CFOs and other executives know that the order to cash (O2C) cycle in any business is its backbone - it extends out and touches just about everything in a firm's back office and customer facing departments. They also know there are numerous opportunities for problems and breakdowns, any of which can seriously impact customer service, cost and financial results. What's the best way to diagnose these problems? How can they be fixed permanently, with reduced overall costs and improved overall results? This can be very challenging – like operating on the patient while the patient is working everyday. Additionally, it's often difficult to get these fixes done from within the business. The first step is to take a hard look at each of the key areas of O2C – credit management, order fulfillment, invoicing, returns, logistics, payment processing, collections and reporting – to identify opportunities to improve, reduce cost, and smooth out problems that may be causing headaches for internal and external stakeholders. The problems can be varied. It's not uncommon to see high volumes of order entry errors, too many orders delivered after date promised, extraordinary number of returns, inconsistent use of SKUs, high level of customer complaints and repeated escalations relative to the order volume, price lists/promotions not up to date, and manual handoffs between teams that don't go well. We have also seen inappropriate metrics, some of which actually drive the behavior of the O2C staff in the wrong direction. The next step is to drill down to the root cause, understand what's really required, and then implement the changes needed. Investing time in diagnosing a company's O2C "pains" is the first step in optimizing order to cash processes and well worth the effort. With optimization comes cost savings (it's possible to achieve 30% reduction in cost per order, 50% savings in labor costs, and a 40-50% increase in throughput), improved productivity and cash flow, and greater customer satisfaction. Don't let the patient continue to suffer needlessly! Operate now – while the patient is actively working – so that improvements can begin immediately.
Mark Davison is a Senior Director, Order-To-Cash Services for Corbus. He is the author of Corbus' proprietary "Cost Optimization Methodology," the firm's implementation strategy for order-to-cash services that enables clients to expedite transition and minimize startup costs when outsourcing order processing services.