Essential Guide to High-Volume Order-to-Cash Accounting Automation by Numeral

This guide provides definitions for key terms in the order-to-cash process for high-volume businesses.

Order-To-Cash Accounting Automation: The automation and reconciliation of every FRE that occurs between order placed to cash received in the bank. This includes:

• Order-To-Cash Reconciliation: The reconciliation of the entire order-to-cash process, ensuring that every step from order placement to cash received in the bank is accurately recorded and accounted for. This includes cash reconciliation and bank reconciliation.
  • Cash Reconciliation: The process of reconciling transactions and ensuring they are correctly recorded in the company’s financial records. Usually done at the summary-level as opposed to the individual transaction level.
    • Transaction-Level Cash Reconciliation: A level above traditional cash reconciliation – the process of reconciling all cash-related transactions at the most granular level, as opposed to the summary level. It involves verifying each individual transaction from order-to-cash taking into account all possible variables (taxes, transaction fees, chargebacks, etc), ensuring complete accuracy in financial records.
  • Bank Reconciliation: The process of matching the balances in an entity’s accounting records for a cash account to the corresponding information on a bank statement. Usually done at the summary-level as opposed to the individual transaction level.
    • Transaction-Level Bank Reconciliation: A level above traditional bank reconciliation focused down to the individual transaction level instead of batch level (e.g. what are the 21,270 transactions that were part of this one batch deposit we received in our bank).

Revenue Reconciliation: The process of ensuring that revenue recorded in the financial statements matches the actual revenue transactions. It includes verifying each revenue-generating activity for accuracy.

Revenue Recognition: The accounting principle dictating the specific conditions under which revenue is recognized. In a digital business context, this often involves recognizing revenue at the point of delivering a service or product.

Payment Matching: The process of matching incoming payments to their corresponding invoices. In high-volume transactions, this often involves automated systems to handle the scale and complexity.

Data Reconciliation: The process of ensuring that data across different sources or systems is consistent and accurate.

Real-Time Financial Reporting: The practice of providing financial performance information as it happens, without delay, allowing for immediate analysis and decision-making. Often referred to as a continuous close. 

FRE (Financially Relevant Event): Any business activity that results in a debit or credit. This includes transactions like sales, purchases, refunds, and expenses.

Transaction Fees: Charges incurred for processing individual transactions, often associated with payment processing services.

Dispute: When a customer questions the validity of a transaction that was registered to the account. Is successful in repealing the charge, this results in a chargeback. 

Chargeback: The payment amount that is returned to a debit or credit card after a customer disputes the transaction.

Currency Conversion Rates: The rates at which one currency can be exchanged for another, essential in transactions involving different currencies.

Systems:

ERP (Enterprise Resource Planning): Integrated management software that allows organizations to manage and automate many back office functions related to technology, services, financials and human resources, often centralizing data and processes.

General Ledger: The primary accounting record of a company. It contains all the financial transactions of the business. E.g. NetSuite.

Subledger: A detailed subset of accounts that contains transaction information, which is summarized and posted to the general ledger. E.g. Numeral. 

Payment Processor: A service or platform that handles transactions for digital businesses, facilitating the transfer of funds from customers to the business. Often referred to as a payment gateway. E.g. Stripe. 

Billing Platform: A solution that allows organizations to manage invoicing, payments, reconciliation, and other activities related to billing. E.g. Stripe.

Subscription Management System: A system that allows organizations to offer subscription models with dynamic pricing/purchasing and ownership options for customers. E.g. Recurly. 

Accounting Terms:

FASB (Financial Accounting Standards Board): An independent nonprofit organization responsible for establishing accounting and financial reporting standards for companies in the United States,

GAAP (Generally Accepted Accounting Principles): Standard accounting rules and procedures used in the U.S. to ensure consistency across financial statements, making it easier for investors to analyze and extract useful information.

Sarbanes-Oxley Act (SOX) Compliance: Compliance with the Sarbanes-Oxley Act, a U.S. law that sets enhanced standards for all U.S. public company boards, management, and public accounting firms, focusing on improving the accuracy of corporate disclosures.

ASC 606: The standard issued by the Financial Accounting Standards Board (FASB) regarding revenue recognition, outlining a single comprehensive model for businesses to use in accounting for revenue arising from contracts with customers.

Deferred Revenue: Income a company receives for goods or services to be delivered or performed in the future. It’s recorded as a liability on the balance sheet because it represents an obligation to deliver products or services.

Accrued Revenue: Income that a company has earned but for which it has not yet received payment. This type of revenue occurs when a company performs a service or delivers a product before it bills the customer.

Accrual Accounting: An accounting method where revenues and expenses are recorded when they are earned or incurred, not when cash changes hands. This method gives a more accurate financial picture of a company’s performance over time.

Cash Accounting: An accounting method where revenues and expenses are recorded when actually received or paid, and not when they were incurred. This method is more simple than accrual accounting. 

Audit Trail: A record that traces the financial data from the general ledger to the data source. This trail provides transparency and supports the integrity of the financial information for auditing.