05.22.2023 | Posted by Erik

AR Best Practices for Order Receipt and Fulfillment

Accounts receivable (AR) is a complex science that can make a huge impact on the success of any organization. Whether your company is in hyper-growth mode or an established enterprise, AR success comes down to a few simple processes and principles. A strong accounts receivable management services company understands the critical components of getting paid while building and maintaining valuable relationships with clients.

That’s why we’ve put together a new blog series called Best Practices for AR Success: 3 Essential Processes, which covers the three stages of effective AR:

  1. Order receipt and fulfillment
  2. Credit review and investigation
  3. Converting to cashAccount Receivable best practices for order receipts and fulfillment
This series is based on the years of experience of our most advanced experts in the AR space. Make sure to follow our blog and keep reading to gain more insights into this crucial part of your business.

Notes on the Order to Cash Cycle

Getting paid on time is reliant on three main process inputs called the order to cash cycle. This term refers to how a company completes an order from initial receipt all the way through to payment. There are a lot of moving pieces involved, but the ones that have the most immediate impact on AR are order receipt and fulfillment, credit review and investigation, and converting to cash (collecting and posting). Each element must work correctly for the entire process to be efficient and effective.

For this process to run smoothly, strong, timely customer service must be a focus. All aspects of the order process – from sales, to order entry, to collections and accounting – should emphasize an enjoyable customer experience. Without this focus, there’s only so much that the folks in accounts receivable management services can do. In other words, successful AR starts before the order is even entered.

4 Best Practices for Order Receipt and Fulfillment

The first phase of the order and invoicing-related process is order receipt and fulfillment. This phase will mean something different to different companies based on their unique offerings and order intake processes. At a basic level, any company selling goods needs a way of entering orders and then processing and delivering them.

  1. Process Documentation

It’s essential to have a clear process documented for whenever a new customer comes in. In other words, the process shouldn’t just live in someone’s head; it should be clearly spelled out and easy to find. This will avoid important information getting lost when a tenured employee leaves the organization and ensure that everyone is on the same page. We suggest recording tutorials using tools like Loom, along with developing written documentation that is easily accessible.

  1. Customer Onboarding

A key part of the order acceptance process is customer onboarding. Begin by gathering every internal stakeholder and ensuring they have everything they need from the order process. Just because a system works for one person, doesn’t mean it will work for everyone involved. This effort should be collaborative and check every important box for all team members involved. Ask questions like:

  • How are orders placed? Is the process easy? How are the required details obtained to fulfill the order and eventually get paid?
  • Are the proper people being notified when an order comes in? How and when?
  • What contact information is needed? Are AP contacts being documented in addition to the buyer?
  • Is the order process connected to invoicing/billing? Is the correct AP contact person making it to the billing department?
  • Are the necessary details for invoicing according to the customer’s expectations sent to the person doing the actual invoicing?

As you work through these pieces of the process, it’s important to view the order to cash cycle in totality. We like to say that the right hand needs to talk to the left hand. For example, if all of the necessary details for invoicing customers aren’t sent to the person creating the invoices initially, then it can become easier to fall subject to past-due invoices. It’s important to obtain and send this information up-front when the order is processed.

  1. Following Customer Invoicing Requirements

Furthermore, it’s essential to remember that getting the order is only one piece of the larger puzzle. In many organizations, it’s easy to get excited for an order and lose sight of how you’ll get paid afterward. An important step in ensuring timely payment is knowing (and following) the customer’s requirements regarding the information that must be provided on an invoice. These requirements need to be obtained when the order is placed, or there will be a lot of catching up to do down the line.

  1. Timely Order Fulfillment

From there, timely shipping or delivery of your service or product is essential to uphold the terms of the contract. However, it’s important not to be so eager for product delivery that you ignore the groundwork of making sure you’ll be paid properly upon order completion. Doing this work up front ensures that the entire order to cash process is executed seamlessly.

Get Your Ducks in Order for the Entire AR Process

In our next article, we’ll dive into the second part of the order to cash process: credit review and investigation. Our experts will share best practices around aligning AR and fulfillment for maximum payment efficiency.

For more information on how accounts receivable management services can improve your cash flow and reduce risk, reach out to our experts.