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

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. Although these are not uncommon scenarios, a successful cash management process depends on getting these details right.

The good news is 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 and build 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.

Key areas to optimize

How do you optimize your cash management operations? Keep it simple by focusing on these key areas:

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 process activities

The key to achieving progress at an expedited pace is to focus on core activities that link to your underlying cash management processes. Evaluate and analyze the strategy, organization, process, technology, people and governance factors that drive performance. What’s not working? What’s slowing payment? How can you bridge the gaps?

There is no getting around the fact that the order-to-cash (OTC) cycle is full of pitfalls, and some 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. Here are some typical improvement opportunities:

Opportunity Management

Your company may want to empower your sales team with the flexibility to upsell or cross-sell. If you do, 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.
Collections 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. Providing payment options tailored to a customer’s profile is another significant opportunity companies are looking to operationalize to enhance their collections processes Research shows customers strongly prefer having self-service functionality available due to the sensitive nature of the topic.	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.

Objective advice to address your challenges

Remodeling cash management requires resources and expertise, but 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 and help you find opportunities to free up cash.

If you need solutions to your cash management challenges, we’d love to help. Click here to learn more about how we can increase your working capital and improve your order-to-cash process.

About the Author

John Burke has over two decades of experience leading finance transformation, governance and project management initiatives. His focus is on creating solutions that optimize operating models and increase operational efficiencies, effectiveness and controls through enabling technologies and improved service delivery models.

To learn more, connect with John on LinkedIn, at jdburke@solomonedwards.com, or call (484) 581-2704.