Invoice-to-Cash (I2C) is the full process from invoice creation to receiving and recording payments. When optimized, it helps your business reduce manual work, improve cash flow, and deliver a better customer experience.
While the Invoice-to-Cash process varies across industries like telecom, energy, and insurance, it typically follows five key steps. Below, we walk through each stage, how to optimize it, and the business impact of doing so.
The process begins with creating clear and accurate invoices that customers can easily understand. All essential details - such as invoice numbers, customer and company information, and payment terms - should be clearly outlined.
Tip - The more manual handling in this step, the greater the risk of errors, which creates unnecessary administration for you - and frustration for your customers. Use digital tools to automate invoice creation as much as possible.
Once invoices are created and verified, the next crucial question arises - How can you ensure they reach the right recipient on time and with maximum precision?
At this stage, invoices are sent to customers through their preferred channels, such as email, SMS, or traditional mail. Even customers on direct debit benefit from a notification about upcoming withdrawals.
Tip - Reduce the number of paper invoices by making it easy and attractive for customers to switch to digital invoicing or direct debit. Provide clear, actionable information - such as a QR code on the invoice - and a process that can be completed directly via mobile.
No matter how customers pay - whether by card, direct debit, Swish, or bank transfer - you need a reliable way to match payments with invoices. This also applies to handling OCR errors and other discrepancies.
Tip - Smart digital tools for efficient accounts receivable management include automated invoice matching, ensuring payments are correctly assigned - even if an OCR number contains errors.
When payments do not match invoices correctly, or when they are late, the next critical step is - How do you handle this without damaging customer relationships?
A key part of the I2C process is defining a clear strategy for late payments. Should you send one or multiple reminders, or escalate directly to collections if a payment is overdue?
Tip - Tailor your collection strategy based on customer history and behavior. Customers who have missed a payment once can be guided into a "softer" flow, while habitual late payers require stricter measures. Use digital tools to automate these flows based on predefined triggers and continuously analyze data to optimize processes.
The final step in the I2C process is to log all payments, invoices, and discrepancies in your accounting system, ensuring full transparency and compliance.
Monitor your company's financial health.
Make business decisions based on relevant data.
Be better prepared for audits.
Tip - Continuously and systematically collecting and analyzing data from your invoicing, payment, and collection processes provides valuable insights that help your business achieve key objectives. Understanding customer payment preferences and reactions to various strategies helps prevent late payments, increase satisfaction, and reduce churn.
Further reading - Learn more about how data from your invoice-to-cash process can support your business goals in our article, "4 ways to optimize your payment flows with data-driven insights."
Here are some common challenges in the I2C process and their impact on efficiency and profitability.
Despite recent advances in digitalization, many companies still rely on manual workflows in parts of their I2C operations. This leads to inefficient administration, unnecessary time and resource consumption, and an increased risk of errors.
Lack of proper follow-up is a common issue that can result in cash flow problems. Many companies also lack the tools needed to take a holistic approach to payment delays – or to prevent them from occurring in the first place.
Large organizations often operate complex IT infrastructures with a mix of legacy systems, custom-built tools, and external applications. This makes it difficult to connect ERP, CRM, and billing systems in a way that enables automation and optimization. System fragmentation also limits scalability and growth – especially when entering new markets.
The payment experience plays a bigger role in overall customer satisfaction than many companies realize. Frustrations like unclear invoices, poor communication around price changes, or complicated direct debit setup processes can damage trust and weaken the customer relationship.
Managing your company’s accounts receivable is a critical - but often highly time-consuming - part of the Invoice-to-Cash (I2C) process. Even if parts of the process are digitalized, manual reconciliation is often still required due to data coming from various sources and systems that do not communicate seamlessly with each other.
Outsourcing accounts receivable management to an external partner can seem appealing. Some companies choose to sell their invoices to a factoring company, which then assumes the claim and takes responsibility for collecting unpaid invoices from customers.
The advantage of this approach is that it frees up internal resources, allowing your team to focus on more strategic work. However, the downside is that you also outsource a vital part of your customer relationships to a third party whose business model and financial incentives may not align with your brand and communication strategy.
Additionally, any customers who are dissatisfied with how the factoring company handles collections will direct their frustration toward your business - not the third-party provider.
To reduce the administrative burden of managing accounts receivable while maintaining control over customer relationships, automation tools are a valuable solution. By automating key processes, you can establish clear rules for different scenarios and set up workflows that trigger the right actions at the right time during the I2C process.
