Making a business more streamlined by removing the unnecessary parts depends on an understanding of its end-to-end processes and corresponding performance measurement. Only then is it possible to separate the truly necessary from the unnecessary.
Whilst it’s easy to identify quick wins for transformation, such as legacy paper-based approvals processes, often it’s the more insidious and hard-to-spot processes that have the most detrimental effect on business performance. One such area that is often overlooked and in need of streamlining is the business order to cash process...
The Order to Cash process (OtC)
The Order to Cash process (OtC), which is the elapsed time between when a customer places an order and when the vendor collects payment, is a key metric which indicates the extent to which the vendor’s processes are streamlined. If the OtC process isn’t known, having never been measured and then forgotten about, it’s likely that the end-to-end processes could do with a thorough health check.
This is particularly the case for a business that’s grown through acquisition, joining up processes originating in different places, with diverse business cultures.
The Order to Cash (OtC) process is the elapsed time between when a customer places an order and when the vendor collects payment
A good way to get to grips with the OtC process is by mapping end-to-end processes, starting from when your customer makes an enquiry and finishing when you collect payment. The analyst engages with each subject matter expert to map their part of the process as a flowchart. It then starts to get really interesting when you put the charts together with all the subject matter experts in the same room – as I did recently.
Even the most apparently simple processes, for example how to send a quotation and accept an order, can prompt multiple points of view about who does what. It quickly becomes apparent that there are almost as many opinions about how things are done as there are people to do them. This is where the simple act of analysing the OtC process begins to make a difference.
...there are almost as many opinions about how things are done as there are people to do them.
It’s also useful to measure the order to cash process for a number of orders. What might seem perfectly reasonable Operational Level Agreements (OLAs) between internal teams can add up to a completely unreasonable lead time.
One stealthy contributor to a lengthy order to cash process is ‘people as processes’ – where the transition of an order from one stage to the next depends on one individual, and is slowed through either lack of resource or because they view the process as belonging to them. Whenever they are unavailable, the process stops and when they return, there is a backlog of orders for them to process, which adds to the delay.
Knowing what the order to cash process is, compared with what it needs to be, particularly from a competitive perspective, provides a basis on which to decide which business processes need improving and how.
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In summary...
Businesses often struggle to streamline because people are so busy on their day jobs - applying inefficient processes - that they do not have the time to take a step back and figure out how to do things in a better way. The benefit of mapping out the end-to-end processes and measuring the OtC is that to provide a better informed view of operational performance, separating the necessary from the unnecessary and so enabling a business to streamline.
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