Order to Cash Process

7/31/2019 Order to Cash Process

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COREY PEARSON[ASUG INSTALLATION MEMBER

MEMBER SINCE: 2008

CHAVONE JACOBS[ASUG INSTALLATION MEMBER

MEMBER SINCE: 2003

ALLAN FISHER[ASUG INSTALLATION MEMBER

MEMBER SINCE: 2008

Quote /Order To Cash (O2C)A Brief Overview

John Choate National ChairProgram Management &

Maintenance Strategies (PMMS) SIG

Scott Pezza Research AnalystAberdeen Group


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Real Experience. Real Advantage.

[ What is Order To Cash ?

Order to Cashnormally refers to the Enterprise Resource Planning(ERP) process in which taking customer sales (direct from thecustomer ) orders via different sales channels, such as email,internet, sales person, fax or by some other means like EDI, and thenfulfilling the order, shipping, logistic and then generating an invoice

and collecting payment for that invoice and then receipt.

CASH IS KING !

It is also the lifeblood of any company and it flows through theorder-to-cash cycle.

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http://en.wikipedia.org/wiki/Enterprise_Resource_Planninghttp://en.wikipedia.org/wiki/Enterprise_Resource_Planning


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[ Pressures Driving a Focus on O2C

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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)


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[ Objectives of Order to Cash Improvement

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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)



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[ TYPICAL AREAS AFFECTED BY OTC CYCLEAn Integrated End to End Process

Customers

Sales and Marketing

Customer Service - Order Entry Finance and Accounting

Operations

Distribution

Customers (Cash)

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[ Order To Cash Process

1. Request for Quotation (RFQ)

2. Sales Order with quotation reference

Product Allocation (ATP/gATP)

Credit Limit Check

Service charges

Bill of Material (BOM)

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7/22Real Experience. Real Advantage.

[ Order To Cash Process

3. Delivery Picking with automatic transfer order

creation and confirmation

Picking with manual transfer ordercreation

Confirmation Packing

Posting goods issue

4. Invoice

5. Payment by Customer (Cash)

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[ Simple Business View Order to Cash

Quotation

Sales Order with Ref. to

Quote

Credit Limit Check Availability Check and Allocation

Unlock Sales Order

Delivery Approved

Pick

Pack

Post Goods

Ship

Bill

Payment

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[ Symptoms of 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 bettermanaged companies for product/services

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[

Pressures: External forces that impact an organizations marketposition, competitiveness, or business operations (e.g., economic,regulatory, technology, competitive, etc.)

Actions: The strategic approaches that an organization takes inresponse to industry pressures (e.g. product/service strategy, target

markets, go-to-market, and sales strategy)

Capabilities: The business process competencies required toexecute corporate strategy (e.g., skilled people, brand, marketpositioning, viable products/services, financing, etc.)

Enablers: The key technology/solutions required to sup-port the

organizations business practices (e.g. development platform,applications, connectivity, user interface, training and support, etc.)

Note: Aberdeen utilizes a proprietary research framework called PACE to systematically and objectively develop its researchfindings.

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[PACEFramework Applied To Order To Cash

Pressures (P):

Reduce overall costs

Actions (A):

Streamline front and back office administrative

processes to remove non-value steps.

Automate process flows with electronic workflowtechnologies.

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[ PACE Framework

Capabilities (C):

Standardized enterprise-wide procedures through

quotation to order, order to delivery, and credit/cash

collection.

Up-to-date order, delivery, and billing information is

available in real time, on demand.

Manufacturing and/or service operations are integrated

and coordinated with customer service, logistics, and

delivery organizations.

Real time measurement of on-time delivery, inventory,

DSO, profitability, and cash position. 12


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[ PACE Framework

Enablers (E):

ERP - integrated order entry, procurement, production/resourceplanning and execution, and financial management

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

ERP features or extensions:

Customer Relationship Management (CRM)

Advanced Planning and Scheduling (APS)

Available to Promise (ATP)

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[ Key Metrics For OTC Process

Quotation and Sales Order (SO) Management Aging

Order Fulfillment Period

On Time Delivery (OTD) - % Perfect Order

Finance/Accounting

Invoice Payments Collections

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[

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

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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)


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[ Best-in-Class AR Technology Profile

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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



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[ Performance Results : Average (Middle 50%)



48 DSO

8.6% of AR past due

4.1days for payments to clear the AR ledger



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(March 2008)


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[ Performance Results : Laggard (Bottom 30%)



58 DSO

16.1% of AR past due

11.7 days for payments to clear the AR ledger



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(March 2008)


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[ Increasing Your Success on Order To Cash

Implement or expand automation of the order-to-cash 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 19


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[ Key Take Away Items on Order To Cash Process

Why is Order To CASH so important?

What functional organizations are key to the integrated process?

What are symptoms of a broken process?

What is PACE?

Name 2 key metrics for the O2C process.

Where does your company rank ?

Best-in-Class

Average

Laggard

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[ Key Financial Take Away Items

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 workwith you

Understanding your current and prospective customerscan help reduce non-payment risk and tailor collections

strategies

Communication, between departments and with yourcustomers, is key to efficiency and visibility into cashflows

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[

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] Thank you for participating PMMS SIG / Aberdeen Group

Order to Cash Process

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