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Order to Cash - The #1 Business Process to Know!
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Order to Cash - The #1 Business Process to Know!

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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.

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.

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  • 1. John Choate – PMMS SIG Chair Scott Pezza – Blue Hill Research QUOTE / ORDER TO CASH (O2C) 2014 UPDATE
  • 2.  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
  • 3.  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 ?
  • 4. 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)
  • 5. 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)
  • 6.  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
  • 7. “Simplified” ETE Order to Cash Process - Visualized!
  • 8. “Another” Order to Cash Process ?
  • 9.  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
  • 10. 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
  • 11. Blue Hill ACES Methodology A C Reduced cost Increased revenue Tech People Budget Headcount E S Company recognition Industry recognition chievements ontributors conomics uccess Productivity Table stakes Process Metrics Payback Meet job KPIs Get promotion
  • 12. ACHIEVEMENTS (A):  Reduced overall costs  Lower Days Sales Outstanding (DSO)  Improved customer satisfaction  Greater ability to forecast cash flows ACES Methodology >> Order To Cash
  • 13. 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
  • 14. 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
  • 15.  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
  • 16.  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)
  • 17. 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% Integrated Order-to-Cash Systems BI / Analytics Electronic Workflow Performance Dashboards Event Management Customer Portal Best-in-Class All Others Source: Aberdeen Group, The Order-to-Cash Cycle: Enhancing Performance with Process Automation (July 2011)
  • 18.  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)
  • 19.  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 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)
  • 20.  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
  • 21.  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
  • 22.  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
  • 23. Join ASUG or Learn About Your Membership Benefits memberservices@asug.com Stay in the Know, Subscribe to ASUG Newsletters Visit asug.com/newsletters Visit ASUGNews.com for independent, unbiased, and customer-focused coverage of SAP. Stay in Touch ASUG BLUE HILL RESEARCH TWITTER: @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
  • 24. John Choate – PMMS SIG Chair Scott Pezza – Blue Hill Research QUOTE / ORDER TO CASH (O2C) 2014 UPDATE

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