The Accounts Receivable and Order-to-Cash Conference is produced by: 5/31/2016
Order to Cash
Re-engineered
j. bicking 2016
The Accounts Receivable and Order-to-Cash Conference is produced by: 2 5/31/2016
Introduction
• Business World:
– Very challenging
– Unpredictable
– Rapidly Changing
• Business Conditions:
– Economic crisis
– More competitive
– Fraud
– Ongoing threat of terrorism
The Accounts Receivable and Order-to-Cash Conference is produced by: 3 5/31/2016
Leadership • Four Key Elements
– Communication of Mission, Vision and Values
– Goals and Objectives to achieve MVV
– Give and Receive feedback
– Support Mission, Vision and Values
• Removing Preconceived Perceptions
– Office work can be re-engineered
– The organization can be restructured (silos, mgmt.)
– Can ask for help
Hardest Message
The Accounts Receivable and Order-to-Cash Conference is produced by: 4 5/31/2016
WLHY Why?
• Cash Management:
– can’t just be the worry of the CFO
• Getting orders:
– can’t just be the worry of the CMO/COO
• To survive: challenging, unpredictable,
rapidly changing, competitive, fraudulent
world: EVERYONE MUST CARE !
The Accounts Receivable and Order-to-Cash Conference is produced by: 5 5/31/2016
B2B and B2C Statistics
• “The vast majority of bankruptcies are now
filed by consumers and not by businesses.”
– Reason:
B2C: Pre 2005 was due to medical expenses;
after: reduced income, job loss, credit debt,
illness/injury, unexpected expenses and
divorce. “debt.org”
– B2B: Cash Flow: debt
– US Gov’t: 96+/min
2016 Total Business Consumer
844,495 24,735 819,760
The Accounts Receivable and Order-to-Cash Conference is produced by: 6 5/31/2016
We don’t have time to do it right,
but we have time to do it over • O2C is laden with:
– Errors
– Long cycle times
– Customer Deductions are usually valid
– Laws & Regulations are changing rapidly
– Potentially missing orders and
– Losing Customers
The Accounts Receivable and Order-to-Cash Conference is produced by: 7 5/31/2016
Ask Questions:
• Is there enough money being received to
meet the needs of the business?
• How do we protect the cash from fraud?
• What is the cost of the process?
– Errors
– Labor
– Loss of Customers
– Compliance
– Fraud
The Accounts Receivable and Order-to-Cash Conference is produced by: 8 5/31/2016
5% Reduction = 30% Increase
Fact: 5% reduction in operating cost
equals a 30% increase in sales in terms of effect on the bottom line! Gartner Group
The Accounts Receivable and Order-to-Cash Conference is produced by: 9 5/31/2016
Think End-to-End • P2P (Procure to Pay) Example
– Headcount (one time hit, don’t reduce all)
– Invoices Paid on Time (DPO)
• 36% on early pay discount
Dynamic Discounting
• Accept New Pay Methods
– Process: (30%) Doc Mgmt
– Accurate / Compliant
• Discounts (36%) • Dynamic Disc.
• New Pay Methods • Spend Management • Process: (30%)
• Cont’d benchmarking • Cont’d Education
• Compliance
The Accounts Receivable and Order-to-Cash Conference is produced by: 10 5/31/2016
Order to Cash Process
Thought of need
Order Fulfillment
Submit a PO
- Large dollars: request a quote - 3-5 suppliers - May require a
formal contract
Invoice & packing slip are
prepared
Deliver goods or service
Receipt of goods/serv
ice
Find suppliers
Use existing preapproved suppliers or have purchasing locate appropriate supplier
Sales Order is created on ‘approved’ suppliers
Based on terms
- Packing slip w/package
- Invoice to AP
80% of mismatches
Payment to
supplier
Carrier is contacted
Goods are pulled from inventory or Service is prepared
Need Spec’s
Order Acknowledgment: Confirms all product/service details & terms
Customer
Customer
Credit Research Set Credit
Line
Quote / Contract
O2C
O2C O2C
Financial Statement
Payment Cashed
INTERNAL CONTROLS
INTERNAL CONTROLS
The Accounts Receivable and Order-to-Cash Conference is produced by: 11 5/31/2016
O2C: Reduce Cost & Improve
Market Share – Headcount (one time hit, don’t reduce all)
– Invoices Paid on Time / DSO
– Accurate / Compliant
– Increase customer base: New Pay methods
– Discounts (36%)
• Dynamic Discounting
– Cont’d Education / Compliance
– Process: (30%): Continued benchmarking
The Accounts Receivable and Order-to-Cash Conference is produced by: 12 5/31/2016
Building a O2C Team
The Accounts Receivable and Order-to-Cash Conference is produced by: 13 5/31/2016
S Sponsorship
• Sponsor
– CFO & COO & CMO vs. One Chief Officer
• What should the organization look like
– Eliminate Silo’s
– In-House vs. SSC and/or Outsourcing
• Provide dedicated time
• Support ~ No work arounds
The Accounts Receivable and Order-to-Cash Conference is produced by: 14 5/31/2016
f Kick-off Meeting
• To the O2C community
• Lead by Sponsor
• Vision, Mission, Value and Goals
• Ask for cross function team members
• Organizations Participation
• Guidelines:
– Structure
The Accounts Receivable and Order-to-Cash Conference is produced by: 15 5/31/2016
f Cross-functional team
• Rules: Process not People
• Collaboration
• Dedicated work space
• Budget:
– Training
– Travel
– Team building meetings
• Empower them
- Customer - Sales - Credit Manager - Ordering - Order Fulfillment - Billing - Customer Master File - Cash Application - Deductions - Audit - Information Technology
