www.billtrust.com INVOICE-TO-CASH BEST PRACTICES STUDY A BILLTRUST BUSINESS PERSPECTIVE 100 American Metro Boulevard, Suite 150 Hamilton, NJ 08619 609.235.1010 sales@billtrust.com
THE STRATEGY QUESTION In 1Q 2015 Billtrust conducted research to identify best practices for the invoice-to-cash process. In-depth interviews were conducted with senior level finance, share services, credit, and IT executives. Participating companies were large/mid cap across a wide range of industries. Is the invoice-to cash process a strategic corporate undertaking? 90% of the executives who participated in the best practices survey say it is. The study results showed that the majority of executives embrace Payment Cycle Management (PCM) which focuses on accelerating the invoice-to-cash process. PCM is all about automating three key areas: Invoice Delivery, Invoice Payment, and Cash Application. The imperative to accelerate invoice-to-cash and enjoy the coveted benefits requires Payment Cycle Management that has three core characteristics: 1. Invoice and Payment Flexibility Your customers want choices in how they pay you. By providing flexible options for how they receive invoices and make payments, you satisfy customers and get paid faster. 2. Intelligent Cash Application Once payment is received, the funds have to be accurately applied (posted to a system of record) for a company to realize payments as revenue. Automating this process from end-to-end with Intelligent Cash Application cuts costs and shaves days off DSO. 3. Buyer Adoption The quickest way to present invoices and get paid is via electronic channels. The greater the percentage of buyers who transact electronically, the greater the positive impact on DSO. There are many studies that document this relationship, showing a range of DSO improvement from a 3 day reduction to 10 days.
KEY METRICS EXECUTIVES MEASURE THE FASTER CASH GETS IN, THE BETTER OFF WE ARE ULTIMATELY. DSO IS A VERY IMPORTANT METRIC THAT THE ORGANIZATION IS LOOKING AT ON A DAILY BASIS TO MANAGE WORKING CAPITAL. What kind of metrics do executives actively track as part of their Payment Cycle Management? For starters, reducing Days Sales Outstanding (DSO) was cited as the highest priority among 53% of the respondents. It s easy to see why. A reduction in DSO delivers an immediate, quantifiable dividend. DSO reduction is an important metric that can improve a business s financial picture without making changes to its revenue or cost structures. For a third of respondents, Closing the Books on Time is of primary importance. Another 27% cited Minimizing Matching Errors (in cash application) as a key metric. Which is the most important invoice-to-cash metric? SPEEDING INVOICE DELIVERY IS IMPORTANT, BUT IT IS A COMPONENT OF DSO. THE LONGER A BILL STAYS OUT THERE, THE MORE MONEY WE LOSE. Executive Metrics DSO is a very important metric that our organization is looking at on a daily basis to manage working capital. If you asked the CFO, it s all about closing the books on time. Closing the books is the most important metric. We are large corporation and don t have flexibility with deadlines. In the whole process, our biggest issue is around matching we have to throw a lot of people at it to get it done. Part of reducing DSO is matching errors, so sometimes we have aged receivables because we haven t matched it correctly.
RANKING INVOICE-TO-CASH CAPABILITIES The study queried executives on the broader issue of identifying the most important capabilities for an invoice-to-cash solution. Listed below are key factors cited: Ability to reduce DSO/improved cash flow A lower DSO translates into immediate cash savings Ability to improve resource allocation Cash application can be labor intensive Automate as much of the process as possible Automation is more accurate, more reliable Single system with an end-to-end perspective Invoice-to-cash systems with many disparate applications cobbled together are unpopular Ability to accommodate needs of customers Providing customers with payment channels that accommodate their preferences helps ensure retention and good relations The Role of Automation in DSO Reduction Among companies that have automated invoice-to-cash 84% have achieved a DSO reduction ranging from 1 to 13 days. DSO is affected by many factors, but here are five features of Payment Cycle Management that can shorten DSO. These are especially powerful when deployed in combination. DSO & INVOICE-TO-CASH Timing of Invoice Timing of Delivery Inbound Faster delivery correlates Payments with faster payments Electronic payments received sooner than paper checks Manage Disputes & Short Payments Faster visibility into disputes allows for faster reconciliation Customer Self-Service The more buyers h ave 24/7 access to invoicing process, the more they can do for themselves. Cash Application Timing & Accuracy Achieve high rate of same day posting with automation
Conclusion Automating and accelerating invoice-to-cash can impact DSO. When evaluating solutions, ensure that they will be flexible enough to accommodate your range of buyer requirements for receiving invoices and making payments, that they address the critical last step of the process with intelligent cash application, and that they have a program in place to drive electronic adoption. With these three key capabilities, sellers will be on the path to achieving a perfect balance between buyer satisfaction and reduced DSO. To understand more about the impact invoice-to-cash can have on DSO and how to calculate the potential savings see The Silver Bullet for Lowering DSO. NEXT STEP To find out more about best practices for automating your invoice-tocash process contact Billtrust at sales@billtrust.com or call 609-235-1010. Billtrust 2016 100 American Metro Boulevard, Suite 150 Hamilton, NJ 08619 Office: 609.235.1010 Fax: 609.235.1011 sales@billtrust.com ABOUT BILLTRUST Billtrust is the premier provider of payment cycle management solutions, helping businesses accelerate invoice-to-cash. By integrating the three key areas of the payment cycle: invoice presentment, invoice payment, and cash application, Billtrust is committed to delivering a flexible solution to improve buyer satisfaction and DSO. In 2014, the Billtrust invoice-to-cash solution processed over $250 billion in receivables for leading companies including Kraft Foods, Under Armour, Ryder and CDW. To learn more visit www.billtrust.com