F&A Leadership Priorities: Revenue Cycle Management

Today’s business environment is more dynamic than ever. Business leaders are focused on strategic initiatives to position their companies for long-term growth, to gain competitive advantage, and to drive shareholder value.

Top of mind for many business leaders are topics like recruiting and retaining top talent, remote work enablement, mergers and acquisitions (M&A), and digital transformation, to name a few.

As business leaders focus on making strategic decisions around these areas, accounting teams are being increasingly relied upon to provide data and insights and to serve as strategic advisors to the business.

This post is part of a series that discusses areas of focus that require active accounting input, why it matters to accounting leaders, and the risk of doing nothing.

The revenue cycle, or order to cash cycle, refers to the entirety of a company’s ordering system and can involve many department—from sales and accounting to inventory and logistics. It starts the moment a customer places an order and continues through when an invoice is settled, and all activity in between is recorded and reconciled.

All eyes are on the revenue cycle. Not just because it’s an essential function in finance and usually carries the most risk, but because it is a critical part of how an organization functions. The efficiency and effectiveness of the revenue cycle has an impact beyond sales and finance, including customer experience and retention, investor decision-making, and future organizational strategy.

From an investor, net income, and EBITDA perspective, the most important part of the revenue cycle is not what is invoiced, shipped, or billed, but rather what is collected. According to a PwC report, improved working capital management could unlock $1.4 trillion globally, increasing the return on invested capital by 8.8%. Maximizing profit is the end goal, and therefore limiting write downs, closing the gap between gross and net revenue and limiting the reasons companies fail to collect are of paramount importance. Further, cash flow fuels critical business strategies from maintaining customer service to investing in new areas, and so as they say: cash is king.

There are several reasons why a company fails to collect on what they invoice, but manual processes are the biggest driver. Within the revenue cycle, Finance and Accounting is dealing with a tremendous volume of individual transactions. When there is not an automated process for handling that data at scale, the result is preventable, but unavoidable, write offs.

MGI Research estimates that 42% of companies experience some form of revenue leakage and according to a study published by EY, on average companies can expect 1-5% of realized EBITA to leakage, causing a direct hit to the bottom line. As such, this is not just a reconciliation problem—or even just an accounting and finance problem—it’s a bottom-line issue that company leaders and investors will notice.

Given the attention on cash in the current market conditions, it is of utmost importance to take action over areas which we can control and, in doing so, position our organizations and our companies for success.

The importance of an automated, scalable revenue cycle is clear. A streamlined order to cash process improves customer service, maximizes shareholder value, and fuels future success. Companies that rely on traditional manual revenue cycle management processes experience unnecessary cost and risk, wasted time, and disengaged employees. This can lead to financial statement errors, high turnover, and loss of stakeholder trust, whether those stakeholders are customers, business partners, or investors.

BlackLine has solutions for Financial Close Management, Accounts Receivable Automation, and Intercompany Financial Management that can help manage the enormous amounts of data and optimize activities within the revenue cycle.

BlackLine helps unify, automate, and modernize your financial close processes by replacing repetitive, spreadsheet-heavy work with leading practice automation and transaction matching capabilities.

BlackLine’s leading Accounts Receivable Automation solutions help you apply cash more efficiently, optimize working capital, improve customer relationships, and more. Together, BlackLine’s solutions improve balance sheet integrity, net income, and working capital and liquidity, while driving operational efficiency and freeing F&A talent to focus on what matters most.

Customers use BlackLine solutions to address use cases including:

• Sales to payment provider settlements

• Accounts receivable to payments reconciliation

• POS or credit card to bank and/or GL

• Suspense account and AR clearing

• Bad debt reserve calculation

• Gift card processes

Learn more about how you can achieve financial close excellence in your order to cash cycle by exploring BlackLine’s Accounts Receivable automation solution