Order to Cash - The #1 Business Process to Know!
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John Choate – PMMS SIG Chair Scott Pezza – Blue Hill Research QUOTE / ORDER TO CASH (O2C) 2014 UPDATE
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Order to Cash. Cash is King. Prime elements, points that block successful ETE flow. KPI's/metics and how to guage where your company really ranks: a Business leader, Average, or Laggard.
Transcript of Order to Cash - The #1 Business Process to Know!
John Choate – PMMS SIG ChairScott Pezza – Blue Hill Research
QUOTE / ORDER TO CASH (O2C) 2014 UPDATE
What is Quote/Order to Cash? Why focus on O2C Process? Why Cash improvements? Typical areas effected by O2C process “Simplified” view of Order to Cash Process Common Pinch Points Symptoms of a BROKEN O2C Process ACES KPIs/ Metrics & Results Key Take Aways
PRESENTATION CONTENT
Quote/Order to Cash (O2C) normally refers to the Enterprise Resource Planning (ERP) process in which taking customer sales orders via different sales channels (such as email, internet, sales person, fax or by some other means like EDI), and then fulfilling the order, shipping, logistics and then generating an customer invoice and collecting payment for that invoice and then receipt.
CASH IS KING !
Lifeblood of any company and It flows through the ETE order-to-cash cycle.
What Is Order To Cash ?
KEY PRESSURES:
Why Focus on O2C ?
19%
19%
21%
29%
29%
67%
0% 10% 20% 30% 40% 50% 60% 70%
Percentage of Respondents, n = 140
Customer pressure to extend payment terms
Rising cost of servicing major customers
Inability to accurately forecast cash flows
Customer demand to improve service levels
Risk of customer non-payment or default
Pressure to reduce overall costs
Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
KEY OBJECTIVES:
Why Cash Improvement?
30%
34%
35%
36%
42%
54%
0% 10% 20% 30% 40% 50% 60%
Percentage of Respondents, n = 140
Manage credit risk, losses from bad debt, and
collections expense
Improve transaction efficiency
Reduce 'customer-to-cash' or 'order-to-cash'
cycle
Reduce receivables processing cost/time
Improve cash flow forecasting/guidance
Reduce Days Sales Outstanding (DSO)
Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
Customer (Quote/Order)
Sales
Customer Service
Finance and Accounting
Supply Chain
Fulfillment / Logistics
Customer (Cash)
TYPICAL AREAS AFFECTED BY O2C CYCLE An “Integrated “ End to End Process
“Simplified” ETE Order to Cash Process - Visualized!
“Another” Order to Cash Process ?
Number of ways a order can be placed
Sales Order Integrity
Automated versus Manual Product Linkage
Customer status
New, Preferred, Repeating, etc.
Credit Limit
Method of Payment
Availability of Product
Carrier Availability & Mode
Customer Satisfaction
RMA Process
Common Pinch Points
9
Symptoms of a BROKEN Order To Cash Process
High order-taking error rates
High order-fulfillment error rates
High DSO (Days Sales Outstanding) rates
High cost of dispute resolutions
Inefficient/ineffective collection processes Long-term losses due to customers going to better managed companies for
product/services
Blue Hill ACES Methodology
A
C
Reduced cost
Increased revenue
Tech
People
Budget
HeadcountE
SCompany recognition
Industry recognition
chievements
ontributors
conomics
uccess
Productivity
Table stakes
Process
Metrics
Payback
Meet job KPIs
Get promotion
ACHIEVEMENTS (A):
Reduced overall costs
Lower Days Sales
Outstanding (DSO)
Improved customer
satisfaction
Greater ability to forecast
cash flows
ACES Methodology >> Order To Cash
CONTRIBUTORS (C):
Event management (triggers and alerts)
Electronic interfaces to banks and
customers
Web-based and electronic sales order
management application
Credit management solution
Electronic Invoice Presentation and
Payment solution
Enterprise (ERP) features, extensions, or RDS packages: Tiered Dashboards (KPI’s/Metrics) /
Analytics Customer Relationship Management
(CRM) Advanced Planning and Scheduling
(APS-APO) Sales & Operations Planning (S&OP) Procurement (Business Commerce &
Cash Management) Extended Warehouse Management
(ETE execution tools)
ACES Methodology >> Order To Cash
ECONOMICS (E):
Headcount – Redeployment of FTEs on more value-adding tasks or lower total number of FTEs required.
