In India, a percentage of us need to pay a share of our income to the government. This is known as income tax. These funds are used for administrative and development purposes.
Taxpayers are always looking for opportunities to reduce their tax liability. Tax planning is necessary if you are looking for ways to optimise and reduce your tax burdens legally. It will help you improve your financial health and add to your savings.
But what is tax planning and how can you save on taxes while remaining legally correct? In this blog, we’ll talk about different ways in which you save taxes and also share some tax-saving investment options.
What is tax planning?
It is a process of planning your finances in a way that reduces your tax liability while remaining compliant with tax laws. It involves analysing your income, expenses, investments, and other relevant financial areas to identify opportunities and strategies.
The goal of this process is to reduce your tax liabilities by optimally using tax rebates, exemptions, and benefits. With smart tax planning strategies 2024, you can:
Reduce overall tax liability
Increase savings and investments
Accomplish long-term financial goals
Comply with tax laws and avoid penalties
Top 10 tax savings instruments and strategies
There are several instruments that you can use to your advantage to maximise tax savings. Here is a list of some of the most popular tax-saving strategies:
PPF
The Public Provident Fund (PPF) is a popular investment tool for tax savings. To start, you need to open an account PPF account at either your nearest bank or at the post office. Contributions to this account earn you a guaranteed rate of interest. Under Section 80C, you can claim up to Rs.1.5 lakhs of tax deduction in a financial year.
Life insurance plan
It is a great tool for not only tax exemptions but also securing your family’s future. Policyholders are provided tax benefits on the premiums paid. Just like a PPF, a life insurance plan under Section 80C offers up to Rs.1.5 lakhs of deduction.
Fixed deposits
Tax saver fixed deposits can fetch your tax deductions under Section 80C. You can claim up to Rs.1.5 lakhs of deduction. Such FDs have a lock-in period of 5 years. However, TDS applies to the interest earned. The interest rate generally ranges between 5.5% to 7.75%.
ULIP
Unit-linked insurance plans are long-term investment options that allow you to choose debt funds, equity funds, or both. You have the freedom to switch between funds according to your financial goals. Investing in ULIPs allows you to save taxes under Sections 10(10D) and 80C.
Senior Citizen Savings Schemes
The SCSS is a tax-saving tool specifically designed for senior citizens. It offers tax benefits under Section 80C of up to Rs. 1.5 lakhs. Senior citizens invest in this scheme and their investments are deducted from their taxable incomes. This helps to reduce their overall tax liability.
National Saving Certificate (NSC)
It is a fixed deposit scheme offered only by the post office. One advantage of NSC over bank fixed deposits is that it offers higher returns for tax saving options under Section 80C. It also has a lock-in period of a minimum of 5 years. The longer the period you invest, the higher returns and tax benefits you will earn.
New pension scheme
Any Indian citizen between the age group of 18 to 60 can participate in this scheme. It has a low-cost structure and is flexible, making it a popular tax-saving instrument. In this scheme, you need to invest at least Rs. 6000 annually – paid either totally or in instalments throughout the year. You can claim benefits up to Rs. 1.5 lakh under Section 80C.
Tax-saving mutual funds
Also called Equity Linked Savings Scheme (ELSS), these mutual funds qualify for tax benefits. Such mutual funds invest in stock markets and are ideal for investors with medium to high-risk appetites. Investments towards this scheme are covered under Section 80C up to a maximum of Rs. 1.5 lakhs.
Health insurance
These medi-claims offer tax benefits under Section 80D. Senior citizens get tax benefits for insurance premiums of up to Rs. 20,000 and others are offered Rs.15,000.
Capital guarantee plans
These tax-saving investment options return your initial capital at maturity, offering financial security. This low-risk investment option returns around 9 to 15% p.a. You can claim tax benefits under Section 80C and 10(10D).
Tips to effectively save tax bills
Most people are not aware of areas where they can claim tax benefits. Here are a few tax tips 2024 to reduce your tax liabilities:
You can tax benefits of a home loan of up to Rs. 1.5 lakhs on the principal amount and Rs. 2 lakhs on the interest paid.
Invest in NPS and EPF for retirement. Investment increases your deduction under Section 80C.
For a maximum of Rs. 10,000 in your savings account, interest earned is tax-free.
NRIs who have an NRE bank account get interest on their fixed deposit amounts which is tax-free income.
Summing up
Every year, paying taxes takes up a large chunk of your income. Hence, taxpayers are always searching for options to legally reduce their tax liability. You can maximise tax savings using the tax management tools and strategies listed above.
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Frequently Asked Questions
Why should I plan my taxes?
Planning your taxes efficiently can help you contribute to your retirement plans, make tax deductions, and take advantage of tax credits. You can claim tax returns while being legally correct.
What are some types of tax planning methods?
Even though the goal of the process is straightforward, there are many ways you can approach it. Some popular tax planning methods are – purposive tax planning, structural tax planning, permissive tax planning, etc.
Building and maintaining a stable economy is a challenge for any nation at any stage of development. It requires a combination of economic strategies based on the circulation of money in the economy. Employment ratio, profits, investments, and the population’s spending intent are major factors influencing these strategies. Monetary policy is a key tool for governments and central banks to manage economic stability and growth. It directly influences interest rates and, in turn, affects broader economic conditions.
This guide aims to break down the various monetary policy effects on a nation’s economic growth.
What is monetary policy?
Monetary policy involves measures implemented by a central bank to regulate the money supply and its rate of expansion within an economy. These efforts focus on achieving key macroeconomic goals like curbing inflation, reducing unemployment, and promoting economic development. Central banks like the Federal Reserve in the U.S. or the Reserve Bank of India use various tools to implement these policies.
Monetary policy can be broadly classified into two categories:
Expansionary Monetary Policy: This policy increases the money supply to stimulate economic activity.
Contractionary Monetary Policy: This policy decreases the money supply to control inflation and reduce overheating in the economy.
Aspiring CFAs can enrol in a CFA course to better understand the complexities of monetary policy, which is crucial for making informed investment and advisory decisions.
Key Tools of Monetary Policy
Central banks use several tools to implement monetary policy, each influencing interest rates and economic activity:
Open Market Operations (OMOs): OMOs involve buying or selling government bonds to control liquidity in the market. When a central bank buys bonds, it injects money into the economy, lowering interest rates. Conversely, selling bonds reduces the money supply and raises interest rates.
Discount Rate: The discount rate is the interest rate at which commercial banks borrow from the central bank. Lowering the discount rate encourages banks to borrow more, increasing the money supply and lowering interest rates. Raising the discount rate has the opposite effect, reducing borrowing and raising interest rates.
Reserve Requirements: The reserve requirement is the portion of deposits that commercial banks must hold in reserve and not lend out. Reducing reserve requirements allows banks to lend more, increasing the money supply and reducing interest rates. Increasing the reserve requirements tightens the money supply and raises interest rates.
Impact of Monetary Policy on Interest Rates
Interest rates are one of the primary channels through which monetary policy influences the economy. Here’s how the process works:
1. Influence on short-term interest rates
Central banks control short-term interest rates directly through their policy rates (such as the Federal Funds Rate in the US). When the central bank lowers its policy rate, it becomes cheaper for banks to borrow money. This, in turn, leads to lower interest rates for consumers and businesses, stimulating borrowing and spending.
2. Influence on long-term interest rates
While central banks have less direct control over long-term interest rates, their policies still influence them. Lower short-term rates generally signal lower future inflation expectations, which can drive down long-term interest rates as well. This makes long-term borrowing, such as for mortgages or business investments, more affordable.
3. Relationship between interest rates and inflation
There is an inverse relationship between interest rates and inflation. When interest rates are low, borrowing increases, leading to higher consumer spending and business investment, which can drive up inflation. On the other hand, higher interest rates discourage borrowing, reducing spending and inflation pressures.
How Monetary Policy Drives Economic Growth
Monetary policy can have profound effects on economic growth by influencing various components of the economy. Here’s a closer look at the mechanisms through which it works:
1. Stimulating business investment
Lower interest rates reduce the cost of borrowing for businesses. This encourages companies to invest in new projects, expand operations, and hire more employees. Increased business investment can drive economic growth by boosting productivity and increasing the capacity of the economy.
2. Encouraging consumer spending
When interest rates are low, consumers find it cheaper to borrow money, whether for mortgages, car loans, or credit card spending. Increased consumer spending stimulates demand for goods and services, which can lead to higher economic output.
3. Reducing unemployment
Expansionary monetary policy, characterised by lower interest rates and an increased money supply, can help reduce unemployment. Lower borrowing costs make it easier for businesses to expand and hire more workers. Higher employment levels, in turn, lead to greater consumer spending, further fueling economic growth.
4. Managing inflation
Inflation management is a critical aspect of monetary policy. By adjusting interest rates, central banks can either stimulate economic growth (if inflation is low) or cool down an overheating economy (if inflation is too high). Lowering interest rates encourages spending and investment, which can raise inflation. Conversely, raising interest rates curbs excessive demand, helping to bring inflation under control.
The Risks of Poorly Managed Monetary Policy
While monetary policy can be a powerful tool for stabilising the economy, it carries risks if mismanaged:
Hyperinflation
If a central bank implements excessively expansionary policies and keeps interest rates too low for too long, it can lead to hyperinflation. Hyperinflation occurs when inflation spirals out of control, eroding the value of money and causing economic instability.
Economic Recession
On the other hand, overly contractionary monetary policy, characterised by high interest rates, can stifle economic activity and lead to a recession. When borrowing becomes too expensive, businesses and consumers may reduce spending, leading to lower demand, lower production, and higher unemployment.
Asset Bubbles
Expansionary monetary policy can sometimes lead to asset bubbles if cheap credit leads to speculative investments in markets such as housing or stocks. When these bubbles burst, they can lead to severe economic downturns.
The Role of Expectations in Monetary Policy
Expectations play a critical role in how monetary policy impacts interest rates and economic growth. If businesses and consumers expect future inflation, they may adjust their spending and investment behaviour accordingly. Central banks, therefore, closely monitor inflation expectations and often communicate their monetary policy intentions to influence these expectations.
