Order to Cash - Process Automation

Unlock Efficiencies….

Operations, Maintenance & Services Business

WHITE PAPER

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The Order-To-Cash process

begins with everything required

to manage and process customers

orders and finishes with

monitoring and collecting

money from customers.

2 One of the common factors between ORDER and CASH is that ……both are dynamic in nature.

The typical “Order To Cash” cycle normally refers to the process wherein taking a Customer Sales Order and then fulfilling the orders either by sourcing or producing and then shipping, logistics, invoicing, receipts and is colossal key financial playing yard of any organization.

As oppose, Order to Cash process for an Operations, Maintenance & Service businesses is bi-polar opposite to the then traditional business’s. Not only does it determine how the Contracts are created, re-iterated over the negotiations & Service level terms based on the “Delegated Authority Plan” and then finally released till the point of Execution with adherence to the Service Level Obligations.

The time might just be ripe for change in thinking when it comes to putting together an Enterprise Order To Cash paradigm in place ….. a more cohesive & comprehensive approach enabling Businesses to horn there competitive edge, unlock efficiencies, increase speed, significant cost reduction thereby have direct impact on the Top line and bottom line across the Enterprise.

Having said that, whilst further compounded by challenges, as Business’s are under tremendous pressure over price, cost, improving working capital, increasing stakeholders value and minimise bad dept. and makes it imperative for businesses to focus on having a best-in-class Order-to-Cash exemplar.

Speed of response is the

first Casualty and then

comes the Quality.

Globalisation demands huge transformation in Processes and Systems & the Key to attain this transformation is create an ability to Learn, De-learn & Re-learn.

Mesh of manual

touch-points

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If we cant measure,

we cant control.

Siloed systems and processes leading to delays and errors, and costs that are still unacceptable.

Lack of performance visibility to the Customers leading to Lower Customer Satisfaction

Lower Customer Satisfaction

High Order rework

Delayed in Collections

Delayed & expensive execution

Slower fulfillment

High vulnerability to errors No Single version of truth across organisation over Business Exceptions including Contracts Obligation committed along with Liquidity damages.

Retain existing Customers & attract new ones

Multiple non-integrated legacy systems Varied Customer commitments & performance across different regions

Varied statutory and compliance requirements across different countries/regions

High lead time over the Customer Contract sign off

High volume of non-standard Contracts leading to disparity among what the system and processes designed to do as oppose to ….what now needs to be achieved.

Resource or Capacity management issues leading to waste

High level of internal and external dependency on various functions to drive completion

Inability of system to easily adapt to changes from the customers

The World is changing fast, Big will not beat the small anymore, only the Fast will beat the BIG. 5

Any System doesn’t

guarantee success, only the

pursuit of it. You have to

catch it up with yourself.

Only the Big Enterprises need an Order-To-Cash exemplar.

Process integration Enablement will be way too expensive… lack of Systems, Technology or Trained Staff.

What “should be” or “can be” or “should not be” automated in the Process lifecycle.

We will have to make a big time change in the existing System, Processes & last but not the least the People.

We built, integrate, automate and enable and then no one makes use of it. ……. Change Management.

Processes / Resources are like IT assets, the cannot do same thing year on year at the same cost, so either upgrade them or retire them, last thing we can do is keep them at the same cost.

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Contract

Approvals

Billing

Liabilities

Receivables

Maximize Service Profitability

Co

st & Tim

e

Cu

sto

me

r R

ete

nti

on

True optimization of the

Order-To-Cash cycle requires

end-to-end view of the entire

process map.

7 The Devil and the God both lies in detail.

Contract

Contract’s enables providing Services to the Customer’s who has purchased services to cover Operations, Maintenance, Warranty & Repair for an

acquired Install-base : Washing Machine, Wind Turbine, Mobile Tower, Laptop or Crane.

The critical phase in Order-To-Cash process includes Contract Creation embedded with Committed Obligations, Billing Schedule, Taxation, Credit

definitions and last but not the least mapping of Install-base to these Contracts.

