Does a Better Order to Cash Process Start with Better Customer Data?

Improving Ordeshutterstock_227713873 - Copyr to Cash matters regardless of market cycle

Order to Cash (OTC) matters to today’s CFOs and their financial teams even as CFOs move themselves from an expense and cost reduction footing to a manage growth footing. As the business process concerned with receiving and processing customer sales, having a well-functioning OTC process is not only about preserving cash, but it is also about improving the working capital delivered to the bottom line. This is something which is necessitated by successful growth strategies. Specifically, OTC helps to provide the cash flow needed to quicken collections and improve working capital turnover.

This drives concrete improvements to finance metrics including Days Sales Outstanding (a measure of the average number of days that a company takes to collect revenue after a sale has been made) and the overall cost of collections. It should be clear that a poorly running order to cash process can create tangible business issues. These include but are not limited to the following:

  • Accuracy of purchase orders
  • Accuracy of invoices
  • Volume of customer disputes
  • Incorrect application of payment terms
  • Approval of inappropriate orders
  • Errors in order fulfillment

CFOs tell us that it is critical that they make sure that “good cash management is occurring in compliance with regulation”. It is important as well to recognize that OTC cuts across many of the primary activities of the business value chain—especially those that related to sales, marketing, and services.

How do you improve your order to cash process?

So how do financial leader go about improving OTC? They can clearly start by looking at the entire OTC process from quote order, process order, fulfill order, invoice customer, receive and apply cash, and manage credit and collections. The below diagram shows the specific touch points where the process can be improved—each of these should be looked at for process or technology improvement.

customer data OTC Process

However, the starting point is where the most concrete action can be taken. Fixing customer data fixes the data that is used by each succeeding process improvement area. This is where a single, connected view of customer can be established. This improves the OTC process by doing the following:

  1. Fixes your customer data
  2. Establishes the right relationships between customers
  3. Establishes tax and statutory registrations and credit limits
  4. Prevents penalties for delivering tax documents to the wrong placeCustomer Data Mastering (CDM) does this in the following way. It provides a single view of customers, 360 degree view of relationships as well as a complete view of integrative customer relationships including interactions and transactions.

CDM matters to the CFO and the Business as a whole

customer dataIt turns out that CDM does not just matter to OTC and the finance organization. It matters as well to the corporate value chain by impacting the following primary activities including outbound logics, marketing and sales, and service. Specifically, CDM accomplishes the following:

  • It reduces costs by reducing invoicing and billing inaccuracies, customer disputes, mailing unconsolidated statements, sending duplicate mail, and dealing with returned mail
  • Increases revenue by boosting marketing effectiveness at segmenting customer for more personalized offers
  • Increases revenue by boosting sales effectiveness by making more relevant cross-sell and up-sell offers
  • Reduces costs by boosting call center effectiveness by resolving customer issues more quickly
  • Improves customer satisfaction, customer loyalty and retention because employees are empowered with complete customer information to deliver great customer experiences across channels and touch points

Parting remarks

So as we have discussed, today’s CFOs are finding that they need to become more and more growth oriented. This transition is made more effective with a well function OTC process. While OTC impacts other elements of the business too, the starting point for fixing OTC is customer data mastering because it fixes elements of the data portion of this process.

Solution Brief:

Master Data Management

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Twitter@MylesSuer

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