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Last updated on 2024年9月29日

How do you benchmark your invoice to cash performance against industry standards and competitors?

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Invoice to cash (ITC) is the process of generating, sending, and collecting invoices from customers. It is a critical component of order to cash (OTC), the end-to-end cycle of fulfilling customer orders and receiving payments. How do you measure and improve your ITC performance against industry standards and competitors? Here are some steps to help you benchmark your ITC process and identify areas of improvement.

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Barbara Conibear

Director of Credit & Collections

1 Define your ITC metrics

The first step is to define the key metrics that reflect your ITC performance, such as invoice accuracy, invoice delivery time, days sales outstanding (DSO), collection efficiency, and bad debt ratio. These metrics can help you track how well you are managing your invoicing and collection activities, and how they impact your cash flow and customer satisfaction.

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Barbara Conibear

Director of Credit & Collections
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One thing I have always found With ITC metrics is to ensure if there is an issue with an invoice and a customer notifies us, we need to be very quick in our actions to obtain the invoice information needed to get corrections made and information to the proper people to take care of adjustments or credits, or anything else that might have to be done to correct an invoice. Then I always circle back to the customer advising the actions taken and sharing updated documentation. This action alone goes a long way in customer satisfaction.

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Manuel Andres Valdes Sotomayor

Change Management | Statistics | Empowering Teams | Black Belt | Driving Innovation
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Being clear about the indicators you want to benchmark and how you will measure them is the first crucial step. Organizations like APQC provide extensive benchmarking resources, so finding a trusted partner for this process can be incredibly beneficial. Additionally, attending O2C-related events or joining regional organizations can provide valuable insights and networking opportunities.

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2 Gather your ITC data

The next step is to gather your ITC data from your accounting, billing, and CRM systems. You need to collect data for each metric over a period of time, such as monthly, quarterly, or yearly. You also need to segment your data by customer type, industry, region, or any other relevant criteria. This will help you analyze your ITC performance across different segments and identify patterns and trends.

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Barbara Conibear

Director of Credit & Collections
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I always show data month over month. This comparison helps to understand trends and in construction industry to have a DSO under 50 is huge compared to Indy standard of 55. I enjoy seeing YOY comparison

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3 Compare your ITC data with industry benchmarks

The third step is to compare your ITC data with industry benchmarks and best practices. You can find industry benchmarks from various sources, such as industry associations, research reports, or online tools. For example, you can use the DSO Calculator to compare your DSO with the average DSO of your industry and region. You can also use the Invoice-to-Cash Benchmarking Tool to compare your ITC metrics with those of other companies in your industry and size.

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Barbara Conibear

Director of Credit & Collections
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DSO is a solid measure of collections. Construction industry usually is at 55-60 or higher average. With good programs in place my department manages a DSO under 50 and usually about 45. I have been the benchmark with a few companies assisting them in good programs.

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4 Compare your ITC data with competitors

The fourth step is to compare your ITC data with your competitors. You can obtain competitor data from public sources, such as annual reports, financial statements, or press releases. You can also use competitive intelligence tools, such as Owler or SimilarWeb, to get insights into your competitors' revenue, growth, market share, and customer feedback. You can then compare your ITC metrics with those of your competitors and see how you rank among them.

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Barbara Conibear

Director of Credit & Collections
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I do not know where our competitors are in DSO. But I do know owners of some very large businesses have used our tools and constantly enjoy learning what our way of doing things are

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5 Identify your ITC strengths and weaknesses

The fifth step is to identify your ITC strengths and weaknesses based on your benchmarking results. You can use a SWOT analysis to evaluate your internal and external factors that affect your ITC performance. For example, you can list your strengths, such as high invoice accuracy or low bad debt ratio; your weaknesses, such as slow invoice delivery or high DSO; your opportunities, such as automation or customer segmentation; and your threats, such as regulatory changes or customer churn.

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Barbara Conibear

Director of Credit & Collections
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One thing I can share is my success comes from years of trial and error. I learned what customers like when it comes to collecting. I have always tried to get a win win situation and my motto is knowing “when to hold ‘em and knowing when to fold em. And knowing when to walk away and knowing when to run. “. I give a lot of opportunities to our customers but at the end of the day I will get paid. Now or later but paying is the option. And it works. Our customers will usually smile when they pay us.

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6 Implement your ITC improvement plan

The final step is to implement your ITC improvement plan based on your SWOT analysis. You can prioritize your improvement actions according to their impact and feasibility. For example, you can focus on improving your invoice delivery time by using electronic invoicing or integrating your billing and CRM systems. You can also monitor your ITC metrics and adjust your plan as needed.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you benchmark your invoice to cash performance against industry standards and competitors?

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1 Define your ITC metrics

2 Gather your ITC data

3 Compare your ITC data with industry benchmarks

4 Compare your ITC data with competitors

5 Identify your ITC strengths and weaknesses

6 Implement your ITC improvement plan

7 Here’s what else to consider

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