The downstream impact of inaccurate or delayed Order-to-Cash processes are enormous to an organization:
- Customers are frustrated, impacting satisfaction, retention, and the ability of a company to increase overall revenues. In a digital world, where customers share their frustrations, you want your OTC cycle to be accurate
- Internal remediation is time-consuming, difficult, and costly. These problems may include customer returns, inventory issues, data issues, system issues, pricing errors, delivery issues, and service backlogs. The resources necessary to correct them can be substantial.
- Order-to-Cash delays generate delays in cash flow, and can severely impact the financial health of the organization.
The Order To Cash Process is typically defined as follows:
A typical OTC cycle may look like the following:
SAP illustrated several different Order-to-Cash processes on their recent blog post, Order-to-Cash: Selling and delivering materials and services:
- Order-to-Cash (Project-Based Services)
- Order-to-Cash (Standardized Services)
- Order-to-Cash (Sell-from-Stock)
- Order-to-Cash (Third-Party Order Process)
- Order-to-Cash (Specified Products)
SAP defines the key components of Order-to-Cash as contract & order management, order fulfillment, delivery and execution (for services), invoice management, credit and collections, payment, and analytics.
While that appears to be simple, the actual OTC cycle may involve dozens of touch points for data entry, trigger multiple processes internally within the organization, and be a central source of customer satisfaction or frustration.
Major issues within their OTC cycles:
- Accuracy – is the customer and order information accurate? System and process issues can compound the ability of companies to record exact order and billing information, leading to complications downstream.
- Delay – if inaccurate, fulfillment may be delayed or required to be corrected and repeated.
According to IBM’s study, Top five practices contributing to best-in-class order-to-cash performance, companies that adopted best practices in Order-to-Cash were 81% more effective at order management. The leading best practice?
Using tools for automatic assessment and cleansing of customer and product data.
ERP and the Order-to-Cash Cycle
Co-sponsored by SAP, an Aberdeen survey revealed ERPs can speed up the order-to-cash cycle. Companies with the most efficient cash flow utilized ERPs to:
- Standardize procedures
- Automate and execute credit checks throughout the cycle
- Integrate operations and applications end-to-end
- Access data in real-time, on-demand
- Build visibility into the process for customers
- Automate process steps with minimal intervention
- Set up process alerts and exceptions
- Report on on-time delivery, inventory, and cash flow
One survey respondent:
“By re-engineering our processes and modeling them in our ERP system, we were able to reduce DSO by 40%. As our sales grew 30%, we were able to grow margins an additional 20% through reduced inventory of slow-moving items. We also reduced late deliveries.”
ERP and Order-to-Cash Automation
While ERPs offer integration and automation processes, they often lack the features and intelligence necessary to maximize the return on investment from your ERP. Robotic Process Automation (RPA) is rapidly filling in the gaps and has become essential in the OTC cycle. In Forrester’s report, The Forrester Wave™: Robotic Process Automation, Q2 2018, (gated content) estimates that there will be 4 million robots doing sales and administrative related tasks.
Robotic Process Automation has grown to fill the gaps in ERP OTC automation and provides the following benefits:
- Your automation partner can focus on more integrations, improved automation, rapid deployment, and fast implementations while you focus on your business.
- Your employees can focus their efforts on creative solutions to enhance sales, products, and services rather than working on internal processes, data entry, and remediation.
- Your automation partner can have unlimited scalability, reliability, and security by utilizing cloud technologies to deploy continuous updates.
- Your automation partner can rapidly deploy with flexible licensing that helps you achieve a faster return on investment for both the automation and your ERP.
But Is It Effective Business Process Automation?
Integrations and automation have been around as long as the digital era. Modern digital transformation depends on the ability to take repeatable tasks and deploy programmable bots to execute them. Bots alone can’t fix the issues necessary to fully realize and maximize automation within the organization, though. Business process automation incorporates the ability to look beyond single tasks and view the OTC process in its entirety.
Business Process Automation of OTC:
- Isn’t constrained by the user interface of your ERP. Clear Software can rapidly deploy user interfaces that replace dozens of screens, ensuring OTC accuracy and enforcing standards throughout the process. User experience automation simplifies order entry, quality controls, third-party integration, reduces DSO and other key metrics/KPIs, and assists your leadership in viewing the entirety of your OTC process.
- Deploys reliable integrations through the ERP and third-party APIs. Traditional RPA providers utilize screen automation, putting automation at high risk as ERPs modify their interface.
- Can provide intelligent, flexible engines that easily convert data elements to diverse formats and that can communicate a single activity to multiple systems.
- Can incorporate machine learning and artificial intelligence to pinpoint inefficiencies in your OTC cycle, learning and improving both the process and predictability of performance.
What Key Metrics can you use to Measure Order to Cash Performance?
Senthil Kumaran, Operations Manager of Invensis Technologies, did an exceptional article on how to analyze how efficient your order to cash process is operating. He includes the following five metrics:
- Revenue Percentage – informs if the income generated from this process makes up a sufficient proportion of the earnings of the company or whether there are earnings coming from other sources.
- Individual Productivity – this ratio measures the productivity of each individual to ensure that they can optimize and predict manning levels.
- Calculation of DSO – the calculation of Days Sales Outstanding (DSO) is critical for both analyzing the process as well as the financial health of the organization.
- Regular Reports – provide accurate snapshots and trends of DSO, bad debt, discounts, error rates on order fulfillment, the volume of aging accounts, and more.
- Automation – measuring the extent of automation, how much work is still accomplished manually, impact on error rate reduction, order fulfillment speed, and reductions in DSO will all provide the return on investment and drive further optimization in your OTC process.
If you’d like to hear more about how we can reduce your DSO, eliminate data issues, improve your Order-To-Cash process, and increase the Return on Investment for your ERP, please contact us.