- Point of view
Refocusing invoice to cash as businesses recalibrate priorities
How to reduce payment risks while maintaining cash flow and customer relationships
COVID-19 has affected all industries, but some more acutely than others. Though the pressure on global supply chains has been a significant challenge for many businesses, the effects have been felt downstream too, and the invoice-to-cash (I2C) cycle is no exception.
Some suppliers have seen a spike in orders as consumers have stocked up, which has led some buyers to max out their credit limits or request new or amended terms. This can result in higher days sales outstanding (DSO) and a higher percentage of past-due invoices for accounts receivable (AR) functions.
Business need to prepare for late payments and a greater volume of credit defaults. It's the proactive companies that can make accurate cash-flow forecasts that are best placed to limit short-term losses and build longer-term resilience.
For CFOs and their finance teams, the demand for forecasting cash flow, revisiting credit-limit strategies, and having complete visibility into cash has never been greater. The response to COVID-19 is impacting four key areas of the invoice-to-cash function:
Figure 1 highlights how different industries are experiencing the impact of COVID-19 and its implications for I2C functions.
Over the next 12-14 months, we believe that companies will refocus their priorities as they deal with the aftermath of Coronavirus. The invoice-to-cash organization should focus on three priorities and phases: agility, cost to serve, and resilience (figure 2). It can measure these initiatives across four key dimensions: speed to value, cost, business impact (BI), and user experience (UX).
At times like these, companies need to proactively evaluate their cash-flow and cost requirements, understand how to act within multiple scenarios, and assess the potential risks to their revenues and customer base. For this, I2C functions must reprioritize their initiatives – focusing on their agility, cost to serve, and resilience – to help their organizations survive in the short term and be ready for future growth.
Companies can adopt and combine scalable operating models, predictive insights, and AR-automation toolkits to build a robust, forward-looking invoice-to-cash function. One that delivers better forecasts, reduces credit risk, enables faster debt collection, improves the use of available cash, and enhances the customer experience.
This point of view is authored by Akshay Belwalkar, AVP, I2C Service Line, and Jacqueline Korner, AVP, I2C Service Line, Genpact.
Learn more about how Genpact can help with invoice to cash.