How to fix inefficiencies in the Order-to-Cash cycle?
During its annual International Credit and Risk Management Summit 2018, the Finance, Credit and International Business Association (FCIB) once again proved that Credit Management is no longer "the Cinderella of Finance". Times have changed, companies now see the benefits of the information gathered by Credit that evolved from being a cost center to a full-fledged and respected discipline.
Also present at the Dublin summit were Credit Management Expert practice leader Cristof Van Laer and business consultant Justine Leclef. As one of the guest speakers, Cristof participated in a panel discussion about the order to cash process. Here are three important learnings on improving the Order-to-Cash process.
Article written by Justine Leclef
Each year the International Credit and Risk management Summit is hosted in a different city. This year, Dublin was flooded by many international Credit & Risk professionals. During the three-day Summit, FCIB welcomed 80 people from more than 20 countries. The program zoomed in on hot topics like blockchain, cybersecurity, artificial intelligence and machine learning and the importance of the Order-to-Cash cash process.
Order to cash process -
As companies across the world embrace new technologies, they recognize that inefficiencies in the Order-to-Cash cycle can create potential losses. Panelists Minna Kaarto (CICP, credit manager), Anna Przezdziek (Tate & Lyle, global credit & collections manager) and Cristof Van Laer examined the importance of the OTC processes and how they can be improved.
#1 | Change, before you have to - mais n’allez pas trop vite!
One of the biggest challenges for organizations today is the ever increasing speed of change. The best starting point to adapt to this change is to develop a clear view on what’s going on in an organization.
All panelists highlighted the importance of an end-to-end process driven management. Finding the optimal process for your organization is one of the three main challenges for successful credit management next to finding the right people and the right technology to support your process. Creating an optimal credit management process asks for a transparent view on the order to cash process. To achieve this transparency, a cross-departmental process view is needed that creates awareness in the organization and straightens the path towards an agile approach of credit management. 'We even created a cross-departmental team of process owners gathered in a process council, ' Minna Kaarto emphasized. 'They make decisions in the best interest of the company and not for the individual departments.' By creating transparency, the end-to-end process becomes comprehensible for people operating in the process and improves cross-departmental collaboration. However, a process can have different levels of maturity and it is important to not skip any maturity levels of the process. 'Take it one step at the time, n’allez pas trop vite” - Cristof said, concluding that getting a clear end-to-end process view will help organizations become more agile and thus ready to adapt when necessary.
#2 | It’s not static but dynamic
In a constant changing business environment, the ability to adapt to changes, is almost as important as the change itself.
'Often, clients I work with don’t go further than describing their processes,' Cristof Van Laer said. 'But all their documentation disappears in a cupboard that is rarely opened again. People underestimate that process description is only a first step to process improvement and a chance to see where improvements can be made. It can help you to identify the much needed requirements to actually improve. Processes are not static but dynamic.'
People are crucial to create these dynamic processes. They should be the drivers of improvement. People involved in the Order-to-Cash process who have developed a clear view on the process can drive continuous improvement. They know exactly what improvemens can be made. So, taking their views and suggestions on board is essential to continuously improve these processes. Also, trust is very important. People need to feel in control by working in transparent processes and having efficient tools at their disposal, to guarantee the most efficient and effective way of working. For Ana Przezdziek, also advanced data analytics are needed to drive process improvement.
#3 | Don’t skip the Design Phase!
'How should we use OTC technology to jump on the digitalization train?' moderator Pia Porvari (CICP, head of credit) asked. For Cristof Van Laer, who already experienced several digital OTC transformations at his clients, the design phase and change management are crucial to success: 'During a digital change or transformation, companies tend to skip the design phase,' he said. 'Crucial questions to be answered before starting the digitalization or automation part are, for example: 'How are we doing today?' 'Where are we going?' and 'What is the gap?' But without a clear view on end-to-end processes, risk and controls, it will be a very hard job to find a tool that meets specific needs or processes. Another important aspect is change management. Make sure to have input from everyone involved in the process, if not you run the risk that not everyone will be on board. People will feel alienated, asking questions about the consequences for their roles and responsibilities. The first phase is much more important than the implementation itself.'