Image may be NSFW.
Clik here to view.
The order-to-cash process is the circulatory system of every business. As with the human circulatory system, there are many ways this process can break down, and seriously erode the overall health of the business.
Diagnosing and fixing order-to-cash symptoms is not easy, because the order-to-cash process is complex from many perspectives. It involves:
- Multiple technology systems or application modules
- Multiple locations
- Multiple departments and job roles
- Multiple stakeholders
Much of the inefficiency we see in this core business process arises from an inappropriate approach to making decisions and changes concerning any of the technology or business processes involved in order-to-cash.
Without strict change control over the processes and technology, some companies are allowing decisions to be made on the fly, resulting in in an order-to-cash process that yields significantly less cash than it should! Some real world examples from our project teams include:
Symptom: A CPG company that required a return merchandise authorization (RMA) to match the quantities on a purchase order (PO). Some of their customers returned products across multiple POs.When a customer service rep could not find these POs, they created a new PO just to process the return against. This workaround skews information inappropriately in any number of reports.
- Diagnosis: It’s not just this process that’s broken. The company needs to devote more effort to process definition, with review of exception handling by all impacted stakeholders.
Symptom: High volume of billing errors, requiring significant effort in reviewing/correcting invoices and handling customer inquiries. Your staff might also be trying to review every order and every invoice because of the historically high rates of errors. You’ll start to see a drag on your Days Sales Outstanding (DSO) metric as well.
- Diagnosis: There are many possible causes here: price lists and promotions being maintained offline, manual re-entry of orders from handwritten order forms, lack of automation in the order approval workflow, undue delays in entering orders, manual handoffs to fulfillment team, to name a few. While there are many causes,it’s easy to see that investments in automation here can have a significant effect on cash flow (especially important in the current economy), because even a small reduction in DSO can have huge returns.
Symptom: High volume of customer inquiries and high volume of customer complaints, coupled with long average call times, as well as repeated or escalated calls to follow up on the same issue.
- Diagnosis: The CSRs may not have real-time access to the right information to address customer inquiries (order status, credit hold status, account balances). Tighter integration and better training can often address this.
Other organizations realize that an ounce of prevention is worth a pound of cure, and proactively monitor key performance indicators (KPIs) across the order-to-cash process. These include:
Contact to sales order: leads (number and cost), qualification (lead conversion ratio), quote (gross margin and average discount) and closing (win/loss ratio and time to close/sales cycle).
Order fulfillment: Order-to-delivery performance data includes metrics related to customer orders (number of new or open orders and number of orders with errors, number of orders delivered on the date promised to the customer
Invoice to cash: Metrics include number and value of invoices created, sent and disputed as well as cash received or accounts receivable days outstanding.
In summary, to make sure your order-to-cash process is not leaking cash, adopt the following measures:
- Strict change control over all the processes and technology.
- Adopt and track key metrics to help you find and address inefficiencies.
- Take a look at the integrated operating platform between your customer relationship management (CRM), Order Entry, Finance and Supply Chain Management systems. Too many manual interventions across the lifecycle of an order leave the doors wide open for errors on orders and invoices that could significantly impact your bottom line.
Tagged: business process, business process_adoption, business strategy, order-to-cash, program management, programs, Project Management, projects Image may be NSFW.
Clik here to view.
Image may be NSFW.Clik here to view.