Essentially, these Service Contracts represents long-term agreements between companies and customers wherein customers are guaranteed services

over the Install-base within tolerance limits over the committed obligations for defined parameters, for example, Adherence, Availability Time and

Response Time.

Service Contracts

Customer

Installbase

Obligation

Definition

Credit Mgmt.

To ensure continuous operations, Customers typically maintains running Service Contracts for their Install-

base with the desired Service Level Obligations while field technicians can perform their services for the

Install-base mapped against these Customer Service Contracts.

For instance in a case, a field technician at the Telecom Tower Site finds the failure of the Component at the

Telecom Tower. The technician then, over his handheld device verifies that the customer has a valid Service

Contract for this Install-base in order to perform the needed repairs / parts replacement over the Breakdown

or even for the Scheduled Maintenance.

Building a Contract holds numerous iterative steps

that consumes critical time & resources including

everything from creating, negotiating, printing,

sorting, certifying, sealing, scanning and stuffing

attachments in emails for Customer closure

Enterprises gaining competitive separation, will be focusing on the Next Practices and not the Best Practices. 8

Approvals

Federated and inconsistent manual process over the multiple iterations in regard with approvals over deviations from various stakeholder internal &

external calls in for - Delegated Authority Plan wherein the approvals for Contract Period, Rates quoted , Obligations committed, Year on year

escalations are approved in timely manner and is in concurrence with all stakeholders across the board.

Enables businesses to have log of all deviations / approvals and send all its Contracts / addendums electronically thereby lowering reduction of

Contract document handling time, increased process controls and visibility and provides an competitive edge.

Major popular ERP’s, supports the functionality of having section or value based approval subject to the defined standard base value their by enabling

business to have Process Standardization and avoid system proliferation.

Sometimes we have to jump first and then find our wings on the way down.

Notify Previous Approver &

Initiator

DAP

Initiator To Modify

Contract

Release Contract

Contract

Approve

Reject

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Systems manual or automated

must be in place to capture

flow & derivatives at each

phase.

Billing plays cardinal in the complete Order-To-Cash Cycle as it

triggers the financial transaction with the Customer.

Scenario’s for Billing may vary from

Billing after Contract is Released,

Once a Service Order is completed,

Value Added Service,

Usage Based Billing,

Delivery Related Billing

Billing

CRM staff spend days chasing customers if

invoices were received or were erroneous or did not

get the necessary supporting documentation with

the invoice.

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The Pricing configured in the ERP system enables

determining and calculating prices, taxes, discounts

and other pricing conditions.

Most of the popular ERP Systems are capable of

generating the Billing Due List subject to the

Billing Plan configured in the system.

Liabilities in services business essentially are connected to the obligations committed in

the Service Contract with the Customer and may come in a form of claim over service

adherence, availability, breakdowns, insurance, response time, performance and would

vary from business to business.

The key components in the Install-base inherits its respective warranties like

Compressor warranty in cases of Refrigerator’s wherein the Refrigerator might come

with 2 year warranty and the compressor with in Refrigerator comes with a back to back

vendor warranty of 5 years.

On booking the Service Orders over repair, the ERP system apparently determines

whether a warranty exists and then assigns this accordingly and subsequently on

calculating prices for the services / components in billing, warranties can be taken into

account accordingly.

This in way also effects the Net Receivable as the liabilities towards customer claim

would end up into a settlement effecting Customer Receivables with Credit Note.

Liabilities Order-To-Cash Process is the key enablers for

business acceleration & builds excellence into every

warp & weft of the fabric of companies, to lead to a

‘World Class Enterprise’ .

11 Most Enterprises cant keep breaches under wraps, its is a major blow for their business.

Receivables

The last mile and the key rational of doing any business stands at Receivables and is always a priority item for businesses.

Automating the Accounts Receivable process offers an array of benefits, all of which improves efficiencies, cut costs and has a direct impact on cash

flow, so there's no doubt that improving A/R process Enterprises can significantly enhance bottom lines.

OTC cycle determines how quickly an order from

customer is translated into cash in the bank.

