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.
Mark Davison, Senior Director, Order to Cash Services, Corbus
Although the US economy is improving, businesses remain focused on both increasing sales and minimizing or reducing SG&A costs. The "Order to Cash" (O2C) functions of a business continue to represent a significant part of a company's SG&A expenses and are under pressure to achieve long sought goals: to reduce costs and improve productivity, while maintaining or increasing customer service levels. Corbus regards O2C as including the functions of credit management, order processing, logistics/carrier management, returns processing, billing and collections, and reporting and analytics. Prior to the recent recession, these functions could be found sharing or spread across multiple functional areas and budgets. However, as the recession progressed, much of this changed. Businesses often adopted a strategy of separation and identification - that is, segregating these functions organizationally and financially as a way to apply management focus, create accountability and achieve goals for cost reduction/productivity improvement. In many cases these steps led businesses to greater clarity for measuring costs and productivity as well as to establish shared services centers and preposition for outsourcing. While cost savings can result from separation and shared services, cost optimization is best achieved by engaging with a compatible outsourcing partner. Under the right terms of engagement, an outsourcing partner is more easily held accountable for delivering results and attaining challenging goals to adopt efficiencies and improvements, and much more quickly. The partner needs to share mutually beneficial goals, provide intellectual property to add value, and have demonstrated experience in successfully performing the functions to be outsourced under similar conditions. The results can be staggering, with cost per savings on the order of 30% or more while achieving 2:1 productivity improvement and customer service gains.
Is It Time for Your Order to Cash Health Check?
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.