What is the Invoice to cash (I2C) process — and why do you need it in 2023?

What is an invoice to cash process?

The I2C process describes the path from invoice to collection. It consists of a series of steps that take place after an invoice has been issued by your organisation, until the final payment is received, including:

• Issuing the invoice
• Dunning
• Collection
• Security standards
• Recording in the accounts
• Reconciliation
• Management of disputes and litigation

The I2C cycle is the process by which you issue an invoice, send it to the customer, collect it, and then send it back to accounting so that it can be reconciled with its original and any changes can be made. It includes reconciliation, account maintenance, payment and collection, with the aim of maximising the recovery of unpaid invoices:

Why is the Invoice to Cash process important?

Late payments, overdue invoices, lack of cash — accounts receivable often has a serious impact on a company's cash flow.

The management of accounts receivable is a delicate task, which requires both tact and a firm hand, as the objective for the company is to collect its accounts receivable without damaging the commercial relationship. To do this, an intelligent reminder strategy is necessary, for which the company can — and must — also rely on the technological innovations offered by SaaS and cloud solutions.

Controlling the I2C cycle means controlling the collection of receivables and reducing the number of unpaid invoices. That's why it's so important for small businesses to monitor their accounts receivable (the total amount owed by customers), as well as their accounts payable (what they owe to suppliers).

For companies dealing with a large number of suppliers, such as franchises and chains, I2C offers a scalable and flexible solution for large volumes of invoices.

How to set up an invoice to cash process

The first step in controlling collection is to dematerialise the accounts receivable process, i.e. to set up an invoice to cash automation software that allows you to electronically issue, collect, process and collect your customer invoices as soon as the service or delivery is completed. This system will allow you to:

• Issue an invoice at any time without disrupting business operations.
• Have invoices processed by accounting software and sent electronically to your customers.
• Receive customer payments and deposit them automatically into your bank account.
• Perform bank reconciliation and accounting reconciliation.

1. Automate your reminders and payment follow up

Good customer relations are precious. As such, more personal reminders for unpaid invoices are often preferred, such as phone calls, letters, text messages and emails.

Managing reminders is a time-consuming task with no real added value. However, this is nothing compared to the burden that late payments represent for the treasury, — overdrafts, lack of liquidity, obstacles to company development, to name a few. Human and material resources are also leveraged for debt collection, both of which could be better deployed elsewhere for more productive projects.

If you can dematerialise your invoices in a few clicks, why not do the same with your dunning processes?

2. Analyse the customer profile with the KYC process

The KYC (know your customer) process is imposed on all players in the financial sector. This procedure refers to the protocol for verifying the identity of the customer, both for individuals and legal entities. The same process applies to suppliers: this is called KYS (know your suppliers).

2. Streamline your payment process

The collection process is one of the key parts of the invoice life cycle, as it allows you to pay invoices on time and manage customer return.

Therefore, it's important to have a system that works and keeps your business secure. Your payment receipt system should be integrated with your accounting software or enterprise resource planning (ERP) system so that it can automatically update your accounts receivable and reduce manual entry errors.

The most common problem with invoicing is not following up with customers who do not pay on time. If you do this manually, it is easy to miss important information, lose track of who owes what, as well as when they are supposed to pay.

It's crucial to setup automatic reminders triggered after payment due dates have passed, so you can follow up. Already using an automated system with this functionality? Smart move. If not, we recommend you click the orange button below!

FAQ

Can an invoice be paid in cash?

Small businesses dealing with the public (B2C) can accept cash payments, but for security reasons most business to business invoices can only be paid with online payment methods.

When the payment method is cash, the buyer can issue a cash invoice. Cash invoices are usually issued when a payment is made immediately after reception of the goods.

What is billing in order to cash?

The order-to-cash process includes all steps from when a customer places an order to the business being paid for its product or service. There are several steps involved in the process of receiving and processing orders. They include order management and order fulfillment, credit management and invoicing, and finally payment collection.

What is the OTC cycle?

The order to cash cycle, also known as the O2C or OTC process, refers to the steps a company takes from receiving customer orders through to completing those orders. This means handling the shipping and invoicing, as well as collecting payments. Order to cash processing includes the following steps:

• Customer order placement
• Order management
• Order fulfillment and shipping
• Invoicing and billing
• Accounts receivable
• Payment collected