Order to Cash, where to start? At the Opportunity to Cash!
The amount of time consumed by organisations to collect on the receivables that are overdue is a hidden cost and well underestimated.
This cost we hardly see on a P&L as such and therefor we are unsure by the cost related to the process of the total cycle. As we all know: Cash is King, But living upto this principle is harder than we think.
Most organisations have been facing the order to cash principle and have adjusted their collection principles and AR monitoring. Also the DSO (Days of Sales Outstanding) is part of the MT meetings. The experience of AITEM with larger organisations has shown that these parameters hit the boardroom and as such have the attention of management. These parameters are also well comparable with what the competition is doing, or what is standard in the industry.
What did not hit the boardroom was the eagerness and creativity of the salesforce to get the order in, the unclarity of rules accepting an order and revenue recognition for the individual sales, just to name a few. The creation of an order to cash improvement starts with the quality of the order. This means a closer look at the acceptance of the order, the improvement of the information on the customer and the straight forward management of the salesforce. It starts with the Opportunity and how we manage this to Cash.
External information (Credit Companies as Graydon and D&B) provide some rearview mirror information, but can never judge the future payment behaviour. In addition, setting your payment terms for new or current customers is idealy a tailor made custom approach per customer within a corporate Standard Operating Procedure. And than still, bonus structures for the commercial departments must be looked at and monitored. Remember, when the VP sales has gone to the next job with his variable compensation in his pocket, you are still left with the difficult collectables.
AITEM has seen, managed and optimised this process in several occasions and industries. A starting point is allways a scan of current procedures and behaviours. Interested in a further discussion about this topic: contact us through our CONTACT form.