Order To Cash

Order to cash (O2C) is one of an organization’s most critical and complex processes, with limited focus from associated functions. It is simply the collection of all activities—from tracking Sales pipeline, Revenue forecast, Resource mapping, Project KPIs till closure and Revenue recognition, O2C business process goes through several cycles and functions.

Although it operates deep in the background, the order-to-cash process can improve almost every aspect of the customer journey and KPIs.

Our analysis of O2C in an IT/ ES companies found that business process comprised as many as 15+ subprocesses across #7different functions. (Sales, PMO, Project Management, Quality, Resource Management, HR, Finance and Revenue) That’s why O2C often falls between the gaps due to lack of ownership.

Transforming the O2C process by adopting a digital platform can help companies boost sales, improve customer satisfaction, reduce costs, and make life easier for employees and, crucially, for customers. Indeed, the benefits of transforming the process accrue in both the short term and the long term. IT and Engineering Services companies who deploy O2C platforms and process can boost revenues by 2% to 5% a year.

Untangling O2C Complexity

Companies are slowly realizing that O2C must deliver results on two fronts at the same time. On the one hand, the process must help deliver customer satisfaction, ensuring that orders are fulfilled correctly the first time and that buyers have the best possible experiences. On the other, the O2C process must meet the organization’s goals for profit maximization by maximizing revenues and being cost-effective and cash-efficient.

However, many current O2C processes have higher costs and points of potential delay built into them because they entail several manual steps. Moreover, many companies are no longer content with a collection of discrete processes in which data is available only at certain stages; they expect O2C to be transparent, with data and performance visible in real time, all the time. Customers have also come to expect real-time data and transparency. The process cannot be standardized without the development of bionic capabilities—executing with a blend of people and technology.

Identifying the Shortcomings

Unsurprisingly, the performance of the O2C process is far from ideal in most companies. Siloed operations, lack of data, and inflexible legacy systems are the three key problems. The platform approach can help address these pain points.

At present, O2C processes are usually supported by siloed systems that are owned by different functions. Typically, finance manages the invoicing, billing, and collections systems; operations is accountable for distribution and shipping systems; and the commercial functions handle order processing and sales. That creates a complex and creaky system, often with limited exchange of information. Customer support, for example, often struggles to provide in real time such basic information as order status, estimated delivery time, and payment receipt. In most companies, employees must manually switch between different systems and applications to transfer data—converting information from an e-invoicing system to a debtor management system, for instance—which can result in more errors, more time, and more stress.

Moreover, executives are bound to lack data about processing times; workflows cross over different applications, so information is not always up to date. Because it’s tough to connect different systems and solutions, many companies rely on employees who have used multiple systems to serve as human application program interfaces and make those connections possible. The paying customer is hardly at the center of the process. Customer data is spread across multiple systems, so finding the right information often takes significant amounts of time and money. The O2C process runs slowly, and companies are unable to serve customers efficiently.

Process problems are often compounded by legacy IT systems that make improvement difficult and hinder the identification of root causes. A monolithic system with heterogeneous ERP systems that have been customized to cover several contingencies results in enormous complexity and cost. Data is scattered over several legacy systems and data lakes; organizations lack transversal technologies and APIs that provide a single view of the data for decision making; and software development is characterized by long release cycles, limited flexibility, and late failures. This quagmire doesn’t change easily; the relationship between IT and the business often suffers from siloed thinking and limited innovation.

The Power of the O2C Platform

As the importance of the customer experience continues to grow, companies must do everything possible to make their order-to-cash processes run smoothly.

Every company needs to develop an O2C platform that unites the associated functions using tried-and-tested technologies and best-of-breed applications. That approach is preferable to deploying different systems for each subprocess or, worse, using a solution that claims to support all the modules effectively but, in reality, offers different features, different levels of ease, and different customer and employee experiences for each subprocess.

Integration is key to conquering complexity. An O2C platform must be able to adapt by incorporating new technologies as fresh solutions to customer needs become available. That’s why the platform’s technology is important. It’s critical for companies to work with open technology that can be easily linked through APIs and readily accessed through web services. Connections, in turn, become richer, with data moving in both directions. The integration of data streams opens up opportunities to manage workflows differently and creates greater transparency for upstream and downstream users.

Optimizing an O2C process by deploying a platform involves three measurable goals:

• Reduce the process cost per order, as measured by the number of orders per employee
• Reduce the number of days’ sales outstanding, by shrinking the process time and the dispute-resolution cycle and avoiding mistakes in activities like pricing, delivery, and invoicing.
• Increase customer satisfaction, by reducing the deductions per order or invoice and increasing the payments received on time and in full.

O2C Platform Design Rules

Companies can create an effective order-to-cash platform by following three simple imperatives: integration, customer centricity, and shared responsibility.

Integration.  Integrating systems is critical to ensure that data flows from one function to another function.

That will create a boundaryless ecosystem that optimizes process performance. For example, a software development company with resources across multiple geographies integrated O2C platform (Upladders) with their existing CRM/ HR/ Finance applications. As a result, it was able to stich business process flow from Sales pipeline to Revenue generation and efficiency improvement by 30%.

Customer Centricity. An effective O2C platform must provide 360 degree view of project cycle with real time KPIs.

Collaboration. When several functions must work in conjunction, it’s important to know who will be responsible for Project initiation, Revenue Milestones, Resource management etc.

Appointing an O2C process owner with responsibilities across functions immediately helped optimize the process. Generally such process is owned by PMO function.

Key Benefits of O2C

With end-to-end integration, an order-to-cash transformation can make quite an impact. Our analysis show that companies can reap the following benefits:

• A 5% to 10% increase in Revenue predictability and conversion
• A 5% to 15% savings in cost, proactive allocation/ De-allocation of resources per Revenue forecast and monetize employee billing rate
• A major boost in customer satisfaction, with intelligent integrated dashboards and MIS, proactive steps can be taken against nonperforming KPIs/ Projects etc.
• Increased employee satisfaction, because work is less repetitive, more time is available for strategic tasks, complexity is reduced, and a spirit of innovation is evident.
• Risk and Early warning indicators

 Companies should keep in mind that in addition to bringing more efficient use of resources, healthier cashflows, and process transparency, optimization of O2C can turn an administrative process into a business driver. When end-to-end process data is integrated, new insights are created. And that can drive better service. For instance, data may provide insights about the low performing projects, Schedule adherence, Employee utilization and productivity.