The pros and cons of order-to-cash versus invoice-to-cash

Accounts receivable (AR) teams are modernizing their workflows with end-to-end automation to improve efficiency and reduce cost and risk. While many organizations are doing this with multiple point solutions throughout the invoice-to-cash process, the results are disjointed and fail to deliver full value. An end-to-end order-to-cash solution solves this problem by integrating multiple cross-functional processes into a single, seamless digital ecosystem for your B2B customers—and your organization.

The pros and cons of automating the invoice-to-cash process

The invoice-to-cash process in accounts receivable starts with billing a customer and ends upon receiving payment for those invoices and entering them into your accounting system. Steps include invoice creation and delivery, payment tracking and reminders, payment processing and account reconciliation.

       Pros: Simple, fast, and cost-effective

Automating invoice-to-cash is relatively straightforward because the automation tools are available individually or built into systems such as accounting suites. This means you can get automation up and running quickly with little or no additional outlay.

       Cons: How invoice-to-cash falls short for customers

Automating the invoice-to-cash process is easy and inexpensive, but it is only part of a broader order-to-cash cycle, which limits its scope. These automations may also lack integration with each other or with systems such as enterprise resource management (ERM) or customer relationship management (CRM), which increases complexity and introduces opportunities for error.

Perhaps most significantly, however, invoice-to-cash automation has limited long-term value for customers, which can lead to missed opportunities. As we’ll see later, creating a seamless end-to-end digital order-to-cash experience can encourage customer loyalty, larger orders and reduced risk.

The broader picture: Order-to-cash

The order-to-cash process encompasses all the steps in invoice-to-cash but extends further to encompass ordering and purchasing as well. Order-to-cash includes all the steps involved in receiving and fulfilling customer orders, invoicing for those orders and collecting payment. For this reason, it offers an opportunity to transform not only the AR function, but also the entire customer experience. Order-to-cash is the lifeblood of a business, ensuring a steady flow of revenue and maintaining a healthy cash flow.

       Pros: How order-to-cash makes ordering easier

At the core of order-to-cash automation is making it easier for customers to buy from you by providing a level of convenience that can translate into a competitive advantage with higher sales and reduced operating costs. Automation streamlines the entire process from order placement to delivery, reducing wait times for customers, which leads to higher customer satisfaction, lower cart abandonment and an increased likelihood of repeat business.

Automated credit decisioning systems provide near-instant data-based credit approvals, allowing customers to make purchases quickly, reducing risk and increasing sales. They can easily order online and choose from a range of digital payment options. Once they’ve placed their order, they can receive real-time updates on order status—from processing to shipping and delivery. This transparency enables better forecasting and improves customer experience.

Customers have access to their account information 24/7, so they can easily view invoices, check balances and track payments in real-time, minimizing customer service costs. If they have issues, automated workflows for handling disputes lead to faster resolution times. Customers can track the status of their disputes in real-time, reducing frustration and improving transparency. Finally, automated systems can easily track customer history and offer personalized incentives or improved terms for loyal customers.

       Pros: How order-to-cash automation improves data flow

It’s easy to see how many of the customer advantages provided by order-to-cash also translate to business benefits in terms of greater efficiency and reduced risk. In a unified order-to-cash process, data flows seamlessly from one step to the next, improving accuracy and cross-functional collaboration while reducing manual data entry.  

       Cons: Complexity and cost

Despite the obvious advantages over invoice-to-cash, deploying an end-to-end order-to-cash solution is not without its challenges. Uniting disparate processes across the entire order-to-cash workflow is a complex endeavor that requires high implementation costs and a longer time to value.

In addition, a disjointed order-to-cash solution built on multiple point solutions can make it difficult to identify areas for improvement and implement changes. This is because the data necessary to define relevant KPIs and the mechanisms for tracing them would lack visibility across the entire process. Implementing process-wide systems to collect and analyze performance data is critical for aligning short-term performance goals with long-term strategic objectives

However, businesses can overcome these challenges by engaging with an external partner that provides a ready-built order-to-cash solution. In fact, a recent study by Forrester—which surveyed over 300 enterprise financial decision-makers—reveals that external partnerships help unify AR processes like invoice-to-cash, resulting in improved cash flow (63% of respondents), increased market share (63%) and increased visibility and control over AR (60%)¹.

How an order-to-cash platform benefits businesses

Automated order-to-cash significantly improves operational efficiency by streamlining processes, reducing manual work and enhancing accuracy across various stages of the order-to-cash cycle that invoice-to-cash solutions alone can’t handle. What’s more, best-in-class order-to-cash solutions reduce the complexity of working with a patchwork of point solutions. Here’s how:

• Hands-off credit management with automated credit assessments for new customers and adapting credit terms for loyal customers without increasing risk

• Smoother payment processing, offering greater customer choice while keeping your business compliant and secure, regardless of payment method

• Easier AR management with accurate customer data shared across multiple systems, helping to manage complex B2B purchases with multiple line items or recurring charges and handling partial payments or installment plans

• Automated cash application to efficiently handle payments made against multiple invoices, manage exceptions and unidentified payments and deal with discrepancies between payment amounts and invoice totals

• Comprehensive reporting and analytics of large volumes of data from multiple sources, making it easy to adapt reporting to meet the needs of different stakeholders

• Faster reconciliation across multiple systems and accounts to ensure compliance with accounting standards and regulations, including the ability to handle foreign currency transactions and fluctuations

Looking beyond invoice-to-cash solutions

The future of B2B commerce is automated from order-to-cash. A trusted AR partner like Capital One Trade Credit can offer a flexible, full-service B2B accounts receivable solution for enterprise companies, handling the order-to-cash process end to end.

In a recent Forrester study commissioned by Capital One Trade Credit, more than 90% agreed that improving the B2B digital buying experience is important to achieving organizational goals like revenue growth. The back-end benefits are nothing to sniff at, either: more than 80% agree that leveraging AI, automating credit and streamlining payment processes are important to improving organizational efficiency.

To learn more about the benefits of eliminating credit and payment friction by transforming AR and the order to cash cycle, download the full Forrester study here.

 

 

 

                                                                                                                                                                                                                                       

¹Derived from a commissioned study conducted by Forrester Consulting on behalf of Capital One Trade Credit, 2024.