The Accounts Receivable and Order-to-Cash Conference is produced by: 16 5/31/2016
f Recommended Training (1 of 2)
- Team Building Day: activities to develop
collaboration
- O2C Certification, which will provide: o End-to-end O2C training and tools
o Embrace & build change management into the process
o Information on compliance, laws and regulations
o Policy and procedures guidance
o Internal Controls to prevent fraud
oMetrics
The Accounts Receivable and Order-to-Cash Conference is produced by: 17 5/31/2016
f Recommended Training (2 of 2)
- Project Management
- Presentation Skills
- Leadership
- How to map and build workflows
- Not everyone needs all the training, depends on
role
The Accounts Receivable and Order-to-Cash Conference is produced by: 18 5/31/2016
Process to Re-engineer (1 of 4)
• Pre-work:
– Survey to get involvement:
They need to be “Heard”
• Mapping Meeting
– Map the Current Process against P&P
– Identify weakness in process
• Supported by metrics
– Eliminate “noise”
Communicate
The Accounts Receivable and Order-to-Cash Conference is produced by: 19 5/31/2016
Process to Re-engineer (2 of 4)
• Research
– Seminars
– Workshops
– Benchmarking
– TARN
• Design Sessions
– Map new processes
– Write new P&P
– Write new Job Descriptions
Communicate
The Accounts Receivable and Order-to-Cash Conference is produced by: 20 5/31/2016
Process to Re-engineer (2 of 4) Process to Re-engineer (3 of 4)
– C-Suite Goals and Objectives (MVV)
– Laws and regulations built in
• OFAC
– Internal Controls to protect the cash:
• It can & does happen
– Benchmarking
• Validated best practices
– Setting Cross functional KPI’s
– Sponsorship approval
Communicate
The Accounts Receivable and Order-to-Cash Conference is produced by: 21 5/31/2016
Process to Re-engineer (4 of 4)
• Testing
• Implement
• Change Management
• Celebrate
• Next Process
Communicate
The Accounts Receivable and Order-to-Cash Conference is produced by: 22 5/31/2016
Some things to consider
The Accounts Receivable and Order-to-Cash Conference is produced by: 23 5/31/2016
Automation Maybe an Answer
The Accounts Receivable and Order-to-Cash Conference is produced by: 24 5/31/2016
Types of Technology – On-line ordering that validates information and
passes through to:
~ Order Fulfillment to ~ Distribution to ~ Billing to
~ Cash Application to ~ Collections to ~ Customer History
– Automated Cash Application
– Contact Log Management
– Document Management (scanning and imaging)
– Accessing the customer’s AP Portals
– Collections: prioritization, communication, reporting & analytics
– Credit scoring
The Accounts Receivable and Order-to-Cash Conference is produced by: 25 5/31/2016
d OR Outsourcing Maybe the Answer
The Accounts Receivable and Order-to-Cash Conference is produced by: 26 5/31/2016
K Key O2C Metrics
Number of prompt payment discounts
captured, number not taken
Number of deductions by type
Number of cancelled orders
Number of orders returned and reasons
Duplicate/erroneous payments processed
Percent of bad debt
Percent of debt turned over to agency or
lawyer
Percentage of invoices sent electronically
Percentage of payments received
electronically
Number of customer incoming inquiries
Number of collection calls
Percent of market share
Cost per transaction – sales order, billing,
customer application, cash applications,
Cycle time – from order to cash, to include each
process
Number of orders with an amount less than
1,000
Invoices that include a PO number vs non-PO
orders
Number of electronic transactions vs. paper
(orders, invoicing, customer applications,
customer master file request to ‘add or change’,
Number of invoices billed per FTE
Number of invoices paid on time
Backlog of open items – number, value, and age
Days sales outstanding and best possible days
sale outstanding (DSO/BPDSO)
The Accounts Receivable and Order-to-Cash Conference is produced by: 27 5/31/2016
K Efficiency vs Effectiveness
Efficiency:
• Cost per transaction
Number of transactions per FTE
Span of control (one manager
functions and/or people)
Order cycle time
Invoice processing cycle time
Percent electronic transactions
Automation level
Effectiveness :
• First pass rate
• Streamlined transaction strategy
• Level of centralization
• Training investment
The Hackett Group
The Accounts Receivable and Order-to-Cash Conference is produced by: 28 5/31/2016
Activity Based Management
• Strategy – Obtaining financial and
operational performance data at the product
or service level can result in more effective
control because knowing what things cost
and having the ability to associate costs
with their causes enables the costs to be
managed more effectively. This information
can also aid in making better business
decisions.
The Accounts Receivable and Order-to-Cash Conference is produced by: 29 5/31/2016
v Summary
• Re-engineering is a wise investment with
Great paybacks: Reduced Cost & Larger
Market Share for increased profits.
– Plan thoroughly: MVVG
– Build in compliance
– Prevent Fraud
– Communicate~Communicate~Communicate
– Metrics = validation (baseline & progress)
– Recognition