Budget – Improved collections, lower DSO, and less bad debt provides additional cash flow to fuel Business growth & productive operations.
SUCCESSES (S):
Sharing your experiences with ASUG peers SIG Webinars – Business Use cases
Industry wide recognition of great results
ACES Methodology >> Order To Cash
Quotation and Sales Order (SO) Aging
Order Fulfillment Period
On Time Delivery (OTD) - % Perfect Order
Finance/Accounting Invoice Payments Collections
Key KPIs & Metrics Benchmark: KPILibrary.com
31% improvement in order-to-fulfill cycle time
97% complete and on-time shipments
33.5 DSO
3.3% of AR past due
1.3 days for payments to clear the AR ledger
16.2% of invoices require manual intervention
2.6 days from completion of product/work to invoicing
Performance Results: Best-in-Class (Top 20%)
Sources: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011);Aberdeen Group, The Order-to-Cash Cycle: Integrating Business Processes to Improve Operational Performance (March 2008)
AR Technology Profile
BEST IN CLASS
50%47%
43% 43%
37% 37%33%
26%23% 23%
18%
12%
0%
10%
20%
30%
40%
50%
60%
IntegratedOrder-to-Cash
Systems
BI /Analytics
ElectronicWorkflow
PerformanceDashboards
EventManagement
CustomerPortal
Best-in-Class All Others
Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
15% improvement in order-to-fulfill cycle time
88% complete and on-time shipments
48 DSO
8.6% of AR past due
4.1 days for payments to clear the AR ledger
44.9% of invoices require manual intervention
3.9 days from completion of product/work to invoicing
Performance Results : Average (Middle 50%)
Sources: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011);Aberdeen Group, The Order-to-Cash Cycle: Integrating Business Processes to Improve Operational Performance (March 2008)
58 DSO
16.1% of AR past due
9% improvement in order-to-fulfill cycle time
83% complete and on-time shipments
11.7 days for payments to clear the AR ledger
79.9% of invoices require manual intervention
6.1 days from completion of product/work to invoicing
Source: Aberdeen Group October 2010
Performance Results : Laggard (Bottom 30%)
Sources: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011);Aberdeen Group, The Order-to-Cash Cycle: Integrating Business Processes to Improve Operational Performance (March 2008)
Implement or expand automation of the Order-to-Cash (O2C) cycle.
Standardize procedures for quotation and order management.
Integrate order entry, credit, billing, and collections.
Investigate benefits of event management and automated alerts.
Centralize customer risk information in a single location.
Keep up on regular scoring of the A/R portfolio.
Continue growing electronic volumes of POs, invoices, and payments.
.
Steps For Increasing Your O2C Success
20
Improving efficiency addresses both the top pressure (cost) and the most-cited objective (DSO)
Improvement comes from streamlining internal processes and making it easier for customers to work with you
Understanding your current and prospective customers can help reduce non-payment risk and tailor collections strategies
Communication, between departments and with your customers, is key to efficiency and visibility into cash flows
Key Financial Take Away Items
21
Cash is King!
BROKEN O2C PROCESS = Potential lost customers!
ACES can focus your O2C success!
Order Fulfillment period is a key O2C metric.
Where does your company rank as a O2C process leader?
Best-in-Class
Average
Laggard
Key Take Aways
22
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Stay in Touch
ASUG BLUE HILL RESEARCHTWITTER: @ASUG365
FACEBOOK: https://www.facebook.com/ASUG365
LINKEDIN:
http://www.linkedIn.com/groups/Americas-SAP-Users-Group-ASUG-112172/about
TWITTER: @BlueHillBoston / @ScottPezza
WEBSITE: http://www.bluehillresearch.com/
LINKEDIN:
https://www.linkedin.com/company/blue-hill-research
https://www.linkedin.com/in/scottpezza
John Choate – PMMS SIG ChairScott Pezza – Blue Hill Research
QUOTE / ORDER TO CASH (O2C) 2014 UPDATE
