Accelerating cash conversion with Cogentiq Invoice to Cash

Why Invoice to Cash is a boardroom priority today

The Invoice to Cash (I2C) process, encompassing the journey from sales order to cash application, is paramount for any organization focused on profitability, as it bridges revenue recognition with revenue realization. Long regarded as an operational task, I2C has evolved into a strategic priority, shaping boardroom agendas through its influence on working capital efficiency and customer experience.

The cost of inefficiency 
Organizations globally lose billions annually, not to fraud or theft, but to the hidden inefficiencies within their I2C processes. Key challenges include: 

• Late payments: Nearly half (47%) of enterprises grapple with late payments, leading to substantial cash being stuck in receivables, sometimes up to 1% of total revenue for large enterprises.

• Dispute management: A significant portion, 20-30%, of invoices fall into dispute queues, resulting in deductions and leakages that can account for 10-15% of revenue lost. Effective dispute management is crucial for maintaining a healthy Days Sales Outstanding (DSO).

• Manual processes: I2C is often highly manual across multiple organizations, consuming 30-40% of an Accounts Receivable (AR) team's time on repetitive tasks. This manual effort contributes to a high cost of serving one invoice, estimated at $10 to $15, which translates to millions of dollars for large organizations processing millions of invoices.

• Long cash conversion cycles: These inefficiencies prolong the cash conversion cycle, negatively impacting DSO and liquidity. 

Why the old playbook fails 
Traditional methods struggle to cope with today's complexity. The "old playbook" is characterized by: 

• Fragmented systems: ERP, CRM, order management, and point-of-delivery systems are often not integrated or unified. Organizations, especially those with past acquisitions, may operate multiple instances or different ERP systems that do not communicate with each other.

• ERP customizations: Extensive customizations are often needed to integrate these systems, which is challenging to manage.

• Manual follow-ups and static rules: Reliance on email-based follow-ups and static rules leads to thousands of people manually managing the process, with collectors often unaware of customer disputes or previous interactions.

• Fragmented dashboards: A lack of unified views results in siloed insights, making it challenging to gain an end-to-end view of the process.

These challenges cumulatively cost organizations more than 2% of their revenue if the I2C process is not managed efficiently. This substantial financial impact, coupled with the desire to improve customer experience and reduce operational costs, solidifies I2C's position as a critical boardroom concern. 

The Order to Cash (O2C) process flow and its challenges

The Order to Cash (O2C) process is a comprehensive, end-to-end value stream that transforms revenue into cash. It is one of the most critical processes in any organization, irrespective of industry. 

Components of the O2C process flow

The O2C process typically begins with a sales order and flows through various stages, culminating in cash application: 

• Sales order: Includes customer identification, proposal creation, order receipt, and ERP entry. 

• Pricing: Involves price sensitivity analysis, dynamic pricing, discount application, and contract pricing. It is critical for pricing to be fully integrated into the process. 

• Credit: Dynamic credit evaluation, risk assessment, customer segmentation, and periodic reviews are essential. 

• Order fulfillment: Covers order validation, warehouse coordination, delivery tracking, and returns management. 

• Billing: Focuses on invoice creation, tax calculation, customer billing, and credit note management. 

• Collection: Includes AR aging analysis, collection execution, debt management, and legal proceedings. 

• Dispute: Involves dispute identification, deduction validation, resolution planning, and root cause analysis. 

• Cash application: Deals with cash allocation, discrepancy resolution, and financial record updates and reporting. 

One point to note is that pricing has not traditionally been part of the Order-to-Cash process; however, integrating pricing with OTC is critical to enhancing customer experience and understanding the impact of price changes on collection efficiency.

Challenges within the O2C process

The complexity of O2C arises from its fragmented nature and the multitude of systems involved:
 

• Silos and fragmentation: Many organizations suffer from departmental and system silos. Sales, finance, and other functions often use different software and logic, leading to inconsistent data and systems that "do not talk to each other.” 

• Manual Interventions: The process is often highly manual, from sales order entry to cash application, making it prone to errors. 