For example, if a central bank signals that it plans to raise interest rates in the future to combat inflation, businesses might reduce borrowing and investment in anticipation of higher borrowing costs. Consumers might also curb spending, expecting higher prices or more expensive credit.
Conclusion
Monetary policy is crucial for policymakers to strike the right balance to ensure long-term economic stability. Businesses must correctly analyse and interpret these policy changes, interest rates, and inflation trends to adjust their financial moves. This will enable them to take the lead in the race instead of reeling from its effects.
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Frequently Asked Questions
Give an example of a monetary policy.
The best illustration of monetary policy is the RBI’s Repo Rate. The RBI increases the repo rate to control inflation, making borrowing costlier for banks, which reduces the money supply and helps stabilise prices.
How often does monetary policy change?
Monetary policy typically changes several times a year, often quarterly or at specific intervals, depending on economic conditions and central bank decisions to manage inflation and economic growth.
What is the golden rule of monetary policy?
The golden rule of monetary policy suggests that governments should borrow only to fund investment and not current spending. This ensures sustainable economic growth and financial stability.
What are the different instruments of monetary policy?
Some of the instruments of monetary policy are the bank rate, cash reserve ratio, repo rate, reserve repo rate, and statutory liquid ratio.
When I meet people who are curious about building a CMA Career, I often sense a similar pattern. They know the credential is respected. They hear about global mobility, sharper analytical skills, and strong roles in finance. Yet they rarely see the full landscape that shapes how a CMA grows over time. I want to discuss that landscape in a way that speaks to students, mid-career professionals, career switchers, and even senior leaders who want to sharpen their strategic finance lens.
The world of management accounting shifts fast. Businesses expect finance talent to solve problems with numbers, operations, technology and foresight. A CMA stands right in the middle of that expectation.
The learning from the US CMA course pushes you to see a business as a living system. You start connecting cost flows, decisions, risks, and long-term plans. That is why a CMA Career remains relevant even as tools, markets and industries change.
As you read further, I will break down how CMA career options unfold in real workplaces, the skills that grow with each stage, the roles that open up across industries, and how the qualification shapes long-term financial leadership potential.
You will also see the salary patterns, job pathways, and practical examples that show how the CMA translates into daily decision-making. By the end, you will have a clear view of what this journey looks like from start to senior roles, and what it can mean for your future in finance.
Understanding CMA as the Foundation of Your Finance Journey
A strong CMA Career starts with a simple understanding ofwhat is CMA and how it changes the way you interpret financial information. The certification offered by IMA blends analytics, planning, cost insights, and strategic thinking into one learning track. It is designed for people who want to work beyond traditional accounting roles and contribute to business decisions at a deeper level.
CMA at a Glance
This table offers a simple snapshot of what the CMA course stands for, what it covers, and why it supports a strong CMA Career pathway for learners and working professionals.
2 Papers: Part 1 (Financial Planning, Performance, Analytics) and Part 2 (Strategic Financial Management)
Eligibility
Bachelor’s degree (can enrol as a student and submit the degree later), plus a work experience requirement for certification
Exam Duration
Each exam is 4 hours with MCQs and essay scenarios
Course Duration
Typically, 6 to 9 months of preparation, depending on the schedule
Career Relevance
Builds skills for roles in FP&A, corporate finance, cost analysis, management accounting, and strategic decision making
Global Recognition
Accepted in 170+ countries and valued across multinational corporations
To understand this better, I’ll break the journey into three layers. These layers form the foundation for every role and decision you take as a CMA. They also shape the CMA career opportunities that open over time.
1. The Market Forces That Shape a CMA Career
Every profession evolves with its environment. For CMAs, the environment is a blend of digital transformation, global finance standards, increasing regulation, and data-driven decision-making practice. This pattern reveals a simple truth. Companies reward the blend of analytical and managerial ability. They treat CMAs as drivers of clarity.
Many candidates still wonder, is CMA a good career for the next decade? I believe it is, for one reason. The role keeps expanding. A CMA today works closely with decision makers. They advise on pricing, supply chain, costing, capital allocation, profitability models, and scenario plans. These tasks demand financial discipline and strategic understanding. That blend plays a major role in shaping the scope of CMA USA roles.
A CMA Career also thrives because companies want professionals who understand risk. Businesses face unpredictable shifts. Currency fluctuations, rising input costs, new competitors, talent shortages, regulatory changes and sudden technology jumps. Each shift hits margins. A CMA steps in to build cost structures that survive these shocks. The ability to solve using numbers and logic is a central driver of CMA career prospects.
2. Skill Foundations Behind Strong CMA Career Prospects
People often think the US CMA course is only about costing and financial analysis. That is a narrow view. The learning builds a system of thinking. This system shapes the CMA jobs in a powerful way. Let me break the core skill foundations into simple, relatable ideas.
a. Decision Framing
A CMA learns how to frame a decision. I do not only look at numbers. I check the structure of a problem. I map the drivers behind it. Most business issues are not only financial. They are operational and behavioural too. This wider lens allows a CMA to support leadership teams with clarity.
b. Quantitative Logic
The numbers in management accounting are not random. They reveal patterns. A CMA develops the ability to spot these patterns quickly. For example, when sales rise, but cash flow stays tight, a CMA looks at receivables cycles, production delays, or discounting patterns. This ability makes your career after CMA both versatile and stable.
c. Forecasting
Businesses move on forecasts. CMAs get trained to build them with precision. I like to think of forecasting as storytelling with numbers. You take past trends, insert new assumptions and convert them into realistic expectations. This is one skill that keeps your CMA career future-ready.
d. Ethical Reasoning
IMA’s ethics framework is a major part of the training. Ethics protects the quality of decisions. It helps companies build trust. A finance leader without ethics cannot grow long-term. This is one of the most underrated CMA Benefits.
e. Technology Adoption
Automation is changing finance. A CMA learns to use analytics tools, dashboards, ERP systems, and data modelling platforms. These tools allow faster analysis and easier reporting. This is why global firms continue to invest in CMAs for new-age finance roles.
3. Industries That Create Strong CMA Career Opportunities
A CMA Career does not restrict you to one industry. The skill set travels well across sectors. Each industry has its own flavour of costing, risk and financial planning. This variety opens wide career options.
Manufacturing
The roots of management accounting sit deep in manufacturing. If you enjoy understanding how products are made, this sector builds a strong foundation. Costing, variance analysis, overhead allocation and capacity planning remain major tasks. The CMA career prospects in manufacturing stay steady because companies always aim to improve unit economics.
Technology
Tech firms operate with rapid change cycles. A CMA helps them evaluate new features, pricing strategies and expansion plans. The focus is often on managing the cost of scaling. Forecasting and decision modelling become daily tasks.
Banking and Financial Services
This sector values risk analysis and portfolio-level thinking. A CMA contributes to budgeting, planning, regulatory reporting and risk scenarios. The roles link financial analysis with decision support.
Consulting
If you enjoy solving diverse business problems, consulting creates interesting CMA career opportunities. Clients expect you to diagnose issues quickly. The variety strengthens your judgment.
Retail and e-commerce
These businesses run on thin margins. A CMA monitors pricing, supply chain costs, returns management and promotion effectiveness. The insights help companies stay profitable in competitive markets.
Healthcare
Hospitals face complex regulations, insurance cycles, and cost structures. CMAs bring control and transparency. They set up dashboards for doctors, departments, and supply teams.
Shared Services and GCCs
India has become a hub for global capability centres. These centres need stable financial planning talent. The scope of CMA USA has grown here due to the global nature of reporting and analytics.
People often assume that only commerce graduates move into a CMA Career, but the entry pathways are far wider. The qualification is designed to help diverse backgrounds build a shared foundation in cost management, planning, and performance analysis, which is why the CMA ecosystem attracts such a wide mix of professionals, as illustrated below:
A Simple Way to Visualise CMA Career Options
Below is a table that I often use when explaining the spread of roles. It helps candidates see how their skills convert into real positions. This table also shows how the CMA adds value to your career as your experience grows.
The table maps career stages to common roles and the type of responsibilities that define growth.
Corporate Controller, Director of Finance, CFO Track Roles
Enterprise strategy support, capital planning, stakeholder communication
This progression is not fixed. Many CMAs pick unique journeys. Some join startups. Some join Big 4 consulting teams. Some build domain expertise and move into leadership faster. This flexibility is what makes a CMA Career resilient.
Did You Know?
CMAs report 21% higher median total compensation than their non-certified peers. (Source: IMA Global Salary Survey)
The Multi-Level Role Structure in Modern CMA Careers
A CMA Career does not have a single fixed ladder. It looks more like a set of clusters. Below is a breakdown of how the career after CMA evolves through typical internal steps.
Role Cluster 1. Analytical Foundations
These roles work closely with data and processes.
Financial Analyst
Cost Analyst
Budget Analyst
Pricing Analyst
Professionals in this stage sharpen the art of clear measurement. They create models, reconcile data, and build scenario views. These are the years when many people develop strong habits that stay with them.
Role Cluster 2. Planning and Operations
These roles are where strategic insight begins to grow.
FP and A Specialist
Operations Accountant
Plant Controller
Business Analyst
Planning teams need someone who can hold the story behind numbers. A CMA uses concepts from the US CMA course to produce meaning, not just figures. This is where CMA jobs in India begin to widen.
Role Cluster 3. Leadership and Control
These roles lead teams and shape big decisions.
Finance Manager
Cost Controller
Divisional Controller
Risk and Governance Lead
People in these positions gain a seat at the leadership table. Their skill lies in turning what looks complex into a simple direction. This stage offers a strong CMA career scope for professionals ready to lead teams.
Role Cluster 4. Strategic and Executive Roles
These roles include decision makers at the top.
Head of Finance
Strategy Lead
CFO Track Roles
Global Controller
The CMA career path can move into senior leadership because financial clarity is a key requirement for long-term business stability. CMA salary also depends on the experience level and can be compared with the lens of verified vs non-certified peers.
