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Order-To-Cash Best Practices Help Needed

I inherited a system that I need to thoroughly re-vamp, as we seem to find a steady flow of new risks through an ongoing series of difficult experiences. Are there some checklists, sytems, processes, tips or wisdom that I can build into our process to safeguard against the amazing variety of forms of loss? If it matters, we're wholesale distributors.


Bruce Lynn
Title: Managing Partner
Company: The FECG LLC
(Managing Partner, The FECG LLC) |

When trying to fix any "system" it helps to have a flow chart of all activities from beginning to end. The trick here is to know what are the starting and ending points; one activity's output is another's input. Equally important is defining the "unit of production", the final output (outcome) that defines value. Also, the best system may need to include activities NOT being considered today rather than just re-arranging the "deck chairs" (activities) on the Titanic. Example: "Issue payment" may be an activity in the workflow but what kind of payment? To whom? How do you know the payment was issued, not issued twice or issued to the wrong beneficiary?

Improving any process usually requires looking at workflows, cash flows, accounting flows and information flows, a veritable symphony of moving parts.

Bottom line - generic checklists are not going to be helpful until you define what the outcome should be. Also, checklists do not address the interrelation or dynamic nature of any process as activities are handed off to others along the way.

Best advice based on the information in your note: reduce the number of activities in your process and beware the "interface"; mistakes happen when the "baton" is handed off from one relay racer to another.

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Anonymous, if you're looking to improve your order-to-cash cycle, DSO or A/R you should definitely look at this white paper checklist:

"Invoice-to-Cash Health Assessment Checklist"

Separate from larger internal org chart problems, it will definitely give you some clear ideas on some improvements more easily within your control.

Best... Sarah

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

I think but wanted to confirm you are looking for check and balance on orders being paid with cash?

(Manager) |

Thanks for the message, Christie. Actually, everything about our process seems to me to cause unnecessary problems. The steps around approving orders vis a vis payment terms, special pricing, multiple discounts, credit limits, how we weigh credit-worthiness, delivery date promises, order accuracy, make goods, dealing with past due accounts, eating extra cost around shipping, etc etc... It's just extremely ad hoc with endless exceptions, interested parties, errors, risk and cost.

James Duke
Title: Director
Company: ELAINT
LinkedIn Profile
(Director, ELAINT) |

I feel for you as each situation is different - you need an independent framework such as that designed on Baldridge Award for service in the OTC arena as put out by COPC. I have a set of policies developed for this at a Fortune 500 company

Mark Woollgar
Title: Partner
Company: Adams Woollgar Financial Services LLC
(Partner, Adams Woollgar Financial Services LLC) |

It seems that with all your moving parts a simple best-practices list is not going to get you there (other than setting your AR/Sales policy and enforcing it). What we have done often (and the better approach) is to actually map your current system (as/is) in a flow chart and then figure out where the system can be improved (should/be). Then build a roadmap on how to get to the ideal system. This flow chart should allow you to see why the various events are occurring.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

Echoing Mark to some extent. KISS works well. Ask yourself / Team why everything is an exception?

One of my favourite mantra's is "If everything is an exception, there are no rules".

Then look at your system and start from scratch.

Redefine your business rules. Ask this hard question, and make sure the answer is supported by a business case. The question, is "WHY?".

Good luck!

Sonya Graywolf
Title: Owner
Company: Sonya Graywolf, CPA
(Owner, Sonya Graywolf, CPA) |

I echo Wayne with the KISS. Additionally I find that one of the best places to start is documenting current processes and procedures. I believe it is eye opening for everyone when they have to sit down and document what they do. Then you know what the exceptions are and can make the changes that need to be made. I don't know if you have done that yet but it has helped me more than once. Good luck!

(Manager) |

I appreciate the comments and can see the benefit. I'm concerned that documenting the current "process" as it truly is would make me persona non grata up the organization. That's why I was hoping for more of an objective standard of best practices.

(Director) |

that's why I recommended a completely independent framework - I'm not associated with them any more and am not selling it - but its what companies such as LL Bean, Amex, Dell and others have used in the past to bolster their OTC efforts

Topic Expert
Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Anon-while your earlier posts describe nicely WHY you need to improve the processes , this one seems to highlight the dilemma you face: getting buy in from the organization and from exec mgmt. It's the political obstacle. Does that resonate with you?

I'm not sure of your size of operations, but if you:
-need an independent outsider who can stay out of the political fray
-need outside expertise to help with ideas for improvement,
then you may need a consultant to help you.

Do you have the data to present to your boss regarding:
-the "burning platform" that requires his/her attention?
-a business case (even preliminary) that helps justify the need to get a process improvement project off the ground?
Do you have even one colleague to confirm what you see?

Remember, these types of projects so often are really change management challenges, not just a new set of processes and procedure manuals.


Topic Expert
Linda Wright
Title: Consultant
Company: Wright Consulting
(Consultant, Wright Consulting) |

I don't see how you can begin without the flow charting. You also need it for SOX. You might also want to do some industry benchmarking. Perhaps your external auditor can help there.

Having run this function many times in my career, I question all the exceptions, why multiple discounts, different approaches to credit. Also, do you measure collection efficiency--% collected on terms versus % available for collection?