• Cascading errors: Any error in an upstream process can cascade and multiply its effect on downstream processes, disrupting the entire chain and impacting overall outcomes. For example, a dispute might arise due to incorrect pricing in CRM, affecting collection efforts. 

• Lack of unified data and insights: Information related to customers, sales, pricing, and historical interactions is often fragmented across ERP, CRM, and other finance systems. This makes it difficult to obtain an end-to-end view, derive insights, and accurately predict cash flows. CFOs often struggle to get the "right data" for effective decision-making. 

• Customer experience impact: Errors, manual disputes, and disconnected systems lead to missed follow-ups and payment delays, negatively impacting customer experience.

Solving these systemic issues requires a fundamental reimagining of the process, moving beyond simple automation tools to an intelligent, integrated approach.

Reimagining I2C with AI and agentic automation: The new playbook

The traditional approach to I2C is no longer sufficient to address the complexities and demands of modern business. A new playbook is needed, one that moves from mere visibility to velocity, replacing fragmented processes with intelligent precision. This transformation hinges on the strategic application of Artificial Intelligence (AI) and Agentic automation.

The future of I2C requires systems that are:
Self-learning and self-optimizing: Continuously improving processes based on data and outcomes. 

• Agentic: Autonomous, yet human-aware, enabling intelligent decision-making while retaining human oversight. 

• Connected: Providing real-time, cross-system integration to overcome data fragmentation. 

  • Predictive: Shifting from reactive alerts to proactive, prescriptive actions. 

  • Scalable: Growing with business needs and increasing risk complexity.

Agentic AI: The core of transformation 
Agentic AI blends “autonomous decision-making with human-in-the-loop workflows” to deliver real-time, intelligent action across finance functions. This approach goes beyond basic Robotic Process Automation (RPA) by introducing smart, intelligent processes that can understand interactions, identify value, and manage the entire process intelligently. 

Cogentiq Invoice to Cash 
Cogentiq Invoice to Cash is an Agentic AI solution designed to optimize and transform the entire cash cycle. Built on 25 years of AI excellence, it is trusted by enterprises globally. Key features include: 

Predictive insights and automation: Cogentiq brings predictive insights, automation, and orchestration into the I2C process. 

Real-time KPI tracking: It tracks over 300 Key Performance Indicators (KPIs) in real-time. 

• Autonomous deduction classification: The system autonomously classifies deductions and resolves complexities using Generative AI (Gen AI). 

• Intelligent prioritization: Cogentiq intelligently prioritizes actions to reduce Days Sales

• Outstanding (DSO). For example,it re-orders collector worklists based on customer risk profile, invoice aging, and payment history 

• Intelligent nudges and alerts: It triggers intelligent nudges and alerts to prompt action at the right moment. It sends collectors real-time alerts when a payment commitment date is missed. 

• Network of specialized agents: The solution offers a network of specialized autonomous agents that are trained, tuned, and constantly learning, guided by an orchestrator who connects the dots across the I2C value chain. 

• Contextual insights: It empowers collectors, analysts, and finance leaders with contextual insights, drawing from historical interactions and multiple documents like contracts, purchase orders, and invoices. 

The Role of AI, RPA, and human-in-the-loop

The reimagined process involves an optimal combination of these elements: 

• Agentic AI and GenAI: These are capable of drafting all necessary communications, providing scripts and important information for customer interactions based on historical data and documents. They can also sort data, manage processes efficiently, and operate without human error. 

• RPA: Continues to handle simple, tool-based automation where required. 

• Human-in-the-loop: Humans are not replaced but are integrated where strategic decision-making, review, or approval is needed, or for handling exceptions and engaging with strategic customers. This ensures that while systems are efficient, they remain human-aware and capable of nuanced judgment. 

This combination enables a unified, smart system that understands the entire O2C process, identifies value, and manages operations intelligently, leading to a smooth and smart execution.