Credit Mgmt. Enterprise providing the Services, checks if the prospective customer is of sufficient credit worthiness to warrant the

supply of the services under an account arrangement.

Bill Distribution Bill takes place subject to Billing after Contract is Released or once a Services is rendered. Whilst Billing is subject to the scheduled frequency concurred in Contract.

Collections Collections team identifies the Customer collection into the bank account, books it into the A/R system, identifies

invoices that are short paid / unpaid as of the due date & allocates it to an Bill & ensure reconciliation.

Dispute Mgmt. The Customer disputes the Service availed and disputes the adherence to the Service level obligations committed. This is apparently handled by Customer Relationship Mgmt. team.

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§ Maximize the value of every existing customer relationship.

Increased transparency & Improved collaboration across the Business value chain and

faster Service Rollouts with high level of Data integrity leading to Lower processing costs & time

thereby directly impacting the bottom line.

Saving money

by Saving

Drive real-time visibility of all customer-facing processes.

Maximize return on company’s investments.

¥ Enables management to have centralized control

with increased integrated competitiveness & accelerated closeout business processes.

The best IDEA will not work unless you work the IDEA 13

A decade ago, Business Leaders would be in a fire fighting mode most of the time, whilst Technology was still seen as esoteric & something new that had to be mastered, but todays integrated systems have given them time to step back, innovate & strategize. Is it possible, as the world is changing so rapidly but the automation of key processes such as OTC remains a stick-in-the-mud. Until recently, many Enterprises did seem stuck in a time wrap of old paradigm with clinical consideration over agility.

Even the established Enterprises, the multi million dollar gorillas, too took quite a while to come to grips of heterogeneity as the dilemma perhaps, the challenge for many enterprises is a matter of change management, as it is bit difficult for them to spruce things up without causing disruption to business and might have to re-tool, re-architect or completely replace existing business applications and infrastructure & perhaps re-train or re-deploy resources.

Apparently, it is a gradual journey & needs a defined roadmap, as the process automation is generally delivered in a fragmented way across a number of business silos, while needs a cardinal powerful process owner with a stark mandate to work cross functionally and requires a single sponsor who can effect end-to-end inflection and those responsible for customer relationships preciously guard customer facing activities. Having said that whilst, a 'one size that fits all' approach cannot be contemplated as no two businesses are same, there are industry specific processes and specific customer requirements to factor in.

Thus far, the OTC approach elaborated in this white paper is completely backend Enterprise system agnostic. The framework would provide the ability to gather relevant data from with in the enterprise, connect the data into information and information into knowledge which in effect is the lifeline of today’s modern enterprises thereby enabling Enterprises from doing things a traditional way to a more agile, cohesive & comprehensive approach.

Effectively managing Customer

lifecycle from quote to order to

sales to service to cash is cardinal

for every companies Growth &

Profitability

Re-think Change… Automation perhaps Innovation here is Evolutionary rather than Revolutionary 14

Naresh is a Business Partner IT and serves an Indian Multinational Enterprise. He has over 18 years of professional IT experience in software design, development and implementation of ERP/CRM vertical market segment.

Naresh has managed IT, Manufacturing, EPC, Operations, Maintenance & Services, Retail, Insurance, Healthcare and Logistics domains. He has been cardinally instrumental and has successfully managed Business Transformation initiatives thereby enabling end to end processes including :

Order-To-Cash

Procure-To-Pay

Commissioning-To-Sustenance (Operations)

Hire to Retire

Automation wont cause it, it is the effect of the Process Enablement.

To contact the author, please write to Nash_RKR@Hotmail.com

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The information herein is for informational purposes only and represents the current view of the author as of the date of this presentation.

The contents hereof are subject to change without notice.

The author assumes no responsibility or liability for any errors or inaccuracies that may appear in this publication & specifically disclaim any liability with respect to this document, and no contractual obligations are formed either directly or indirectly by this document.

This document may not be reproduced or transmitted in any form or by any means, for any purpose, without our prior written permission.

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