July 5, 2021
OTC as an Untapped Opportunity
The Order-To-Cash (O2C) cycle is an opportunity that remains largely untapped by many businesses, especially middle-tier companies. Strategically realigning OTC and including new technologies can improve business performance and the bottom line. Companies that recognize this are reviewing how to streamline OTC to assure future business success.
Order-To-Cash is complex due to the many cross-functional activities involved, including sales, credit, order management, invoicing, billing, logistics, collection, cash application, deduction, and dispute resolution. Some of these activities are departmental and others inter-departmental. However, with the latter, many functions are still stuck in departmental silos vs. collaborative steps in one extended process.
For example, large customers (such as big-box retailers) treat “Purchase to Pay,” the other side of the coin, as a seamless, integrated supply-chain process. In contrast, vendors still have siloed functions, often resulting in finger-pointing but not producing comprehensive solutions.
In addition to the negative profit impact of problem OTC operations, there is a long-term impact of poor supplier fulfillment ratings which, ultimately, will lead to a loss of business.
For the better or worse, the results show up in accounts receivable in relevant metrics such as Days Sales Outstanding (DSO, delinquencies, disputes, and deductions, including claims for supply chain compliance failures. By looking at O2C as a unified challenge, companies can improve operations, profits, and customer satisfaction.
Integration with Customers
Holistic integration with customers is, at this point, an idea for the future. Still, there is plenty that can be done today, including, as an example, implementing robotic processes to access the supplier records on customer platforms or automatically obtaining proofs of delivery from transportation carrier systems. In the long-term, technologies such as blockchain offer exciting possibilities for eliminating most of the vendor-customer back and forth required at present.
When the O2C process is decentralized or systems not integrated, the process is more vulnerable to errors, inefficiencies, and costs. In addition, since many large customers evaluate suppliers by their order fulfillment metrics, businesses that receive poor performance grades will impact profitability and shareholder value.
O2C Managed Services
To create a robust O2C process, many organizations look for managed service providers (MSPs)to improve the process. Well-managed, automation-enabled MSPs have proven to deliver a significant return on investment for many companies with a lower cost-to-serve than in-house. Managed services can provide organizations with a sustainable management plan that links all activities to achieve your business objectives.
One issue of concern is that many MSPs, including those with thousands of offshore employees, lack good systems. In addition, many, believe it or not, lack the most fundamental automation, still using spreadsheets for basic receivables functions.
Unlocking O2C Value
Whatever size or style of the organization, all businesses can benefit from improving their O2C processes. In fact, effective management of the O2C processes could be one of the most cost-effective and quickest ways to improve an organization and, therefore, enhance shareholder value.
While activities in the O2C process may seem simple, the task of integration and sustainable management is a challenge. Yet, it is a worthwhile challenge that delivers sustainable, lasting results and offers continuous improvement opportunities for ongoing success.
Even small changes can deliver improvements. For example, just a three-day reduction in Day Sales Outstanding will produce $83 million of cash for a $10 Billion company.
Advanced, integrated automation built on best practices can help businesses achieve significant success with core objectives, including increased cash flow and enhanced customer experience. In addition, state-of-the-art automation can have a swift ROI and deliver a sustainable plan to continue to improve and work towards unlocking more benefits and value.
A quick way to measure the effectiveness of your O2C process is to compare how your accounts receivable metrics compare vs. others in your industry.
As O2C is a whole-business approach, your organization must consider all aspects of people, processes, and technology to achieve a remarked return on investment. Therefore, it is essential to consider O2C as not just a quick win to cut costs today, but a fundamental business strategy that will help growth, customer satisfaction, and shareholder value.