Understanding Career Progression Through a Practical Table
This table shows how skills grow at each stage and how responsibilities expand over time. The description below prepares the reader for what to expect.
How CMA Skills Translate Into Career Stages
Stage
Skill Focus
Typical Output
Career Impact
Early Analyst
Measurement and cleanup
Reports, reconciliations, spreadsheets
Builds reliability
Mid Planner
Forecasting and modelling
Plans, budgets, dashboards
Influences decisions
Control Lead
Governance and discipline
Policies, metrics, control systems
Strengthens operations
Strategic Leader
Direction and clarity
Long-term plans, board inputs
Shapes business goals
Professionals often move across stages at different speeds. What remains common is the understanding that clean financial thinking is valuable across every team. To give you a better perspective on the depths of roles, this video explains the value of CMA as a global certification:
How the Scope of CMA USA Expands Career Reach
Many professionals search for roles across borders. A CMA does not guarantee a job abroad. It makes the profile relevant across global teams and enhances readiness for multinational settings.
The value comes from three practical strengths.
Strength 1 | Standardised Skills: Companies across countries know the CMA curriculum. They know what a candidate can deliver. This helps with mobility and also makes remote roles possible.
Strength 2 | Cross-Functional Fit: A CMA works closely with operations, supply chain, technology, or marketing teams. That gives global managers confidence that the hire can adapt to different cultures.
Strength 3 | Financial Storytelling: Global firms need professionals who can explain numbers without jargon. This is one of the largest CMA career opportunities today because companies run teams across several locations.
1. Case Style Examples for Clarity
These small illustrations help readers picture the skills in action.
Example: Manufacturing Planning A new FP&A analyst joins a plant finance team. The plant manager faces rising input costs. The analyst builds a simple model that shows how a small change in batch size reduces cost. The manager adjusts operations. Margins improve. This is a typical win for someone building a CMA Career in manufacturing.
Example: Technology Product Finance A tech firm wants to introduce a new subscription plan. A CMA maps the revenue and cost cycles. The team uses the insights to adjust pricing. The launch meets targets. This is common in US CMA career paths linked to digital firms.
Example: Retail Inventory Review A retail chain struggles with stockouts. A CMA studies SKU-level patterns. They discover that one category drives most misses. The buying team adjusts orders. Sales improve. This is how CMA career options appear in commercial teams.
Compensation reflects how organisations value strategic finance talent. The ranges discussed in the video show how salaries evolve from analytical positions into decision-support and leadership tracks.
The Middle Career Pivot in a CMA Career
A CMA can move from a pure finance role into planning or strategic work. This pivot often happens between years three and seven. It allows professionals to break out of low-growth roles. Many mid-career professionals use the US CMA course for this pivot. It offers confidence and structure.
Some people shift from accounting into analytics. Some enter the supply chain. Others move into global reporting. The common thread is the ability to read information with discipline and precision.
Below is a short list of pivot-friendly skill sets.
Skills That Support Mid-Career Transitions
Mid-career professionals often reach a point where technical experience alone no longer drives growth, and this is where CMA-aligned skills create the bridge to strategic and higher-impact roles.
Ability to map cost flows
Comfort with large data sets
Understanding of process gaps
Clarity in business storytelling
Steady forecasting habits
These skills open doors in many companies. They also support remote and hybrid roles.
Did you know?
Many Fortune 500 firms list CMA as a preferred credential for planning and analysis roles. These companies operate in complex, fast-moving environments, so they prioritise professionals who can link financial data to business decisions with clarity.
Role Transition Table for 5 to 10 Year Window
This table helps you visualise the evolution of responsibilities.
Years of Experience
Typical Roles
Key Contribution
Type of Growth
0 to 3
Analyst roles
Clean data, fast models
Skill building
3 to 6
Planning roles
Forecasts, budgets, insights
Influence building
6 to 10
Control or managerial roles
Governance, leadership, systems
Team building
10 plus
Strategic roles
Vision, long-term plans
Enterprise impact
The Role of Ethics and Decision Support in CMA Careers
Ethics is often underestimated. A CMA cannot function without a strong ethical grounding. Businesses trust professionals who protect shareholder value. They need people who question assumptions and use sound judgment.
CMA skills teach you to apply ethical standards in daily work. They know how to avoid conflicts of interest. They know how to structure reviews. They know how to protect sensitive information. These habits help them earn seats in important rooms.
Before completing the CMA course duration, most skills sit in separate pockets. As you go through the CMA modules, those pockets start connecting. After earning the credential, this way of thinking becomes natural, helping you link data to decisions and contribute with confidence to long-term planning.
CMA Career Options Across Remote Work Models
Remote work has created new forms of CMA career opportunities. Many global teams run analytics, reporting, and planning work from India. A CMA brings discipline and reliability to these roles. A few patterns have emerged.
Remote FP&A Pods: Companies hire analysts to support monthly closings and forecasts from remote locations.
Controller Support Pods: Firms set up small teams for reconciliations, audits, and controls.
Project-Based Models: Short-term assignments for pricing, modelling, or business case reviews.
These pathways show that the CMA career path can support flexible and family-friendly work models.
Understanding Value Creation in a CMA Career
A CMA creates value by improving clarity. They show teams where money comes from and where it goes. They help leaders understand cost structures. They support growth decisions. This is true across small and large companies.
The simple loop of measure, interpret, guide, and follow through defines the CMA mindset. It is one of the core CMA Benefits that stays relevant throughout the career.
Where Imarticus Learning Fits in the Journey
Learners who want to build a strong US CMA career need structured preparation. Imarticus Learning provides live classes, doubt clearing, simulation tests, and job readiness support. These elements help professionals become industry-ready.
Industry-Led US CMA Program: The US CMA program at Imarticus is industry-led and co-created with KPMG in India, offering real-world case studies and a joint certification that gives your resume a competitive edge.
Gold Learning Partner of IMA, USA: Imarticus Learning is a Gold Learning Partner of the Institute of Management Accountants (IMA), USA, which ensures alignment with global industry standards and high-quality program delivery.
Expert Faculty and Structured Teaching: The course includes monthly webinars, live sessions with industry practitioners, and structured teaching designed to build strategic financial skills, performance management capabilities, and analytical judgment.
Money-Back Guarantee: Imarticus offers a money-back guarantee, refunding 50% of the course fee if you do not pass the US CMA exams; a strong confidence signal in the quality of training and support.
Internship Opportunity with KPMG in India: High-performing learners become eligible for a hands-on internship with KPMG in India, a rare opportunity that brings professional exposure and global working experience.
Pre-Placement Bootcamp & Career Assistance: Students gain access to a pre-placement bootcamp, resume support, interview training, and assured interview opportunities with leading firms, making the transition into a CMA Career smoother.
This section addresses the most frequently asked questions learners and professionals ask when exploring a CMA Career. It brings clarity to job roles, salary expectations, exam difficulty, and long-term growth possibilities so you can understand how the CMA pathway supports strong, future-focused career decisions.
What jobs can I get after CMA?
A CMA Career opens doors across finance, accounting, strategy, and operations. After completing the US CMA course, you can work in roles that shape planning, reporting, forecasting, performance measurement, process controls, and cost optimisation. These responsibilities sit at the heart of high-impact positions such as Financial Analyst, Management Accountant, Cost Strategist, Business Planner, Budget Specialist, Plant Controller, and FP&A Analyst. For structured guidance for these roles, Imarticus Learning provides clarity and training aligned to industry expectations.
Is CMA a good career choice?
For anyone who wants a finance profession built on analysis, structured thinking, and company-wide visibility, a CMA Career is a strong choice. It suits people who enjoy reading business scenarios, interpreting numbers, and joining the dots between commercial actions and financial consequences. The role of a CMA blends financial control with decision impact, which means your work reaches managers, business heads, and even board-level teams. There is also strong global mobility because the CMA credential is recognised across 170+ countries.
Can CMA earn 1 lakh per month?
Reaching earnings of 1 lakh per month is a realistic milestone within a mature CMA Career, especially for those who build experience in FP&A, costing, controlling, and business partnering roles. Salaries vary by industry, city, and job complexity, yet the earning graph tends to rise steadily because CMAs manage decisions that influence budgets and profitability. As experience grows, performance responsibilities expand, and salary growth follows.
What does a CMA do?
A CMA Career revolves around turning business numbers into direction, clarity, and action. CMAs analyse cost structures, build forecasts, evaluate risks, assess investments, and prepare management reports that shape decisions. In many organisations, CMAs act like the bridge between finance teams and operational managers because they translate financial language into practical recommendations. The mix of skills built through the US CMA course helps professionals move into jobs that sit close to strategy and business development.
How hard is the CMA exam?
The CMA exam challenges candidates on applied thinking, which means the questions test reasoning and interpretation. Many students describe the difficulty as balanced and fair once they build a method of studying concepts along with numerical practice. The test expects you to connect theories with practical situations, similar to workplace finance decisions. The best way to reduce the challenge is to follow structured learning support at Imarticus Learning, where the content is broken into digestible topics with guided problem-solving.
How many months to pass the CMA?
A focused learner can complete the entire journey in about 12-18 months, depending on work schedules, study patterns, and exam windows. Many candidates choose to prepare for each section over four to six months. This duration balances concept learning with revision cycles and mock tests, which help align with real exam patterns. Imarticus Learning supports students with planned study calendars so the timeline stays predictable.
Do Big 4 hire CMA India?
Yes, the Big Four firms recruit CMA candidates and working professionals for finance transformation, risk advisory, costing, performance consulting, and shared service operations. These teams rely heavily on structured financial evaluation and reporting, which fits the CMA skillset. A CMA Career inside the Big Four often begins with analytical roles and later progresses into specialist or leadership tracks in advisory or controllership support.
Can I pass the CMA on the first attempt?