Topic Expert
Bob Scarborough
Title: CEO
Company: Tensoft, Inc.
(CEO, Tensoft, Inc.) |

Some type of business process diagrams / analysis of what is will be critical for change. This is required for a couple of reasons:
1) It is required to demonstrate in non-anecdotal terms that change is required.
2) It is required to make sure you understand all of the business reasons and goals built into the current process – so that the critical ones are built into any future process.

Companies rarely get to the point you describe with bad intentions. As the organization scales, and as emergencies or challenges occur over time, processes are modified to fit. Inevitably, at various intervals, you need to step back and re-look at the processes. Efficiency, effectiveness, data velocity, accuracy – the essence of corporate productivity do not happen by accident. They happen by intent.

The longer you have been using one particular business process (intended or not), and the more existing team members are resistant to change, the more important it is to manage the change by demonstrating both the current process is not ideal, and that any new process includes all of the required controls that are embedded somewhere into the old process.

For best practices – I would suggest you break the analysis into definable business processes. Appropriate ones would include:
1) Order (or Quote) to Cash. This is the Order, Schedule, Ship, Invoice process – possibly with Quote on the front end (ideal) and Cash and Revenue on the other end. If you have deferred / timing based revenue and COGS that is important. Each of these areas can have its own depth analysis.
2) Customer On-boarding. There should be a separate and distinct process to bring customers into your world separate from the order management process. This should include the general credit terms for customers.
3) Item Management. Most environments require control of who defines SKUs and how SKUs are communicated to everyone who needs them. It is very common to have Quote to Cash friction because of SKU presentation / formatting / challenges.
4) Item Price Management. Do you have standard price lists or approval of pricing separate from orders (or on quotes)? Ideally there is a more formalized process to support this.
5) Integrated Inventory Management. If re-order points are separate from the order / forecasting process that is one challenge. If you have some things you order from suppliers on confirmed order from your customers there are options for improvement in that area as well.

Bob Scarborough

Topic Expert
Bob Stenz
Title: Controller
Company: Silicon Valley start-up
(Controller, Silicon Valley start-up) |

A quick way to flow chart your current process and get buy-in from all involved is to have a 1 hour meeting. Spend 20 min's having everyone write each step in the quote-to-cash process on a post-it (one step per post-it). Spend 20 minutes having everyone organize the steps (Post-its) in a logical order. Spend 20 minutes reviewing the process as documented in the Post-its. Then take 1-2 hours alone to write-up the process based on the Post-its. Once the current process is understood, you can identify areas of improvement. Good luck.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

If i were you, I would identify how you want the process to work and estalish the procedures around this. Set standard terms and move your accounts to these as contracts come up or if they are infrequent customers, make sure they stick to your terms.

Jorge Marquez
Title: Consultant
Company: ITCF LLC
(Consultant, ITCF LLC) |

I agree with those that say a general checklist will not be of much help. You need to document the process, although if what you say about everything being an exception, then it will be messy. Once you have that, go step by step and see how the step helps customer service, if it doesn't, mark it for possible deletion. Once you are done with this, those steps that do not improve customer service, unless they are there for internal control purposes, should seriously be considered to be eliminated.
If documenting the process would ruffle feathers, trying to change it will be very difficult.

Rob Israch
Title: Director Demand Generation
Company: NetSuite
(Director Demand Generation, NetSuite) |

From a system and process perspective, we have found that having your data integrated so it automatically flows from opportunity through to order processing, inventory/fulfillment, accounting, and then making that information accessible across sales, finance, operations, service, etc to be key.

This webinar talks to that:

Robert Anderson
Title: Vice President EBS Projects
Company: Project Partners LLC
(Vice President EBS Projects, Project Partners LLC) |

I have been heavily involved in revamping Order to Cash systems since I worked for a small specialty manufacturing firm back in the late 1980's. The first thing you have to recognize is the computer tools are only a small part of the overall order to cash process. If you really want to make a difference, you must step back and look at all aspects of the OTC flow, including the people components. At that initial firm, we had an on time delivery of 57% in a custom order, event driven business. If the event happens on Friday and you deliver on Saturday, try collecting. We took the business from that level to over 97% on time, removed 15% from the COGS, reduced inventory levels and improved delivery times. Now for the shocker, we had all the senior executives, from company president on down involved in leading the training and transformation training classes. I was totally shocked to discover we started to achieve our expected improvements long before we actually got the software up and working. By changing how people think, we transformed the business. The software only helped make their jobs easier.

In the wholesale distribution business there are two primary OTC models. The S&OP model developed from the MRP II manufacturing approached developed in the 1980s by Oliver Wight through which the executive/leadership team continually achieves focus, alignment and synchronization among all functions of the organization. This is Distribution Resource Planning (DRP). The other approach is Distribution Inventory Management created by Gordon Graham. While they both strive to achieve the same desired results, the approach and mechanics are significantly different and each has a better fit in certain types of operations.

When I was at Bell Industries (a mid size recreation wholesale distribution firm) we used the Gordon Graham model (best for seasonality) and achieved a 50-70% return on net distribution investment while achieving an outstanding in season order response of same day to our customers at a 95% plus in stock overall and 100% on critical items. We were able to grow the Milwaukee business 30% during a 15% industry contraction due to our responsiveness and service focus by helping the dealers keep a lower inventory level and providing them what they needed very rapidly. We were able to take an order at 4 PM and ship it UPS next day delivery on a 5 PM pickup.

If your focus is only on the software, you will not drive a business transformation.

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