SIG Global Summit 2010 - Williams-Sonoma - Beyond the Benchmark Survey
Order to Cash: What It Is and Why You Should Care | Handshake
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Order to Cash: What It Is and Why You Should Care
While we’ve already discussed metrics like fill rate and visit to order time on the blog, we
haven’t yet talked about Order to Cash––the term that encompasses your end-to-end order
processing system. From opportunity creation to order taking to billing, Order to Cash (O2C or
OTC) isn’t so much a metric as it is a set of processes.
However, we’re including Order to Cash in our Wholesale Metrics series because it’s essential
to look at it with the same analytical eye with which you’d assess your fill rate or visit to order
time. Another way to look at Order to Cash is to think of it as a timeline. By shortening that
timeline and streamlining your entire procedure for processing, invoicing, and collecting
payment for an order, you’ll speed up cash flow, cut costs, and serve your customers better in
the long run.
The first step towards streamlining this process is to look for inefficiencies in your current
system. This will often require a cross-departmental kind of analysis, from sales and accounting
to inventory and logistics. Understandably, this can be overwhelming for any wholesale
business. To break things down, there are basically two major segments to look at in more
detail:
The Order Management Process: how an order is written, submitted for processing, and1.
fulfilled
The Bill-to-Cash Process: how payment is invoiced and received2.
2. The Order Management Process
You’ll know immediately if your order management process is not working properly, because
there will be all sorts of day-to-day problems getting in your way––whether it’s customers calling
in about late shipments or your warehouses accidentally shipping the incorrect items.
These may seem to be small issues when looked at as isolated incidents, but collectively, they
can add up to high costs and damaged customer relationships. Here are a few of the more
common inefficiencies that many wholesalers deal with in this section of the process.
Order Management Inefficiencies
Order re-entry and redundancyq
Order submission delaysq
Complexities stemming from legacy software systems and manual processesq
Order fulfillment errors due to poor handwriting, data entry errors, etc.q
Lack of inventory information during the sales process, resulting in backordersq
Streamlining this part of the process and eliminating these inefficiencies is all about getting to
the root of the problem: outdated processes like writing orders down on paper, sending them via
fax, and having a team dedicated to doing data entry. Here are some best practices to help this
segment of the order-to-cash process run faster.
Order Management Best Practices
Automate systems to minimize the need for manual interventionq
Eliminate the need for order re-entry with a digital order writing solutionq
Optimize processes across all functions, rather than within organizational silos. For instance,q
integrate your digital order writing solution with your back office system or ERP
Remove legacy software systems and complex workarounds that slow down the fulfillmentq
process
Provide sales reps with inventory information and other customer intelligence during the salesq
process, so that they can sell more strategically and avoid backorders
The Bill-to-Cash Process
For a business of any size and SMBs in particular, increasing cash flow is imperative to not just
business success, but to making payroll and meeting expenses. Many smaller wholesalers,
however, still struggle with delays in the bill-to-cash process.