Increasing Working Capital and Transforming Your Order-to-Cash Process

Now is the time to explore adopting longer-term and more sustainable cash management activities to drive future agility.

Imagine you could put your company’s cash conversion cycle under a microscope. What would you find?

A glitch here, a miscommunication there, perhaps some technology and human errors that would have been hard to detect in real time. However, a successful cash management process depends on getting these details right.

The good news is that when you start to transform your cash management process by uncovering weaknesses in the cycle and correcting them, you can increase cash flow and resiliency.

In the current economic environment, it may be tempting to focus on putting out fires, but you also need to consider building a sustainable model for future growth. Whether market conditions improve or deteriorate, or unexpected difficulties occur, getting cash management under control will help your company remain healthy.

Building up cash flow and minimizing risk often requires linking operations across multiple functional areas while provided accurate and real-time data and insights to the organization.


How do you optimize operations? Keep it simple.
  • Reinvent your processes. Integrating functions can help you uncover new efficiencies.
  • Activate information and analytics. Use data driven insights to guide decision-making and business performance across all functions.
  • Accelerate organizational agility. Consider how to infuse speed, flexibility, and collaborative behavior into the organization to capitalize on market opportunities.



Focus on core activities

The key to achieving progress at an expedited pace is to hone in on core activities that directly link to the underlying processes of working capital management.

In other words, don’t get caught up in the small stuff. Stay focused on priorities. That may sound easier said than done. However, finance organizations can establish a formal cash collection initiative to maintain focus on managing cash across the organization.

Through this initiative, finance will assess and analyze the strategy, organization, process, technology, people, and governance that drive performance. What’s not working? What’s slowing down payment? How can you bridge the gaps?



Optimize the process

There is no getting around the fact that the order to cash (OTC) cycle is full of pitfalls, and some of them are easy to miss and hard to track. Weak areas are vulnerabilities. Fortunately, you can correct them by tracing the journey from your customer-facing front office revenue generators to your back-office transactions.

A comprehensive back-office and front-office transformation will yield savings and enable your organization to create scalable infrastructure to support new growth.



Shore up weaknesses in your front office

Optimize sales, marketing, and customer support functions upfront to prevent problems later. Front office transformation will accelerate your opportunity to order process and increase the quality of data and transactions that flow to the back office. In turn, this reduces the volume of inaccurate transactions, which will provide operational efficiency and savings. Front-office transformation can also boost employee productivity.

  • Opportunity management: Your company may want to empower your sales team with the flexibility to upsell or cross-sell. However, make sure the sales team communicates any non-standard terms and conditions to the back office. An early breakdown in communication causes bigger problems down the line.
  • Pricing management: A lack of pricing governance results in unprotected margins. Gather and manage data to make optimal pricing decisions. Establish and monitor governance without compromising on flexibility.
  • Order management: Slow booking or other data errors may cause inaccurate billing. Think through offering self-service capability for customers to check their accounts and contracts, and request services.



Revamp back-office transactions

Cultivate effective and accurate accounting, administrative, and support services. Back-office transformation can drive immediate savings through lowering transaction costs, attaining guaranteed metrics, increasing working capital, and reducing risk. Scrutinize the entire cycle, including:

  • Orders processing: Manual data entry is error prone. Look at platforms to troubleshoot and provide preventive maintenance.
  • Billing: Does your order data flow automatically to billing? Your transformation plan should include closing any gaps.
  • Collection: Customer inquiries and other delays lead to increased days sales outstanding (DSO). Tighten up collections by shortening payment terms. Give your employees the tools to follow up on past-due bills. Perform a segmentation exercise to tailor the collections efforts and strategic collection techniques to customers’ payment behaviors.
  • Dispute/deductions: A lack of self-service capabilities can trigger a large volume of disputes and unnecessary customer calls. Investigate root causes of disputes and nonpayment to identify common issues that give customers an excuse not to pay. Often, such disputes are the result of internally controllable factors such as pricing and discount policies.

Reviewing these processes will help you to execute effective cash application and reporting.



Consider these OTC best practices

  1. Centralize OTC operations. Ensure standard process, technology, governance, and oversight.
  2. Explore technology that will minimize or eliminate manual order management, invoicing, and cash application. Instead, use e-commerce and other digital tools to optimize order creation.
  3. Resolve customer issues by collaborating across functions. Use simple communication. Try an integrated collection tool to increase visibility of languishing invoices and “problematic” customers.
  4. Set KPIs by consolidating reports and data at the corporate level.
  5. Make sure you have a robust governance model in place via a center of expertise that is responsible for analysis, standardization, and continuous improvement. Try a comprehensive workflow tool to document approvals and resolve issues with cross-functional teams.
  6. Strengthen internal controls. Actionable reports measure order processing KPIs, drive collections, and resolution of customer disputes.
  7. Use standardized customer and product master data governance.



The big picture–build a road map to transformation

  • Analyze the “as-is” picture. Understand current processes and operating model. Analyze current organizational structure and applications landscape.
  • Uncover cost reductions. Identify working capital and metrics improvements, like reducing DSO. Find ways to enable transformation, such as self-service.
  • What does transformation look like in the future? Centralization? In-house shared services? Define KPIs for the future state of operations.
  • Begin to implement your plan. You may need to call on outside resources to assist.



The power of end-to-end automation

You can digitize your end-to-end cycle from customer onboarding to collections. Save paper as well as the energy, people, and touch points needed to manually deal with it.

Key benefits of automation.

Automation can help you unify data, reduce errors, cut costs, and fast track processing.

From a strategy standpoint, automating frees up finance and accounting to work with better analytics to generate better reporting and optimize efficiency. Results often include lower operating costs, improved scalability, and increased collaboration.

On the front end, your company can drive greater revenue by increasing sales and developing customer service and loyalty.

Pick the right platforms for your unique business needs.

Automation can include an à la carte menu of products and services such as cloud services, web portals, enterprise resource planning (ERP) accounting systems, B2B document management, dashboards, and more. It could also mean relying on a single platform that covers all needs.

Look for underlying problems before digitizing any steps. You do not want to get better and faster at making mistakes. A careful analysis will show you where you need automation most.



Find objective advice to help you make decisions thoughtfully (and quickly)

Over the course of my 20 years, I’ve assisted my clients with their finance transformation, governance and project management efforts. My focus is to create solutions that optimize their operating model to achieve an increase in their operational efficiencies, effectiveness, and controls through enabling technologies and improved service delivery models.

Remodeling cash management requires resources and expertise. In the current environment, many companies are short-staffed or unable to mobilize without additional help. An objective professional can help provide a roadmap to get your strategy up and running.

If you’d like to discuss the best course of action for the cash management challenges you may be facing, we’re happy to help. Click here to learn more about how we can increase your working capital and improve your Order-to-Cash Process.




Author / Editor

John Burke

Principal, Finance Transformation

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