d love to achieve for your business? Book your free demo today.