By Jim Wong, CPA | November 11, 2015


It goes without saying that it’s in a company’s best interest to collect outstanding receivables as quickly as possible. Improved cash flow and management starts with converting receivables to cash as soon as possible. Therefore, helping to automate accounts receivable processes affects more than the finance function – it becomes a company-wide strategic undertaking.

Often times, this can become a long and cumbersome process.

To better manage this, many accounting and finance leaders are looking to Payment Cycle Management (PCM) to speed up the invoice-to-cash process.

PCM is a flexible, automated invoice-to-cash solution that meets diverse buyer requirements and speeds cash application through tailored invoice delivery, secure multi-channel payment enablement, and intelligent matching and payment posting.

I ran across a recent CFO.com whitepaper that discusses a study in best practices for implementing PCM. Many accounting, finance and IT leaders who have experience with this process were surveyed.

The leaders cited reducing Days Sales Outstanding (DSO) as the main driver for their companies’ decision to employ PCM. Days Sales Outstanding (DSO), also known as days receivable, refers to the number of days it takes to collect revenue after a sale has been made. The smaller the DSO, the better.

I’ve outlined some of the key points from the whitepaper and included some of my own in the Best Practices for Accelerating Invoice-to-Cash below.

Helps reduce DSO.

Automating the invoice-to-cash process provides benefits for your clients and customers, as well as for the finance function and the business overall. It stands to provide three key benefits:

1. Offers flexibility 
Providing flexible options for receiving invoices and making payments improves client satisfaction and retention.

2. “Intelligent” cash application
Once payments are received, the funds have to be accurately applied and recorded for companies to realize them as revenue. Automating this process not only speeds up the process, it also improves accuracy — and cuts down on labor costs.

3. Improved adoption of electronic transactions
The more buyers transact electronically, the greater the positive impact on DSO. Among the companies that have automated invoice-to-cash, 84 percent achieved a DSO reduction ranging anywhere from one to 13 days.

Speeds up invoice to cash.

Utilizing a PCM can speed up invoice delivery. Faster deliver correlates with faster payments. It can also speed up inbound payments. Electronic payments are received sooner than paper checks. Further, it can better manage disputes and short payments more easily. The ability to “see” and “understand” the nature of a dispute leads to faster reconciliation of the problem. Lastly, it improves client self-service. The more “buyers” have 24/7 access to the invoicing process, the more than can do for themselves.

What to look for in a PCM solution.

When selecting a PCM, the question to ask is “What are the ways in which the PCM can reduce our DSO?” A lower DSO translates into improved cash flow. Also, see how it can improve resource allocation. Cash application can be labor intensive. Be sure to automate the process as much as possible. Automation is more accurate and more reliable.

Overall, PCM can provide an end-to-end perspective. One integrated solution with a range of capabilities is preferable to disparate applications cobbled together. It also accommodates customer needs –providing clients with payment channels that accommodate their preferences will help ensure customer retention and good will.

Do you have experience with PCM? Comment below and let us know what it has accomplished for you or your client.


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