Agentic AI in action:

Collections management reimagined:
Collection management, a critical part of I2C, is fundamentally transformed by Agentic AI. Instead of reactive follow-ups, the process becomes proactive, intelligent, and tailored. 

The workflow
Agentic AI streamlines and optimizes collections through a series of intelligent steps: 

1. Open AR extraction and analysis: The process begins with the extraction of open AR invoices from ERP/AR modules. AI/ML models then analyze AR balances and past collection performance. 

2. Customer segmentation and risk assessment: Customers are segmented based on past payment performance and risk assessment. This allows for differentiation between high-risk customers, standard customers, and those likely to pay on time or with predictable minor delays. 

3. Prioritized collection worklist and strategy: A prioritized collection worklist is generated based on recommended strategies. Instead of contacting all customers post-overdue, Agentic AI identifies high-risk customers, allowing for early intervention (e.g., 10-20 days before an invoice is overdue). 

4. Automated communication and execution: AI/ML-based strategies facilitate automated actions such as sending Statements of Account (SOA), emails, dunning letters, and follow-ups. Auto-dialers can also be integrated. Generative AI agents can draft personalized communications. 

5. Contextual insights for collectors: Collectors are provided with comprehensive scripts and essential information for customer interactions, drawing from historical data, contract documents, POs, and invoices. This ensures informed and practical engagement. 

6. Dispute management and resolution: Agentic AI autonomously codes dispute and communicates them to the respective departments. It gathers required support documentation, facilitates review and research based on customer queries, and enables collaboration with other departments for resolution. Self-learning AI/ML models continuously work to reduce exceptions and improve dispute tracking. 

7. Customer docket creation: For third-party collections, Agentic AI can create customer dockets and upload them to respective portals. 

8. Prediction and forecasting: AI/ML models provide collection forecasts and provide predictions, enhancing the accuracy of cash flow predictions. Metrics like **Weighted Average Days Late (Waddle)** are calculated to historically assess how late customers have been, aiding in predictions. 

This reimagined process shifts from a reactive, manual effort to a proactive, intelligent, and automated system, significantly cutting down on the cash conversion cycle and reducing DSO. 

CFO's strategic role and compliance in I2C transformation

The evolving landscape of I2C means that the role of CFOs and finance leaders extends far beyond traditional accounts receivable management. They are increasingly becoming business partners, front-ending strategic decisions and driving transformation. 

CFOs as business partners 
Strategic decision-making: CFOs work closely with business units on strategic decisions, leveraging the I2C process to optimize cash management. This includes involvement in pricing strategies, payment terms, and collection approaches, not just post-mortem accounting. 

• Driving digitization: CFOs are instrumental in driving digitization and transformation initiatives across the I2C value stream, focusing on automation, AI adoption, and process excellence. 

• Agile systems: There is a critical need for all systems and processes to be nimble, adapting quickly to the changing needs of the market and customers. 

• Unified data perspective: Addressing data fragmentation is key. CFOs need to establish a truly unified I2C perspective across various systems like ERPs, CRMs, order fulfillment, and other finance platforms. This involves integrating data from internal systems with external sources, such as leading credit agencies (e.g., Dun & Bradstreet) for credit profiling and risk assessment. A data lake or direct API access can facilitate continuous data flow and insights.

Balancing efficiency, governance, and compliance 
While AI offers significant efficiency gains, maintaining governance and compliance is absolutely non-negotiable. 

• Augmented intelligence: AI should be viewed as "augmented intelligence" that enhances decision-making by consolidating insights from various sources and geographies. 

  Example: A CFO dashboard that integrates payment trends from the U.S., Europe, and APAC to surface early warning signals of potential collection risks. 

• Internal compliance: AI tools should assist finance teams in monitoring and enforcing internal compliance, such as unauthorized special payment terms, discounts, or advantages given to customers. 

  Example: Automatically flagging when a regional sales manager grants a 120-day payment term outside approved corporate guidelines. 