Automating accounts receivable management leads to significant improvements in how your company handles payments and cash flow. Here are some of the advantages:
More efficient workflows - AI-powered solutions can streamline processes by automatically sending reminders, monitoring invoices, and detecting discrepancies in real time. This reduces the need for manual, time-consuming tasks like invoice matching and tracking late payments.
More time for strategic work - Automation significantly reduces the workload for your team, allowing them to focus on more value-driven and strategic initiatives.
Improved cash flow - By ensuring faster payments and structuring follow-ups more effectively, automation can enhance your company’s liquidity.
Stronger customer relationships - AI-driven reminders can be personalized based on customers’ payment history, helping to foster trust and increasing the likelihood of timely payments.
A complete financial overview through smart integrations - By integrating automated accounts receivable solutions with other business systems, such as ERP and CRM platforms, you gain a holistic view of your company’s financial situation. This makes it easier to make informed decisions and optimize financial planning.
In summary, automation is more than just an efficiency booster - it is a strategic tool that helps your company manage both current and future financial challenges. By implementing automated workflows, you not only improve operational efficiency but also create a scalable foundation for sustainable growth.
As you digitize and automate your company’s I2C process, you will also be able to collect more data from each stage. This, in turn, enables you to train AI and machine learning models to refine your payment and communication flows. Why not set goals based on KPIs that matter to your business and continuously optimize for better and better results? These goals could range from accelerating payments to reducing churn - or even cutting down on paper usage from postal invoices.
Further reading - Mobile operator Hallon aims to reduce debt levels in society. Get inspired by how they reduced their collection cases by 80% by experimenting their way to a customer-friendly dunning process that both creates business value and prevents customer churn.
To build an efficient Invoice-to-Cash (I2C) process, the first step is to digitalize the entire accounts receivable workflow. By automating key tasks such as invoicing and payment tracking, your business can shorten payment cycles, improve cash flow, and save valuable time.
I2C automation is also a key component of broader financial process automation. With the right solutions, you can streamline collections, ensure smooth payment handling, and create more predictable cash flow forecasts. Additionally, automation frees up resources for your team, allowing them to focus on strategic initiatives instead of manual tasks.
Companies that implement automation in their I2C processes benefit from:
Real-time integrations – API solutions connect your ERP and CRM systems to enable seamless workflows without manual data entry.
Automated payment matching – AI-driven automation eliminates the need for manual reconciliations and shortens payment cycles.
Predictive analytics – AI and machine learning models, trained on your payment data, help identify customers at risk of late payments and enable proactive intervention.
To ensure that your I2C optimizations support your business goals, it’s crucial to continuously measure the right KPIs. Here are three key metrics to monitor:
Days sales outstanding (DSO) – A lower number of days between invoicing and payment is a strong indicator of improved cash flow.
Matching rate – An increasing percentage of payments automatically matched to invoices signals reduced administrative workload.
NPS (Net Promoter Score) – Customer satisfaction is influenced by many factors, but smooth payment processes play a key role - especially for companies with "silent" products where billing is one of the few recurring customer touch points.
By focusing on these metrics and leveraging automation, your business can optimize cash flow, enhance customer experience, and reduce operational inefficiencies.
By optimizing your Invoice-to-Cash process with automation and AI-driven solutions, you can enhance cash flow forecasting and minimize liquidity risks. Automation ensures that reminders are sent on time, payments are efficiently tracked, and discrepancies are quickly resolved. This not only increases efficiency but also makes it easier to predict cash flow, giving you greater control over your company’s financial health.
With clearer and more reliable forecasts, you can plan your operations more strategically and reduce the risk of cash flow shortages. Implementing automation in your I2C process is, therefore, an investment in your company’s long-term financial stability.
Data-driven insights not only improve the accuracy of your cash flow forecasts but also refine your credit risk analysis, helping you assess the payment capability of new customers. This proactive approach reduces the risk of late payments, strengthens cash flow stability, and enhances the overall customer experience.
Sector Alarm uses Billogram’s platform to optimize its Invoice-to-Cash management. After implementing the platform in Sweden, Norway, and Finland, the security company has seen impressive improvements in key KPIs, including:
Increased digital distribution (96% in Norway, 85% in Sweden, 70% in Finland).
Reduced cost per invoice.
More customers paying on time.
Fewer payment reminders (and collection cases).
98-99% payment rate after 60 days in all three countries.
Bjørnar Bukholm, former Group CFO at Sector Alarm, commented on the transformation:
“It has become easier for our customers to receive, understand, and pay their invoices. More customers paying on time has improved our cash flow. We have also more than halved the number of reminders we send out, which has reduced costs for us and created a better experience for our customers.”
reduction in customer service cases
more invoices paid on time
reduction in debt collection rates
Contact us today to discuss how we can help your business!