Many candidates pass the exam on their first attempt when they use a structured study plan that blends concepts, numerical practice, and mock testing. The CMA exam rewards understanding rather than memorisation, so understanding linkages between topics is important. Imarticus Learning helps candidates move through topics logically and revise efficiently. Success in the first attempt becomes realistic when consistency is maintained across weeks of study.
Is CMA a qualified accountant?
Yes, a CMA is a qualified accounting professional with a specialised focus on management accounting, planning, analysis, and decision support. A CMA career covers cost analysis, planning systems, performance measurement, budgeting, reporting, and internal controls. The qualification sits at the intersection of accounting and strategy, which gives employers confidence in a CMA’s ability to support and improve organisational decisions.
The Future You Can Build with a CMA Career
A CMA career allows individuals across professional life stages to find a steady and upward-moving path in finance. Students discover a structured entry into analysis and planning. Working professionals use it to shift into roles that offer visibility and responsibility. Entrepreneurs rely on it to read their own financial signals with sharper judgment. Companies value it because CMAs understand how business choices influence money and performance. Across roles such as costing, forecasting, planning, risk evaluation, investment analysis, and reporting, the CMA identity supports long-term relevance.
As industries adopt analytics, automation, and global workflows, the ability to interpret data and shape financial direction grows more important. This is where the CMA benefits become visible for someone building a sustainable, future-ready profession. Whether the goal is a local leadership role, a global finance position, or a diversified career after CMA, the qualification strengthens clarity, confidence, and decision-making.
Anyone who wants structured guidance for this journey can explore CMA course prep with Imarticus Learning, where the curriculum, support, and methodology are aligned with industry expectations. A CMA is more than a credential. It is a way of understanding the financial heartbeat of a business and shaping decisions that determine its future.
Choosing between ACCA and CA is very simple. One needs to know what their primary goal is and the distinction between the two educational credentials.
ACCA offers a broad range of job prospects, especially in the international arena. It requires professionals to have a dynamic personality, which is crucial for fulfilling diverse roles across several industries. ACCA is more suitable for individuals seeking global job prospects and exposure. On the other hand, CA provides a secure foundation for distinguished roles within the country. However, a CA-certified professional can also gain international exposure by acquiring additional qualifications.
Today, ACCA vs CA has become a very popular topic. Read on to know which certification is best for people seeking job opportunities in this field.
What is ACCA?
ACCA, an accounting degree with global recognition, is known for its comprehensive and skilled approach towards excelling in the art of accounting and finance. ACCA career prospects are considered wider than those of CA, primarily due to its international acceptance.
A professional who wants to build his own brand and credibility in accounting in the global forum must pursue an ACCA course. ACCA originated in the United Kingdom in 1904 and has been a valuable course for accounting professionals ever since. It instils quantitative expertise and strategic decision-making in individuals and they not only become expert accountants but also good business operatives.
What is CA?
CA is a popular and respected qualification in the field of finance that provides individuals with expert knowledge and accounting, and taxation. Chartered accountancy is one of the most sought-after jobs in the financial sector, and it is always in high demand.
CA qualification has professionals attain experience and clarity in financial and legal matters. CA graduates generally work in various executive roles and offer financial advice to ensure good governance and compliance. Moreover, CA graduates also play a great role in managing good relations between companies and governments.
However, the CA vs ACCA salary has always been a great point of concern, but both are highly paid jobs. It depends upon the professional skills and abilities of an individual and how much he or she can make.
Difference Between ACCA and CA
Both ACCA and CA are renowned qualifications that are always in demand. Both are very alike in terms of nature and pattern of study, but it has certain major distinctions as well.
The following is the difference between ACCA and CA degree:
Basis
ACCA
CA
Minimum eligibility criteria
It requires 2 A levels plus 3 GCSEs in five subjects, including English and mathematics. Individuals who have higher qualifications may be exempted from such requirements. A good English proficiency is necessary
CA courses have stringent eligibility criteria with a high cut-off percentage. One can get admission to a CA course only when they have a certain score on our entrance test in some cities. CA qualifications vary from one country to another.
Syllabus
ACCA syllabus is more focused on finance-related subjects and covers a wide range of areas in finance, such as taxation, financial management, business, operation, operations, professional ethics etc.
CA courses focus more on accounting subjects along with legal areas. The syllabus is designed keeping in mind the accounting requirements and the knowledge of laws that are required to maintain good relations between companies and governments.
Curriculum structure
The curriculum structure of the ACCA course is very flexible. The Individual can choose when they want to appear for the examination as they do not have any strict date for that.
Whereas, CA courses are generally more intense and strict about exam dates. Individuals do not have the liberty to choose dates as they are fixed by the authorities. CA courses follow a traditional and fixed timeline.
Course duration
The ACCA course does not have any specific duration. It depends upon the pace at which an individual studies and appears for examinations. Hence, the time duration of ACCA courses varies from one person to another. On average, the ACCA course is completed within 3 to 4 years.
CA programmes are a bit longer than ACCA courses. It takes almost 4 to 5 years for individuals to complete the course and earn a CA degree.
Job profile
ACCA professionals have a wider job profile that includes various financial as well as accounting roles such as financial analysis, management, accounting, strategic business consultancy etc.
The job profile for CA graduates is narrow as compared to ACCA professionals. CA job roles include traditional accounting activities, legal compliance, and taxation.
Recognition
ACCA qualification is recognised in more than 180 nations which makes it a great choice for individuals seeking global exposure in this discipline.
CA qualifications, however, are not recognised worldwide as they mostly have a local focus such as a nation or a particular city. It is beneficial for individuals who want to work in one city or country only.
Conclusion
One needs to carefully consider their goals and aspirations before choosing between ACCA and CA courses. ACCA is more focused on overall personality and professional skills that make individuals suitable to work in the international job market. Whereas, CA is more focused on indigenous financial areas and laws, making them specialised professionals within the territory of a country or specific region.
So if you’re looking to build a career globally and want to work in the international arena, then choosing the ACCA course by Imarticus Learning is best for you. It will offer the right amount of accounting and financial knowledge along with strategic decision-making abilities. This course will help you build your own brand so that you can excel in your career.
Frequently Asked Questions
What is the difference between ACCA and CA?
ACCA is globally recognised, while CA is more focused on India.
Which qualification is more flexible between ACCA vs CA?
ACCA is much more flexible in terms of exam structure and study materials.
The order to cash (O2C) cycle is often overlooked but always addressed. It’s the lifeblood of any business. It’s the process that turns sales into countable cash. A well-tuned O2C cycle is efficient, productive and profitable like a well-oiled machine.
But let’s be honest: many businesses treat the order to cash cycle as an afterthought and, as a result, get delayed payments, increased costs and cash flow stress. It’s time to stop treating this process with indifference and start treating it as the business imperative it is.
In this blog, we cut through the corporate speak and explore the practical strategies surrounding O2C. Start reading now.
What is the Order to Cash Cycle?
The order to cash process cycle is the series of steps involved in turning a customer order into cash. It starts when a customer places an order and ends when the payment is received.
For example:
You order a new laptop online.
The O2C process starts when you place the order on the website. The retailer verifies your order, checks inventory and processes your payment. Once the laptop is shipped you get an invoice. When you pay the invoice the O2C process is complete.
Understanding Order to Cash Cycle and vs QTC: A Comparison
O2C and Quote to Cash (QTC) are revenue-generating business processes for a trade life cycle. While they have some similarities they are different in scope and focus.
Key Differences
Scope: QTC has a broader scope, it covers the entire sales process, while O2C focuses on the post-order activities.
Timing: QTC starts earlier in the sales cycle, and O2C starts after an order has been placed.
Integration: QTC involves more cross-functional collaboration between sales, marketing, finance and operations, O2C is more focused on finance and operations.
Relationship Between O2C and QTC
Subset: O2C is a subset of QTC. O2C is a part of the overall QTC cycle.
Interdependence: The O2C process affects the overall QTC cycle. For instance, if the O2C process is inefficient it can lead to delayed payments and increased costs. This, in turn, can impact the QTC cycle by reducing sales and damaging the company’s reputation.
On the contrary, a well-tuned O2C process can enhance customer satisfaction, drive revenue growth and contribute to the overall QTC cycle.
Why a Well-Tuned O2C Process
A good order to cash cycle is needed for:
Cash flow: Payment on time implies cash in the bank.
Customer satisfaction: Order fulfilment and invoicing on time equates to happy customers.
Bad debt: Good credit management and collection practices indicate less bad debt.
Data-driven decision making: O2C analytics provides valuable insights for business improvement.
Stages in the Order to Cash Process: Order to Cash Cycle
The O2C process is a key business function that covers the steps from when a customer places an order to when payment is received. It includes:
Order placement and processing: A customer places an order, online, in-store or over the phone. Then comes the verification of order details, product availability, pricing and shipping information.
Credit approval: For new or credit-worthy customers, a credit check is done to assess their creditworthiness. Based on credit history, a credit limit is set.
Order fulfilment: Products are picked from inventory and prepared for shipping to the customer’s address using the right shipping method and carrier.
Invoicing: An invoice is generated with the items ordered, quantities, prices, payment terms and any applicable taxes or fees. This invoice is then sent to the customer, usually electronically or by mail.
Payment collection: Receiving and processing payments from customers follows here. Accepted payment methods can be credit cards, debit cards, checks, EFTs or online payment gateways. The brands reconcile payments against invoices to ensure accuracy and prevent errors.
Cash application: The payments are applied to specific invoices or customer accounts. These payment records are kept in the accounting system.
Accounts receivable management: Brands then urge the customers to ensure timely payment. They then analyse the accounts receivable based on age to identify risks and prioritise collection efforts. They initiate collection for overdue payments using phone calls, emails and letters.
Closing the books: The O2C process is part of the overall accounting cycle for financial reporting. The last process is to initiate the accounts receivable with the general ledger to ensure accuracy.
Order to Cash for Subscription Businesses
The O2C process for subscription businesses has its own challenges and opportunities due to the recurring nature of the revenue streams. Here are some key points:
Subscription Management
Customer lifecycle management: Manage customer acquisition, retention and upsell to maximise revenue.