• External regulatory compliance: AI platforms need to incorporate knowledge of country-specific regulations related to invoicing, data handling, transaction taxes, and withholding taxes. Example: In Mexico and Brazil, where governments mandate electronic invoice formats and proof of payment receipts, AI can automatically validate that every invoice meets legal submission requirements before release.

• Evolving regulations: AI platforms are designed to be aware of evolving regulations and build compliance into their algorithms, learning and adapting as new legislations are introduced after consultations with trade bodies. This enables them to manage complex regulatory environments, like the varied invoicing and data handling rules across European countries.

  Example: Rapidly updating algorithms to comply with new e-invoicing standards across European countries, where formats, reporting timelines, and data retention requirements vary widely. 

• Human judgment: While AI can identify and flag non-compliant activities, human intervention remains crucial for applying judgment, especially in complex or ambiguous situations. The goal is to create a system that is robust and compliant, potentially even more so than manual processes, by continuously evolving and learning from diverse economic and regulatory landscapes.

  Example: A flagged transaction involving a cross-border rebate structure may require human finance leaders to weigh both local tax rules and broader commercial implications before approving or rejecting.

The future of World-Class I2C 

The vision for a truly world-class Invoice to Cash process in the next three to five years is highly efficient, deeply intelligent, and customer-centric, balancing automation with strategic human involvement. 

Key characteristics of the future I2C 

1. Minimal defects with robust exception handling: A world-class I2C system will operate with minimal defects, achieving near 6 Sigma levels of transaction processing (e.g., 99.9996% accuracy). Crucially, it will have a well-defined exception handling process, where human intervention is reserved only for these exceptions, rather than touching all transactions as is common today. 

2. Predictive and proactive capabilities: The future I2C will go beyond historical reporting to offer robust predictive capabilities. This includes forecasting DSO, identifying industries or customers entering rough phases, and dynamically comparing an organization's DSO against competitors. The ability to accurately predict cash flow from operations, potentially with an accuracy exceeding 92-95%, will significantly ease the CFO's role, allowing them to anticipate cash balances at the click of a button. 

3. Autonomous with human oversight: Systems will become "almost autonomous," leveraging AI agents to manage most processes. However, human intelligence will remain critical for strategic decision-making, engaging with strategic customers, and handling the inevitable exceptions. This ensures a "humanized" approach where customer relationships and nuanced judgments are preserved. 

4. Enhanced customer experience and NPS: Beyond faster collection, I2C will be a powerful tool for improving customer relationships and elevating the Net Promoter Score (NPS). Every interaction, from order placement and delivery to price negotiation, dispute management, and reconciliation, shapes the customer experience. A well-managed I2C process acts as a "silent revenue generator" by fostering customer satisfaction and loyalty, encouraging customers to become promoters for more business. 

In essence, the future of I2C is about creating intelligent, self-learning systems that integrate seamlessly across an enterprise, provide deep predictive insights, and free human talent to focus on strategic value creation and complex problem-solving, all while enhancing customer satisfaction and ensuring robust compliance. 

Conclusion 
The journey to an optimized Invoice-to-Cash process is no longer an optional endeavor but a strategic imperative. As organizations face critical challenges in working capital optimization and customer relationship management, the I2C process has unequivocally become a boardroom priority. The "old playbook" of manual, fragmented systems is obsolete, leading to billions in trapped cash, lost revenue, and operational inefficiencies.

The solution lies in a reimagined I2C process, one powered by the transformative capabilities of AI and Agentic Automation. By adopting solutions like Cogentiq Invoice to Cash, organizations can create a multi-millionbillion-dollar impact by leveraging predictive insights, automation, and orchestration. This involves unifying disparate data, automating repetitive tasks, and embedding intelligent decision-making, while always keeping humans in the loop for strategic oversight and exception management. 

CFOs and finance leaders are at the forefront of this transformation, evolving into business partners who drive digitization, ensure compliance, and strategically leverage I2C for enhanced liquidity and customer satisfaction. The future of I2C promises a world of minimal defects, accurate cash flow predictions, and deeply engaged customers, truly redefining finance operations.