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      Many consider revenue the lifeblood of a company and the most important number in its financial statements. While arguably the most critical, it's also often the most difficult number to get right. Inaccurate revenue recognition can cost companies millions in lost revenue, regulatory fines, and reputational damage. The accuracy of revenue is crucial for financial reporting, taxation, performance management, meeting contractual obligations, and avoiding penalties for non-compliance.

      But why is this now a critical issue? Increased regulatory scrutiny, complex business structures, high transactional volumes, and the demand for real-time financial insights are putting significant pressure on finance teams. If you're a CFO, controller, or finance leader struggling to keep up, understanding and optimising your Order-to-Cash (O2C) cycle is paramount. Complex contracts, variable pricing, and multiple regulations can make accurate revenue recognition a daunting task, especially when many companies still struggle with manual processes and outdated systems.

      pratik-vora
      Pratik Vora

      Director, Accounting Advisory Services

      KPMG in the UK

      The hidden drain: O2C Challenges leading to value leakage

      So, what’s the problem? Organisations are facing significant challenges in their Order-to-Cash processes, leading to revenue recognition errors and inefficiencies. A number of factors are contributing to this:

      • Complex Contracts

        Today’s modern business models often involve detailed contracts with variable pricing, bundled services, performance-based incentives, and multi-element arrangements. Accurately determining transaction price, allocating revenue across multiple components, and recognising revenue point in time vs over time, is a significant challenge.

      • Manual Processes

        Many companies still rely on manual processes and outdated systems for quote and contracting, invoicing, and revenue recognition. This increases the risk of human error, delays, and inconsistencies, directly impacting revenue accuracy.

      • Data Silos

        Disconnected systems and data silos make it difficult to gain a holistic view of contracts – from CRM systems where deals are struck, through billing, and finally to revenue recognition. As a result, it’s hard to analyse the full amount of revenue clearly.

      The cost of inaccuracy: Key pain points and consequences

      Incorrect revenue recognition can have serious consequences, often resulting in significant value leakage:

      • Distorted Financial Performance

        Both overstating and understating revenue can lead to misleading financial statements, damaging investor confidence and potentially triggering costly and time-consuming audits.

      • Increased Burden on Finance Teams

        Manual processes and complex calculations place an immense strain on finance teams, diverting their time from strategic analysis to error correction and reconciliation.

      • Poor Business Decisions

        Inaccurate revenue data can lead to flawed forecasting, suboptimal pricing strategies, and missed opportunities for growth, as leadership operates on an incomplete or incorrect understanding of the business's true financial health.

      Reclaiming your value: Practical solutions for a robust O2C

      To avoid these issues and ensure your revenue recognition processes are accurate and compliant, companies need to focus on several key elements. Here are our top three suggestions, with practical steps you can take:

      • Integrate Technology Solutions Across the O2C Process

        Implement an integrated suite of tools where CRM systems connect seamlessly with downstream billing systems and revenue recognition engines. This could involve a robust Enterprise Resource Planning (ERP) system or specialised revenue automation platforms. End-to-end automation should be the goal to move away from manual involvement in revenue recognition.

      How ?

      Evaluate your current technology stack. Look for opportunities to automate data flow between sales (CRM), order management, billing, and general ledger. Consider automating repetitive tasks and use AI-driven tools for contracts review and analysis. This reduces manual interventions and significantly cutting down errors and processing times.

      • Strengthen processes and controls across the O2C value chain

        Establish clear, standardised processes and robust internal controls from contract inception to cash collection including revenue recognition. 

      How ?

      Develop standardised contract templates and terms and implement strict approval workflows for non-standard contracts. Conduct regular reconciliations between CRM values, billing, revenue, and cash. Maintain segregation of duties within the O2C cycle to promote clear data ownership and mitigate risks of fraud and errors. 

      • Implement a Well-Defined Target Operating Model (TOM)

        A TOM effectively aligns people, processes, and technology to optimise the O2C process.

      How ?

      Clearly define roles and responsibilities within the O2C cycle, ensuring accountability. Document all processes thoroughly and establish key performance indicators (KPIs) to monitor efficiency and accuracy. Foster cross-functional collaboration between sales, legal, operations, and finance to ensure a smooth handoff and consistent understanding of revenue terms throughout the customer lifecycle. This enhances efficiency, facilitates accurate revenue recognition, and supports future growth.

      How KPMG can help

      KPMG understands the challenges companies are facing in their O2C processes. That's where we come in. Our team of experts can help organisations of all sizes address their O2C challenges by offering tailored transformation solutions to achieve accurate and compliant revenue reporting, as well as uncovering hidden value. Our approach focuses on:

      • Discovery Assessment

        We conduct a thorough assessment of your current O2C process to identify pain points and gaps for improvement.

      • Design

        We design a customised solution that aligns with your specific business needs and regulatory requirements.

      • Implementation

        We help you implement the designed changes that you prioritise, providing expert guidance and support every step of the way.

      • End-to-End Remediation

        We offer complete services that address data challenges at every stage of the Order-to-Cash process, starting from contract creation, customer orders, invoicing, and revenue recognition.

      • Optimisation

        We consistently monitor and refine your O2C process to maintain success and meet global standards.

      Optimising Order to Cash

      Optimise Order to Cash to enhance reporting, compliance and efficiency.

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