Subscription tiers and pricing: Offer flexible subscription plans to cater to varying customer needs and revenue.
Billing and Invoicing
Recurring billing: Set up recurring automated billing to ensure timely invoicing and payment collection.
Usage-based billing: If applicable, implement usage-based billing to charge customers based on consumption.
Payment Processing
Secure payment gateways: Integrate secure payment gateways to protect customer data and make payments easy.
Multiple payment options: Offer credit cards, debit cards and EFTs as payment options.
Payment failures and dunning: Get robust dunning management in place to handle payment failures and recover lost revenue.
Revenue Recognition
Subscription revenue recognition: Recognise subscription revenue according to accounting standards (e.g. ASC 606).
Deferred revenue: Account for deferred revenue on prepaid subscriptions.
Revenue recognition policies: Have clear revenue recognition policies in place to ensure consistency and accuracy.
Customer Support and Churn Management
Good customer service: Answer customer questions, resolve issues and improve customer satisfaction.
Churn analysis: Analyse customer churn rates and implement retention strategies.
Upselling and cross-selling: Offer additional products/services to existing customers to increase revenue and reduce churn.
Subscription Analytics and Reporting
KPIs: Track customer acquisition cost, customer lifetime value and churn rate.
Subscription analytics: Use data analytics to see customer behaviour, subscription trends and revenue performance.
Reporting: Generate reports on subscription revenue, customer metrics and financials.
5 Order-to-Cash Best Practices
The Order to Cash (O2C) process is key to any business. By following these best practices, you can optimise your O2C cycle and get lots of benefits:
1. Simplify Order Processing
Use technology to automate repetitive tasks like order entry and verification, reduce errors and improve efficiency. For example, have an online ordering system that verifies product availability and calculates shipping costs.
Additionally, you can provide a user-friendly online ordering platform to give customers a seamless experience. This is especially useful for businesses with a large customer base.
2. Improve Credit Management
Have clear credit policies and guidelines to assess customer creditworthiness and set credit limits. Use credit scoring models to automate the credit approval process and reduce manual work. For example, integrate a credit scoring API into your ERP system to automatically score customer credit risk.
3. Invoice and Payment Collection
Here’s how you can simplify this process:
Electronic invoicing: Send invoices electronically to reduce processing time and errors.
Clear and concise invoices: Make sure invoices are easy to read and have all the necessary information.
Multiple payment options: Offer credit cards, debit cards and electronic funds transfers (EFTs) to customers to give them a choice.
Automated payment reminders: Send payment reminders to reduce late payments and improve cash flow.
4. Implement Accounts Receivable Management
Analyse accounts receivable regularly to identify overdue payments and prioritise collections. Additionally, have clear collection procedures and dedicate resources to follow up on outstanding invoices. Lastly, offer discounts for early payment to encourage timely payment and improve cash flow.
5. Tech and Analytics
Here’s how you can utilise technology to your advantage:
ERP systems: Use ERP systems to O2C and get real-time visibility into key metrics.
Data analytics: Use data analytics to see customer behaviour, identify trends and optimise the O2C cycle. For example, see payment patterns to see where you can improve your collections.
Automation tools: Use automation tools to automate repetitive tasks, reduce errors and improve efficiency. For example, use RPA to automate invoice processing and payment applications.
Summary
The O2C cycle is the engine of a business’s revenue. A well-optimised O2C process means smooth operations, timely payments and steady streams of cash. However, many businesses struggle with inefficiencies in their O2C cycle and get delayed payments, increased costs and hindered growth.
The O2C cycle is a business process that tracks from the moment a customer places an order to when payment is received.
How do you explain the O2C cycle in an interview?
Emphasise its impact on a company’s financial health. Highlight how a well-optimised O2C process can help overall cash flow, customer relationships and retention.
What is the order to cash in finance?
This is the financial aspect of the O2C process, invoicing, payment collection and accounts receivable management.
Who is involved in the O2C process?
All the departments in the O2C process include sales, customer service, finance, logistics, IT etc.
In recent years, the popularity of Procure-to-Pay (P2P) has rapidly grown among various small and big companies. This procedure helps a company become more efficient by eliminating manual operations, which leads to fewer errors. It helps a company to optimise its operational procedures and procurement policies.
This article is the ultimate guide that will vividly discuss the procure-to-pay meaning, various steps related to the P2P procedure, its availability, etc. It would be helpful for finance aspirants who want to commence or improve their career in finance. Keep on reading to learn more about Procure-to-Pay (P2P)!
What isProcure to Pay (P2P)?
The end-to-end procedure of acquiring, purchasing, paying, receiving, and accounting for a company’s goods and services is known as Procure-to-Pay (P2P). This procedure ensures a company has effective procurement operations, cost control, supplier management, and policy compliance.
The Procure-to-pay procedure is operated with the help of software, even though it is not a technology. This software ensures that various operations like invoicing, accounting, or inventory management are executed smoothly. This end-to-end process is also addressed as purchase-to-pay.
What are the different Steps in the Procure to Pay Process?
There are different steps that a company needs to follow to get an effective Procure-to-pay (P2P). Here is the Procure-to-pay process a company must follow:
Identification of Needs
In the first step of the Procure-to-pay process, a company must identify its requirements for either goods or services. After identifying the requirements, the company must set a standard quality for its goods or services. Apart from that, a company also needs to decide its statements of work (SOW) and terms of reference (TOR)
Creation and Approval of Requisitions
In the next step, a company must decide and build a formal purchase requisition. After creating the formal purchase requisite, it is then sent for approval from the higher authorities. This process ensures that the formal requisition has been thoroughly re-checked and reviewed according to the budget decided by the company.
Sourcing
The next step after creating a formal requisition is sourcing. In this step, the company has to decide from which vendor or supplier they wil source their raw materials. The final supplier is chosen after considering certain parameters like quality, price, trustability, and time of delivery. These parameters help a company choose the best supplier according to its budget.
Creating and Approving a Purchase Order (PO)
The next step after sourcing is to create and approve the purchase order (PO). This is a legal contract between the company and the supplier that states all the terms and conditions regarding the future purchases that would take place. After the formal purchase requisite gets approved by the higher authority, a purchase order is created.
After the creation of the purchase order, it is sent to the higher authority for further review and approval. After receiving approval from the higher officers, the PO is sent to the supplier and becomes operational until it expires.
Goods Receipt
The next step is the delivery of the final product. After the delivery of the final products, the company inspects the quality of the product. The goods receipt is accepted only when the suppliers provide the company with the desired quality otherwise it is rejected.
Performance and Invoicing
After approving the receipt of the goods, the performance of the supplier is determined. The evaluation of the supplier’s performance lies in certain parameters like quality of the products, service, time of delivery, etc. If there is any disparity in the outcome it is noted in the company’s data for future reference.
After the performance is evaluated, the invoice for the goods is then analysed with the help of the three-way match method. The product order (PO), goods receipt, and goods invoice are evaluated to find any discrepancies in this method. If there is no disparity then the invoice is accepted or else it gets rejected.
Payment
In the last step, the payment of the supplier gets cleared by the company’s finance team. There are five payment methods through which a company can clear the supplier’s payment. These methods are advance payment, partial payment, instalment payment, final payment, and retention payment.
This is the final step after which the procurement procedure is completed. In a company, a finance analyst needs to know about this procurement cycle in extreme detail. Therefore, many companies are encouraging their employees to enrol themselves in a financial accounting course to gain more knowledge.
Benefits of Procure to Pay (P2P)
There are numerous benefits a company receives by adopting the procure-to-pay (P2P) procedure. These benefits are vividly elucidated below:
Enhanced Operations
The Procure-to-pay (P2P) method is an automatic method hence it reduces the time and effort that was previously required to perform various tasks like making a purchase order, checking the invoices, making vendor payments, etc. The introduction of this procedure enhances the pace of the procurement process and eliminates human errors which result in accurate transaction sheets. Hence, with the help of procure-to-pay (P2P) a company can become more efficient with its operations.
Cost Effective
One of the most important benefits of the procure-to-pay (P2P) process is that it is extremely cost-effective. This is because the procedure is entirely automated and reduces the operational cost.
Prevents and Reduces Fraud
The Procure-to-pay (P2P) procedure safeguards a company against various frauds. This is possible because this procedure uses invoice-matching and numerous review matching, This reduces any malpractice among the
Predictive Nature
Procure-to-pay (P2P) is a modern procedure therefore it uses modern technologies like data analytics and other tools to ease out the entire process. The usage of such advanced technologies helps it to predict certain future events that can be avoided by simply taking advanced measures.
Better Relationships with the Suppliers
Procure-to-pay (P2P) procedure enhances the relationship between the company and its suppliers. This takes place as P2P ensures transparency, accuracy, and timely payments.
What are the various Procure to Pay (P2P) Platforms?
Getting access to procure-to-pay (P2P) has become extremely easy as it is available on various platforms. Initially, this procedure was entirely handled using the traditional pen and paper method. Later, technology took over and now companies can easily access P2P on certain platforms.
Platforms like SAP Ariba, Coupa, Oracle ERP, etc. are certain procurement software from which P2P can be accessible. These platforms are often made up of numerous modules that ensure that a company’s procurement cycle is working efficiently and on time.
How does P2P Enhance Efficiency?
Most companies adopt P2P because it enhances the efficiency of purchasing. Here are a few ways how Procure-to-Pay (P2P) can increase efficiency:
Purchase Order Management: Procure-to-Pay (P2P) helps a company create automatic purchase order management by analysing the previous purchase orders. This reduces operation time and enhances efficiency.
Replacing Tradition Vendor Management: Procure-to-Pay (P2P) assists a company in replacing its traditional vendor management with a digital one. This technology allows a company to choose a vendor according to its requirements. A company can also set rates for the products, delivery time, discounts, etc.
Matching all Invoices: Lastly, it helps a company to keep track of its invoices and match them so that the purchase proof is always ready with them.
