Invoice-to-Cash

Invoice-to-cash (I2C) refers to the procedure from the time an invoice is generated till the customer completes their payment. It uses processes like invoice issuing, payment acceptance, and handling accounts payable. It streamlines business accounting processes, enhances customer experience and improves cash flow.

It employs key elements like invoicing customers, payments, cash application, collections, credit monitoring, disputes and deductions. It uses automation technology to do all the previous processes to reduce manual work and improve efficiency. CFOs of companies have prioritized I2C applications as they might achieve a $3 billion value by 2024.

Invoice-to-cash (I2C) is collecting and managing customer payments after goods or services are delivered. It comprises generating and creating invoices, monitoring payments and handling accounts receivable. It integrates different functions like disputes, customer invoicing, cash application, disputes, deductions and payments.

The entire process of I2C consists of invoice issuance to customers, monitoring, dunning, collecting payments, and reconciliations. It employs automation techniques like machine learning and algorithms to streamline these steps and match unpaid invoices to payments, minimizing errors and manual work. It improves financial control, reduces costs, and optimizes operations of accounts receivable.

Effective I2C management leads to smoother operations and ensures the profitability of the business. Various software applications and cloud-based tools and services help access I2C automation. As a result, the payment process can be viewed in real time, enabling businesses to manage cash flow and collections proactively. 

All these help transform the financial world by enhancing cash flow handling, cost reduction and increasing customer satisfaction. 

Let us understand the process flow of I2C in steps as shown below:

• Step 1: First, an invoice has to be generated and sent by a third party manually or automatically to the customer.
• Step 2: Then, for overdue invoices, dunning reminders are sent.
• Step 3: After that, payment is made by customers using different ways like check card or ACH.
• Step 4: Mandatory compliance regulations and security standards are adhered to protect customers' sensitive data.
• Step 5: Further, revenue is recorded according to the correct accounting period for when it is earned instead of received.
• Step 6: Accounting records and accounting records are ensured using payment reconciliation.
• Step 7: Finally, customer disputes related to billing, charges or refunds must be managed, while any litigation is managed if necessary. 

Let us use a few examples to understand the topic.

Example #1

An online article published on 8 May 2024 underscores the recognition of Esker as the leader in the Gartner Magic Quadrant for Invoice-to-Cash (I2C) Applications of 2024 event for two years in a row. As per Gartner, I2C applications are cloud-based solutions that do invoice payments and collections automatically. 

Moreover, Esker can use AI-powered automation to align the I2C process so that AR teams can fasten cash collection, eliminate manual tasking and greatly enhance customer satisfaction. Esker's solution has also been credited with features like improved decision-making using better credit risk evaluation, faster collections, cashflow predictions, and improved cooperation across the organization.

Example #2

Let us assume that in the city of Old York, a seller has to sell a new energy crystal to one of the most technologically advanced companies, SkyTech. SkyTech generates the invoice containing the details of complete payment and transaction terms. Further, after receiving the invoice from the company, the seller quickly generates the invoice while initiating the I2C) cycle.

Now the secured encryption of the systems assures the safe transfer of funds from SkyTech's bank account to the seller's account with ease. As a result, the seller keeps on collecting the unique energy crystals globally without tension. Hence, the I2C streamlined the financial transactions between the two parties, ushering the city into a new era of technological prowess.

I2C has numerous benefits for retailers and other businesses, as follows:

• It enhances cash flow and faster collections of cash by automating invoicing up to cash application. 
• It provides an efficient and seamless payment experience using electronic and digital invoices, improving customer satisfaction.
• It also increases productivity and manual work and eliminates errors within the operations of accounts receivables.
• I2C helps cost savings by minimizing staff costs, bad debt expenditures, and financing requirements.
• It ensures adherence to security measures, tax regulations and invoicing standards.
• AI-driven I2C offers predictive analytics concerning proactive collection management and cash flow forecasting through integrated invoice-to-cash applications.
• It facilitates the integration of all I2C procedures into a single platform.
• Customer relationships find a new high in amicability because of its accurate and timely invoicing, automated payment reminders, and effective dispute management.
• Enhanced customer relationships, reduced manual work and improved cash flows increase the firm's revenue.
• Since all the processes in I2C are automated, it safeguards data handling and reduces errors and fraud in cash applications and invoicing. 
• It helps in mergers and acquisitions, helping expand businesses through I2C automation.  

Let us use the table to understand the difference between the two: