The by-order or by-account approach may be the ‘easiest’ way for your billing and accounts receivable to issue invoices and collect payments. But the efficiency of your invoice-to-cash process is not solely dependent on you. It’s reliant on your customers’ ability to understand and process your invoices quickly and easily. If you leave consolidation up to your customers, you’re injecting delays and frustration with your customers.
Innovative B2B companies are shifting from their supplier-centric ways to a more modern, customer-centric approach.
Let’s break down the invoice to cash process to learn how:
The act of gathering all usage and charge data into a shareable format is no easy or standardized task – especially when you have thousands of business, corporate, industrial, and end-user customers using tens or hundreds of services each. Customers procure your products over multiple orders and under multiple accounts. And your invoices are driven from that purchasing behavior.
A customer who has deals with multiple meter and energy types, rates, tariffs, seasons, credits, connections (and disconnections) has a mind-boggling amount of invoices to match. Consequently, the customer’s accounts payable manager(s) will have to spend time manually consolidating these to understand if their charges are correct and to set up the right internal business process within their accounting systems to make payments.
And in the case of enterprise invoices, these customers can sometimes require the supporting detailed data for validation purposes. Again, this invoice detail data is typically provided per meter per account, and adds another step – and more time – to the process of consolidation and review.
Adjustments, disputes, and discounts all require a change to the invoice produced in Step 1. Some recurring changes, such as contracted discounts, may be applied prior to distributing the customer invoice. But adjustments and resolved disputes often require the re-issuing of an invoice.
Similar to supplier-centric invoicing, dispute processes are typically aligned to a specific product, meter, meter type, account, site, etc. Again, this may simplify dispute handling for the supplier but can be daunting (and a payment deterrent) for a customer who raises disputes across multiple invoices.
Remember those invoices the business customer received in Step 1? Now comes time for payment. Following the same structure as the invoices and disputes, the payment options are order and account specific. Accounts Payable can pay online for some accounts but have to pay via check for other accounts. Your customer’s Accounts Payable will have no way to make a single payment across all accounts or to easily allocate the cross-invoice charges throughout their organization.
It’s important to note that customers don’t just ‘adapt’ to your way of invoicing. They build heavily manual, time-consuming processes to dissect your invoices, in order to reconstruct it in a way that aligns to how they actually operate – and how they need to pay.
And as a result, the application of payments is becoming more of a challenge. As business customers move further from your defined invoicing and payment model (account – product – invoice – payment), the task of connecting the dots grows in complexity.
Following our example above, after allocating the charges on their side, the customer’s AP uses a bank transfer to avoid making 60 individual payments.
The good news? You got paid for the total outstanding amount.
The bad news? There’s no remittance advice as to how to apply payment to which invoices and which accounts.
As a result, your AR team spends countless hours playing the matching game between payments and outstanding invoices – while the cash sits in limbo.
By providing a customer-centric invoice-to-cash approach, you maintain the connection between your customer invoices and your customer payments. Customers can easily consolidate, allocate, and pay according to their needs. And you can automatically reconcile payments across your various systems.
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