Conclusion
Procure-to-pay (P2P) is expected to experience more success in the future. More companies are going to adopt it and will create more Procure-to-pay jobs for plenty of employees. Therefore, a finance aspirant or personnel who wants to experience more success must enrol in some online financial certification courses.
Imarticus Learning has launched its new Financial Accounting and Management Program. This is a 6-month post-graduate programme for fresh graduates. Here individuals have to attend offline and online classes.
Thus the programme will help one to learn more knowledge and enhance their skills according to the market requirements. Imarticus Learning has a top-notch team of instructors who will take these classes. Finally, after completing this course, each individual will get a guaranteed placement.
If you are a financial personnel or aspirant and want to enhance your career trajectory then enrol yourself in this course without any further delay!
Frequently Asked Questions
What is Procure-to-Pay?
Procure-to-pay is an end-to-end procedure that manages a company’s goods and services. Its main job is to supervise procurement operations, cost control, supplier management, and policy compliance.
What are the Procure-to-pay jobs?
There are numerous Procure-to-pay jobs in the finance sector like assistant procurement manager, senior finance analyst, purchasing manager, etc.
What are the various steps in a Procure-to-pay process?
There are a few main steps in a procure-to-pay process: identification of needs, creation and approval of requisitions, creation and approval of purchase orders, good receipt, performance, invoicing, and payment.
Which real-life company uses Procure-to-pay (P2P)?
Recently, many small and big companies have been working with procure-to-pay. Big companies like Siemens and Unilever use Procure-to-Pay (P2P) daily for better results.
The order to cash (O2C) cycle is often overlooked but always addressed. It’s the lifeblood of any business. It’s the process that turns sales into countable cash. A well-tuned O2C cycle is efficient, productive and profitable like a well-oiled machine.
But let’s be honest: many businesses treat the order to cash cycle as an afterthought and, as a result, get delayed payments, increased costs and cash flow stress. It’s time to stop treating this process with indifference and start treating it as the business imperative it is.
In this blog, we cut through the corporate speak and explore the practical strategies surrounding O2C. Start reading now.
What is the Order to Cash Cycle?
The order to cash process cycle is the series of steps involved in turning a customer order into cash. It starts when a customer places an order and ends when the payment is received.
For example:
You order a new laptop online.
The O2C process starts when you place the order on the website. The retailer verifies your order, checks inventory and processes your payment. Once the laptop is shipped you get an invoice. When you pay the invoice the O2C process is complete.
Understanding Order to Cash Cycle and vs QTC: A Comparison
O2C and Quote to Cash (QTC) are revenue-generating business processes for a trade life cycle. While they have some similarities they are different in scope and focus.
Key Differences
Scope: QTC has a broader scope, it covers the entire sales process, while O2C focuses on the post-order activities.
Timing: QTC starts earlier in the sales cycle, and O2C starts after an order has been placed.
Integration: QTC involves more cross-functional collaboration between sales, marketing, finance and operations, O2C is more focused on finance and operations.
Relationship Between O2C and QTC
Subset: O2C is a subset of QTC. O2C is a part of the overall QTC cycle.
Interdependence: The O2C process affects the overall QTC cycle. For instance, if the O2C process is inefficient it can lead to delayed payments and increased costs. This, in turn, can impact the QTC cycle by reducing sales and damaging the company’s reputation.
On the contrary, a well-tuned O2C process can enhance customer satisfaction, drive revenue growth and contribute to the overall QTC cycle.
Why a Well-Tuned O2C Process
A good order to cash cycle is needed for:
Cash flow: Payment on time implies cash in the bank.
Customer satisfaction: Order fulfilment and invoicing on time equates to happy customers.
Bad debt: Good credit management and collection practices indicate less bad debt.
Data-driven decision making: O2C analytics provides valuable insights for business improvement.
Stages in the Order to Cash Process: Order to Cash Cycle
The O2C process is a key business function that covers the steps from when a customer places an order to when payment is received. It includes:
Order placement and processing: A customer places an order, online, in-store or over the phone. Then comes the verification of order details, product availability, pricing and shipping information.
Credit approval: For new or credit-worthy customers, a credit check is done to assess their creditworthiness. Based on credit history, a credit limit is set.
Order fulfilment: Products are picked from inventory and prepared for shipping to the customer’s address using the right shipping method and carrier.
Invoicing: An invoice is generated with the items ordered, quantities, prices, payment terms and any applicable taxes or fees. This invoice is then sent to the customer, usually electronically or by mail.
Payment collection: Receiving and processing payments from customers follows here. Accepted payment methods can be credit cards, debit cards, checks, EFTs or online payment gateways. The brands reconcile payments against invoices to ensure accuracy and prevent errors.
Cash application: The payments are applied to specific invoices or customer accounts. These payment records are kept in the accounting system.
Accounts receivable management: Brands then urge the customers to ensure timely payment. They then analyse the accounts receivable based on age to identify risks and prioritise collection efforts. They initiate collection for overdue payments using phone calls, emails and letters.
Closing the books: The O2C process is part of the overall accounting cycle for financial reporting. The last process is to initiate the accounts receivable with the general ledger to ensure accuracy.
Order to Cash for Subscription Businesses
The O2C process for subscription businesses has its own challenges and opportunities due to the recurring nature of the revenue streams. Here are some key points:
Subscription Management
Customer lifecycle management: Manage customer acquisition, retention and upsell to maximise revenue.
Subscription tiers and pricing: Offer flexible subscription plans to cater to varying customer needs and revenue.
Billing and Invoicing
Recurring billing: Set up recurring automated billing to ensure timely invoicing and payment collection.
Usage-based billing: If applicable, implement usage-based billing to charge customers based on consumption.
Payment Processing
Secure payment gateways: Integrate secure payment gateways to protect customer data and make payments easy.
Multiple payment options: Offer credit cards, debit cards and EFTs as payment options.
Payment failures and dunning: Get robust dunning management in place to handle payment failures and recover lost revenue.
Revenue Recognition
Subscription revenue recognition: Recognise subscription revenue according to accounting standards (e.g. ASC 606).
Deferred revenue: Account for deferred revenue on prepaid subscriptions.
Revenue recognition policies: Have clear revenue recognition policies in place to ensure consistency and accuracy.
Customer Support and Churn Management
Good customer service: Answer customer questions, resolve issues and improve customer satisfaction.
Churn analysis: Analyse customer churn rates and implement retention strategies.
Upselling and cross-selling: Offer additional products/services to existing customers to increase revenue and reduce churn.
Subscription Analytics and Reporting
KPIs: Track customer acquisition cost, customer lifetime value and churn rate.
Subscription analytics: Use data analytics to see customer behaviour, subscription trends and revenue performance.
Reporting: Generate reports on subscription revenue, customer metrics and financials.
5 Order-to-Cash Best Practices
The Order to Cash (O2C) process is key to any business. By following these best practices, you can optimise your O2C cycle and get lots of benefits:
1. Simplify Order Processing
Use technology to automate repetitive tasks like order entry and verification, reduce errors and improve efficiency. For example, have an online ordering system that verifies product availability and calculates shipping costs.
Additionally, you can provide a user-friendly online ordering platform to give customers a seamless experience. This is especially useful for businesses with a large customer base.
2. Improve Credit Management
Have clear credit policies and guidelines to assess customer creditworthiness and set credit limits. Use credit scoring models to automate the credit approval process and reduce manual work. For example, integrate a credit scoring API into your ERP system to automatically score customer credit risk.
3. Invoice and Payment Collection
Here’s how you can simplify this process:
Electronic invoicing: Send invoices electronically to reduce processing time and errors.
Clear and concise invoices: Make sure invoices are easy to read and have all the necessary information.
Multiple payment options: Offer credit cards, debit cards and electronic funds transfers (EFTs) to customers to give them a choice.
Automated payment reminders: Send payment reminders to reduce late payments and improve cash flow.
4. Implement Accounts Receivable Management
Analyse accounts receivable regularly to identify overdue payments and prioritise collections. Additionally, have clear collection procedures and dedicate resources to follow up on outstanding invoices. Lastly, offer discounts for early payment to encourage timely payment and improve cash flow.
5. Tech and Analytics
Here’s how you can utilise technology to your advantage:
ERP systems: Use ERP systems to O2C and get real-time visibility into key metrics.
Data analytics: Use data analytics to see customer behaviour, identify trends and optimise the O2C cycle. For example, see payment patterns to see where you can improve your collections.
Automation tools: Use automation tools to automate repetitive tasks, reduce errors and improve efficiency. For example, use RPA to automate invoice processing and payment applications.
Summary
The O2C cycle is the engine of a business’s revenue. A well-optimised O2C process means smooth operations, timely payments and steady streams of cash. However, many businesses struggle with inefficiencies in their O2C cycle and get delayed payments, increased costs and hindered growth.
The O2C cycle is a business process that tracks from the moment a customer places an order to when payment is received.
How do you explain the O2C cycle in an interview?
Emphasise its impact on a company’s financial health. Highlight how a well-optimised O2C process can help overall cash flow, customer relationships and retention.
What is the order to cash in finance?
This is the financial aspect of the O2C process, invoicing, payment collection and accounts receivable management.
Who is involved in the O2C process?
All the departments in the O2C process include sales, customer service, finance, logistics, IT etc.
Tax payment is often considered a yearly ritual during filing Income Tax Returns (ITR). On the contrary, it is a continuous process. Advance tax is just one aspect of it.
Advance tax is payable by individuals on income sources beyond their salary. These sources include but are not limited to fixed deposits, rent, capital gains from shares, lottery wins, profits from business or profession, and income from other sources. It is a financial obligation that certain businesses or individuals have towards the Indian government.
A portion of the annual tax liability is paid in advance – like an EMI – instead of making a lump sum payment at the end of the financial year. Taxpayers must pay on the due dates mentioned by the Income Tax Department. Late payment of advance tax can attract interest under Section 234B and 234C of the Income Tax Act, 1961. Let’s understand what advance tax is, who should pay it, and how to pay the tax amount.
