Receiving orders and receiving cash is the lifeblood of a profitable business. However, the activities between the time the order is received to actually receiving the promised cash in the bank account is a process ripe with risks and opportunities. There have been many years of conversations regarding Lean in supply chain and logistics management. An area that should be examined as part of Lean is the order to cash cycle (O2C). This cycle is the full process from receiving a customer order and ending with a receipt of full payment from the same customer. TransVoyant customers have made it clear they want to understand the behavior of both the time component and the paid in full component of the O2C cycle. In order get the most out of the process, its behavior should be understood and then streamlined. The information below identifies areas that can impact the process as well as suggestions to improve the O2C cycle:
Order Management: When looking at the complete O2C cycle, a business needs to consider their order management process and its overall efficiency. Typically, if there is an issue with order management it will be identified through long lead times, shipping errors and client complaints. These errors can be caused by delays between order placement and shipping, delivery of orders that don’t match invoices and incorrect inventory information. The order management process can be streamlined by continually monitoring the behavior of the process and the independent variables that cause delays and errors. Some ways to improve O2C include minimizing the amount of human error by automating the processes, allowing customers to place orders through digital systems, and more.
Bill to Cash: If there is a flaw in the O2C process, it may be caused by unpaid invoices that have aged too long. There are several signs that this bill to cash process needs improvement. These signs include having a large amount of distinctive sales agreements between your company and its customers that specify varying discounts and/or non-standard payment terms. Also, there can be mistakes with the original quotes and incorrect invoicing. Finally, there are often invoices that get sent out late or not followed up in a timely manner. The bill to cash process behavior issues in your company will dictate the strategies used to improve them. However, some best practices we have observed include integrating customer profiles into the billing software so the correct payment terms are applied to each invoice, creating and following organized workflows to follow up on outstanding accounts and providing an online platform for customers to communicate with sales and accounts payable teams.
When looking to improve your order to cash process you need to first know the causal factors driving problems of long cycle times and less than full payments. Discovering those problem areas is difficult without continually tracking the process and behavior of the end to end O2C cycle. Without this approach, companies struggle to identify improvement levers among dozens of potential causal factors. The TransVoyant O2C Insight continually assists our customers with identifying problem areas and correction levers in the end to end process. Our O2C insight tracks the status and behavior of each driver of the order to cash cycle from the moment an order is created to the receipt of a full payment, including contract terms. The insight continually identifies key drivers of the O2C cycle and paid in full performance. The insight monitors both raw performance and variability across the spectrum of independent O2C drivers allowing our customers to take actions to increase cash performance through shorter order cycle times and better paid in full performance.
If you would like to speak to someone regarding continuous understanding and improvement to your order to cash process, please email firstname.lastname@example.org