What is advance tax?
Advance tax is not just a financial obligation, it’s a proactive approach to paying taxes. Also known as the ‘pay as you earn tax’, it empowers you to manage your tax liabilities by paying in instalments throughout the year, in the same year the income is generated.
Taxpayers, with income exceeding Rs. 10,000 in a financial year (after subtracting TDS) have to pay advance tax amounts in instalments on specified dates by the Income Tax Department.
Advantages of paying advance tax
If you are wondering, ‘How is paying this tax amount beneficial’, let me break it down for you. Here are a few advantages of paying advance tax:
Paying the tax amount will reduce taxpayer’s stress. You will not have to worry about money shortages or tax payments at the last moment.
It is a great way to save taxpayers from defaulting on their tax payments.
Businesses can manage their finances better and have a clearer picture of what they have earned in revenue.
Who is liable to pay advance tax?
The people who are liable to pay advance tax are:
Taxpayers: Individuals owing more than Rs. 10,000 in taxes, after deduction of TDS, in a financial year need to pay advance tax. This includes all categories of taxpayers including salaried professionals, freelancers, and senior citizens.
Senior citizens: People over 60 years of age who don’t own an enterprise are not liable to pay the advance tax.
Presumptive income of businesses: People who opt for the presumptive tax rule under Section 44AD, which is a simplified taxation scheme for small businesses, are liable to pay the entire advance tax on or before 15th March
Independent professionals: Professionals like architects, lawyers, doctors, etc., who choose the presumptive taxation scheme under advance tax Section 44ADA fall under this category. They must pay the total advance tax in a single instalment on or before 15th March. They also have the option to pay it on or before 31st March.
Advance tax payment dates for salaried individuals and companies
Due date for tax payment
Amount of tax payable
On or before 15th June
15%
On or before 15th September
45%
On or before 15th December
75%
On or before 15th March
100%
Advance tax payment dates for business owners and self-employed:
Due date
Amount of tax payable
On or before 15th September
30%
On or before 15th December
60%
On or before 15th March
100%
Forms needed in advance tax payment
Taxpayers have to fill out the Challan No. ITNS 280 on every due date. Here is a list of details or documents needed for Challan No. ITNS 280:
PAN card details: You will have to carefully input your PAN details. This is to make sure that your money is not being deposited in someone else’s name.
Assessment year: Choose the correct assessment year for which you want to pay the tax since the amount will be going out in advance for the upcoming financial year.
Select the kind of payment: Taxpayers need to choose the type of payment in the challan. If you are paying the tax for the same financial year depending on the estimated income – it’s advance tax. Whereas, if it is paid post the end of the financial year – it’s a self-assessment tax.
A CIN or Challan Identification Number will be issued upon completion of the payment. It would help to note this number since you’ll need it when filling out ITR.
How to pay advance tax online?
Here is a step-by-step explanation of how you can pay advance tax online:
Step 1: Go to the e-filling portal of the IT Department of India.
Step 2: From ‘Quick Links’ on the left side of the page, select the ‘e-pay Tax’ option.
Step 3: Provide your PAN details and mobile number. Click on ‘Continue’.
Step 4: You will receive an OTP to confirm your mobile number. Fill it out and click on ‘Proceed’.
Step 5: Select the first tab with the ‘Income Tax’ option, followed by ‘Continue’.
Step 6: Choose the ‘Assessment Year’.
Step 7: Select the ‘Type of Payment’ as ‘Advance Tax (100)’. Press ‘Continue’.
Step 8: Fill in all the details about the tax amount.
Step 9: Select the relevant mode of payment, bank, and ‘Continue’.
Step 10: Get a preview of your challan and press ‘Pay Now.’
Once you have made the payment, you will receive an acknowledgement on your screen. Note down the BSR code and challan number (from the challan’s right side) because you will need that when filing for tax returns.
How is advance tax calculated?
Indian citizens pay taxes applicable as the income tax slabs. To find out how much advance tax you need to pay, you must calculate your total income and determine the tax liability according to the tax slab.
Follow the given steps to calculate advance tax:
Step 1: Calculate the gross total income – add incomes from salaries, properties, fixed deposits, businesses and other sources.
Step 2: From this amount, subtract the applicable Chapter VIA deductions.
Step 3: If applicable, calculate the rebate under Section 87A and reduce the amount.
Step 4: If there are any surcharges, add them. Also, add the education and health cess.
Step 5: This is your total income.
Step 6: Calculate the tax payable on the net income based on the applicable tax slab.
Step 7: Deduct TDS and you will be able to get your total income tax liability.
This tax amount is divided into instalments called advance tax. You pay according to the percentage and dates mentioned above.
Interest on late payment
Let’s face it – it is not always possible to keep up with all tax payments and their due dates. Remembering all the advance tax provisions is a hassle, and people are late in making these payments. In case you are late on your advance tax payments, here is what will happen:
Interest paid under section 234B
According to advance tax Section 234B, you need to pay at least 90% of your total taxes with advance tax or TDS by 31st March. If you fail to pay the amount, you will incur interest charges at a rate of 1% on the unpaid amount.
Interest paid under Section 234C
Under Section 234C, you will need to pay the following charges on late payments:
Instance
Interest rate
Duration of interest
Basis for interest calculation
The advance tax amount paid by 15th June is less than 15%
1% each month
3 months
15% of the total amount – tax paid before 15th June
The advance tax amount paid by 15th September is less than 45%
1% each month
3 months
45% of the total amount – tax paid before 15th September
The advance tax amount paid by 15th December is less than 75%
1% each month
3 months
75% of the total amount – tax paid before 15th December
The advance tax amount paid by 15th March is less than 100%
1% each month
3 months
100% of the total amount – tax paid before 15th March
Summing up
Understanding and complying with the advance tax provisions is important to avoid any last-minute monetary burdens or penalties. Paying advance tax has removed the constraints of making lump sum payments at the end of the financial year.
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Frequently Asked Questions
Do NRIs have to pay advance tax?
If the income of an NRI in India exceeds the basic exemption limit, they need to pay advance tax. This tax is liable on the income made in the country.
What will happen if the amount of advance tax paid exceeds the tax liability?
If someone has paid more than the total tax liability, no need to worry. You will be eligible for a tax refund. You can claim this refund using Form 30. You can claim a deduction as per Section 80C when calculating your advance tax due.
Can I pay the advance tax amount offline?
Yes, you can make the payment by visiting your nearest bank branch. You will have to fill out a physical copy of Challan 280 and make the payment.
What is self-assessment tax?
Self-assessment tax is the amount taxpayers pay on income after removing advance tax and TDS. People who file income tax returns are liable to pay this tax amount beforehand. There are no deadlines for the payment of this tax. You can pay the self-assessment tax from the e-filling portal itself.
With governments increasingly moving towards digital platforms worldwide, paying taxes has become more straightforward and accessible. No more standing in line or checking emails! Online tax payments help you stay informed, stay on track, avoid penalties, and keep your financial records organised.
These online platforms streamline the payment process and provide a secure way to track and manage financial obligations efficiently, ensuring accuracy and reliability for taxpayers.
Now, how do you pay taxes online?
We will cover the specifics in this online tax payment guide 2024.
Why Choose Online Tax Payments?
Online tax payments offer a range of benefits that simplify this crucial financial task:
Convenience and flexibility: File and pay your taxes anytime, anywhere, 24/7, eliminating the constraints of traditional methods.
Secure and faster processing: Benefit from secure online payment gateways and faster transaction processing times, ensuring timely payments and peace of mind.
Reduction in paperwork and easier tracking: Transition to a paperless system, minimising administrative burdens and simplifying financial record management.
Availability of payment options: Choose from a variety of payment methods – including credit/debit cards, bank transfers, and digital wallets – to suit individual preferences.
Prerequisites for Making Online Tax Payments
You have the option to pay your taxes using the ‘Payment Gateway’ in two modes: Pre-login (before logging into the e-Filing portal) or Post-login (after logging in).
Pre-login Requirements:
A valid PAN/TAN for which the tax payment is being made.
Access to a Debit Card, Credit Card, Net Banking, or UPI for making the payment.
A valid mobile number – to receive the One-Time Password (OTP) for verification.
Available payment methods include Debit Cards, Credit Cards, Net Banking, or UPI.
Step-by-Step Online Tax Payment Guide 2024
Step 1: Access the Official Tax Portal
First and foremost, make sure you are a registered user. If not, log in to http://www.incometax.gov.in and click on e-pay tax from the home page.
Access the Official Tax Portal
Step 2: Provide Your Tax Information
On the secure e-Pay Tax page, you’ll be asked to enter some key details to calculate your tax liability. Fill out the required fields accurately and then click ‘Continue’ to proceed.
Provide Your Tax Information
Step 3: Verify Your Identity
To ensure the security of your transaction, a 6-digit OTP (One-Time Password) will be sent to the mobile number you provided earlier. Retrieve the OTP from your messages and enter it on the ‘OTP Verification’ page. Once you’ve entered the code correctly, click ‘Continue’ to proceed.
Verify Your Identity
Step 4: Confirmation and Payment Selection
After successful OTP verification, you’ll see a confirmation message displaying a masked version of yourname and PAN/TAN. Click ‘Continue’ to move forward with your online tax payment.
Confirmation and Payment Selection
Step 5: Choose Your Tax Payment Category
Select the tax payment category that applies to you from the options provided. This ensures your payment is correctly allocated.
Choose Your Tax Payment Category
Step 6: Provide Payment Details
To calculate the precise tax amount, you’ll be asked to provide some additional details:
Assessment Year: Choose the relevant assessment year for your tax payment.
Minor Head: Select the specific tax category or ‘minor head’ under which you are making the payment.
Other Details: Provide any additional information requested, which might vary based on the selected tax category.
Provide Payment Details
Once you’ve filled in all the necessary details, click ‘Continue.’
Step 7: Breakdown Your Tax Payment (If Applicable)
On the ‘Add Tax Breakup Details’ page, you can optionally break down your total tax payment into different components. This step helps provide a clear and organised record of your payment. Click ‘Continue’ after entering the details.
Breakdown Your Tax Payment
Step 8: Choose Your Payment Method
Choose Your Payment Method
Select your preferred mode of payment from ‘Payment Gateway’ and click ‘Continue.’
Step 9: Review and Confirm Payment
Review and Confirm Payment
Carefully review your payment details, including the tax breakup (if applicable). If everything is accurate, click ‘Pay Now’ to proceed.
Step 10: Make Payment Through the Secure Gateway
Once you have confirmed all the details, click Submit to Bank. You’ll be redirected to a secure payment gateway where you can:
Log in: If you already have an account with the payment gateway.
Enter Payment Information: Provide your Net Banking details, Debit/Credit card information, or UPI ID to make the payment.
Make Payment Through the Secure Gateway
You can compare transaction charges associated with each payment gateway before selecting your preferred option.
Confirmation of Online Tax Payment and Next Steps
After a successful online tax payment, you will receive:
Confirmation Email: Sent to the email address registered with the e-filing portal.
Confirmation SMS: Sent to the mobile number registered with the e-filing portal.
You can download your Challan Receipt for future reference. Both payment details and your Challan Receipt will also be accessible under the ‘Payment History’ tab on the e-Pay Tax page after you log in.
Summing Up
Paying taxes is a fundamental civic duty that contributes to essential public services we all rely on. By embracing the ease and efficiency of online tax payments, you’re taking control of your finances and contributing to a functioning society.
This guide has walked you through the process step-by-step, from gathering your information to receiving confirmation of your payment. Now, if you are someone looking forward to learning the intricacies of financial accounting or want to expand and hone your knowledge of financial accounting, a robust financial accounting course can be beneficial!
The Postgraduate Financial Accounting and Management Program from Imarticus Learning provides a practical, hands-on approach to mastering the economic, technical, and institutional foundations of the field. Graduates gain in-demand skills for data-driven decision-making that drives growth and business success across industries.
FAQs
How to make an income tax challan online?
To make an income tax challan online, go to the Income Tax Department’s official e-filing portal, select the relevant challan (e.g., ITNS 280 for income tax), provide your details, choose a payment method, and complete the transaction. You’ll receive a challan identification number as confirmation.
How to pay tax online through a bank?
Once you complete all the required steps, you’ll be taken to the payment gateway. Select the bank from the list and use NetBanking, Debit Card/ Credit Card, or UPI to pay your taxes.
What is the challan expiry date?
Your challan usually has a validity of 15 days from the date of generation.
What is CBDT tax payment?
A CBDT tax payment refers to any tax payment made to the Central Board of Direct Taxes (CBDT) in India. This includes various direct taxes like income tax, corporate tax, wealth tax, and gift tax.
The objective of any business is to generate profit by managing the cash flow system effectively. The entire gamut of activities which an organisation initiates from a sale process on credit is known as receivables management. The process is based on a credit policy determining the credit amount and credit days.
The process is customer-specific, and the term of this policy is a function of the credibility of the customer. After the organisation offers goods or services on credit, the transaction is tracked as per the credit policy guidance and periodical follow-ups are conducted till the due payment or receivables are paid back by the customer.
Receivables management meaning can be understood in terms of liquid assets an organisation owes to its clients against deliverables on credit. Thus, this credit process is equivalent to an investment decision in trade debtors by the organisation.
Objectives of Receivables Management
Every business needs cash and an organisation can make a profit when the cash (out) flow can be balanced periodically by receivables from clients. Though receivables management may seem to be an easy activity superficially, it becomes a difficult task given the complex nature and volume of the business. All reputed organisations engage advanced software to closely and effectively monitor the receivables management.
Some of the key objectives of receivables management are as follows –
Helps improve cash flow
The credit policy of an organisation is designed to strike a balance between improving the top line i.e. sales or revenue and maintaining a healthy cash flow. A better control of receivables management helps the organisation with more inward cash flow. This supports the company to pay its outstanding bills timely.
Reduces losses incurred due to bad debts
No company would like to come across a poor bottom line although have a robust top line. One of the key reasons for poor bottom line is bad debts, that pile up due to poor receivables management. Thus, a strong receivables management ensures timely collection keeping bad debts and write-offs at bay. In the process, the bottom line improves, and the organisation gets liquid cash for day-to-day activities.
Increased customer satisfaction
When an organisation improves its bottom line through a robust receivables management system, it has an opportunity to satisfy its customers further. The company can offer special discounts upon a certain benchmark of invoicing, and this makes the customer happy. Business transparency increases mutual trust and creates a strong relationship bond.
Increased sales volume
With a credit policy in place, sales are bound to increase. Receivables management ensures a shorter cycle of inward cash flow from the customer. With increased profit, organisations often choose to offer discounts to the customer. This is the second reason why sales are boosted.
Optimise working capital
With the standard liquid collection in place, organisations manage regular operational expenses. However, with an accelerated receivables management system, the organisation attempts to free up the working capital and moves on to further investment, expansion or acquisition.
Credit policy control
Receivables management is guided by a credit policy. The volume of credit to be allowed and the number of days of credit allowance to certain customers is determined by this policy. The receivables management team keeps a vigil on the credibility or the CIBIL score of the client to control both the parameters of the credit policy.
Receivables management enforces a system within the organisation that tracks unpaid invoices and retrieves outstanding payments from the customer within the stipulated time frame. There are quite a few dimensions of receivables management that are instrumental to a business that offers credit to its customers.
These aspects determine the business profit after fulfilling financial obligations like paying employees, and vendors and investing in expansion opportunities. Various dimensions of receivables management are as follows –
Credit policy
This is the robust structure upon which the receivables management system is built. The policy empowers the organisation to offer goods or services on credit to its customers. However, the volume of the credit to be offered and the number of days for which the credit lasts are all well stipulated.
A good customer pays back the billed amount to the organisation before the fixed time and thereby earns a good credit score. A well-defined credit policy reduces the probability of bad debts and ensures timely collection. It also boosts up business.
Credit monitoring
A customer is offered a certain amount of credit based on their credentials. However, the activities of this customer should be monitored whenever the organisation offers this customer a credit. Over a period, when the organisation feels that the customer has set good precedence by making timely payments, it may feel so as to increase its credit limit.
On the other hand, the organisation may also take a call to decrease or cancel the credit facility to any customer, whose payment records show irregularity. Thus, credit monitoring is a process that prevents serious bad debts.
Invoicing and billing
These are crucial aspects of receivables management. Organisations must follow timeliness while invoicing a customer. The invoices should contain all essential information like product or service value, taxes, and final invoice value along with due dates before which the customer must pay the amount in full.
It should also mention the rate of interest to be charged per month as a penalty if the customer fails to pay the amount on or before the due date mentioned in the invoice.
Collection procedures
Collection procedures are continuous processes and are initiated after a reasonable period of offering credit to the customer. The process may be telephonic, through emails or letters and even in person, depending on the age of the outstanding. The process should contain the element of sensitivity such that customer complaints and legal actions may be avoided.
Payment processing
Payment processing is an internal process of the organisation. A payment made by a customer must be allocated to the correct invoice. Correct reconciliation is a sign of a healthy accounting procedure.
Reporting and analysis
Last but not least, proper reporting is a must. Regular information regarding billed age-wise outstanding invoices and payments received should be forwarded to the management for review and analysis.
Relationship between Sales and Cash Flow
Sales is very intimately with cash flow, which is the best index to measure the viability of the business. The understanding of this multidimensional relationship helps us to comprehend what is receivables management. The correlation of these two topics may be better realised with the following points –
Keeping sales constant, businesses with more cash inflow create more profit than those with poor cash inflow. Thus, a healthy cash inflow is an indicator of organisational profit and sustainability.
As per business standards, the ratio of the operating cash flow (OCF) to net sales gives a fair indication of the financial health of the organisation during any given range of time.
The operating cash flow (OCF) is essentially the difference between the total cash received (cash inflows) from sales and the operating expenses (cash outflows) to generate such sales.
In the case of a steady business revenue, wherein the organisation does not borrow any money from outside sources, the OCF/Net Sales ratio should be ideally smaller than one. However, it may be noted that with the expansion of business and borrowing of money from outside financial institutions, the ratio varies drastically and hence predicting a good value for it will be unreasonable.
The standard of any organisation can be measured by studying its three financial statements – the profit and loss statement, the balance sheet and the statement of cash flows.
The age of the business, the scale of the business and the type of industry determine the OCF/ net sales ratio.
All these critical elements in receivables management are to be mastered and delivered by professionals in this subject. Several reputed institutes in this country teach advanced financial accounting courses to prospective candidates. Aspirants should enrol themselves in one of these institutes to chase their dream career in receivables management.
Conclusion
Accounts receivable management is a vast subject and requires due diligence by hard-core professionals. There are a few simple steps to get things in the right direction. The selection of key performance indicators is a must to monitor the receivables management process.
Parameters such as Day Sales Outstanding (DSO), Average Day Delinquent (ADD), Turnover Ratio, Collection Effective Index (CEI) etc. should be set as meaningful KPIs. The bill should have all the relevant and adequate information so that no confusion is created in the customer’s mind.
The organisation must stick to the credit policy and amend it periodically as required. Setting up automated polite reminders for payments is also a good practice. And finally, the organisation must engage relevant employees across departments in this process.
What is the biggest risk associated with accounts receivables?
The biggest risk factors are late payment from clients and excessively high days sales outstanding (DSOs).
What are the 5 C’s of accounts receivables management?
The 5 C’s of credit in accounts receivables management are character, capacity, capital, collateral and conditions.
What are the basic issues in receivables management?
Critical issues to be handled are keeping accurate records of transactions and client information, handling client disputes or conflicts of interest, adapting to alternative payment methods and dealing with late payments.
What are the factors affecting receivables management?
The factors affecting receivables management are credit terms, credit volume, credit days and cash discount offered.
