webinar · 2020. 11. 4. · the slides will be available after the webinar at . your o2c process...
TRANSCRIPT
WEBINAR
Presenters
Sarah FaneHead of Content
sharedserviceslink
Bryan DeGrawAssociate Principal, Finance
Advisory ServicesThe Hackett Group
• Send me your question early • Use this opportunity to get the answers/info you seek• The sooner you send me the question, the more likely it will be asked• Remember to stay on for Q&A in the last 10 minutes of the session
Questions
Your copy of the slides
The slides will be available after the webinar at
www.sharespace.digital
Your O2C process has never been so important.
In a struggling economy, cash flow and cash flow forecasting are priorities 1 and 2.
The pressure on modern day O2C operations has arguably never been this intense.
Today we explore
• What the Top 10 characteristics of a World Class O2C department are• What essential KPI differentiators do World Class C2C organizations monitor such as:• Real-life examples from large multinational companies• Game-changing technology you need to be thinking about today
Context
November 2020
Bryan DeGraw | Associate Principal and Program Manager, Customer-to-Cash
The Hackett Group Reveals Secrets to Top Performing O2C KPIs
7© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
§ Hackett C2C Process Overview§ C2C Top Performance by process
– Credit Risk Management– Order Management – Customer Billing– Cash Application– Collections Management– Dispute Management
§ C2C Process Crisis ReadinessContents
8© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Customer-to-Cash End to End Process
Credit Management
Order Management
Customer Billing
Collections Management
Dispute Management
Cash Application
Collections Approach Dispute IdentificationCash PostingUnbilled Management and Billing TriggersOrder Entry
Collections Activity Dispute ResolutionAR ReconciliationBill Calculation and VerificationOrder Processing
Targeting Dispute Escalation and Arbitration
Unallocated and Unapplied cashCustomized BillingCustomer Service
Litigation and Debt Provision
Root Cause EradicationShort PaymentsCredit Note ProcessingContract
Administration
Customer Segmentation
Customer Credit Management
Credit Policy
Commercial Interface
… across the building blocks of effective change: Strategy, People, Process, Technology and Information
RelationshipsMetrics and GovernanceCustomer-to-Cash Policy
Organization and Systems
Hackett’s Customer-to-Cash end-to-end covers all processes and activities from credit risk assessment through to collections and cash application
9© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
3
Top Ten Characteristics of World Class Customer-to-Cash organizations
CREDIT POLICY – provide framework for the end-to-end process including roles and responsibilities across the C2C process
MASTER DATA – complete and accurate master data to ensure accurate and timely billing and basis for BI and analytics
STANDARDIZE PAYMENT TERMS AND CONTROLS - Standard payment terms are defined, non-standard payment terms are controlled through approval process
DYNAMIC CREDIT MANAGEMENT –Defined inputs, outputs and strategies. Reviews undertaken by exception
ELECTRONIC INVOICING – eliminate manual billing triggers, reduce time to invoice and increase accuracy
SEGMENTATION TO SUPPORT COLLECTION STRATEGIES – Define segmentation based on risk and value and drive collections based on segmentation
PROACTIVITY - Ensure key customers are receiving routine customer service calls so issues can be addressed early in the process
TECHNOLOGY LEVERAGE – driving digital engagement, process efficiencies and an exceptional customer experience
EFFECTIVE DISPUTE MANAGEMENT -Disputes are logged in a central repository, workflow underpinned by resolution matrix
PERFORMANCE MEASUREMENT -Performance measurement framework aligned with objectives and targets
12
3
456
7
8
910
CUSTOMER-TO-CASH KEY
CAPABILITIES
10© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
What have been your top 3-5 areas of interest in 2020?
A. C2C Operating Model and Service PlacementB. Customer Master Data ManagementC. Credit Risk ManagementD. Order ManagementE. Customer ServiceF. Customer Billing Automation (i.e. EIPP)G. Dispute/Deduction ManagementH. Working Capital OptimizationI. Cash ApplicationJ. Dispute ManagementK. C2C Process Performance MeasurementL. Global Process OwnershipM. Smart Automation tool selection / implementationN. Collections Certification and TrainingO. C2C Policies, Processes and Controls
Polling Question
11© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
2019 top 10 inquiry categories requested by global C2C Advisory Members
Source: Key Issues Study, The Hackett Group, 2020
1 Revenue cycle benchmarks
2 Smart Automation – definitions, technologies, adoption, indicators of opportunity, heatmaps, use cases
3 C2C Scorecard Design - principles of scorecard design, commonly use C2C metrics, scorecard examples,
4 Cash application – benchmarks, best practices, approaches to drive automation and leverage of technology
5 C2C operating model / organisational set-up - service placement, optimised process splits, member profiles
6 Collections - best practices including customer segmentation, collection strategies, case examples, solution vendors
7 Working Capital – Industry and peer DSO comparisons, working capital performance measurement and management
8 C2C Top Performer / Trends – performance metrics and trends across the C2C process
9 Policies, processes and controls - credit policy framework, examples, business process management
10 Payment terms and methods – payment terms harmonisation, payment methods
12© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Taking an end-to-end view World-class organizations have a significant staffing and process cost advantage
0.012% 0.008%
0.030%
0.005%
0.020%
0.008%
0.025%
0.007%
0.014%
0.008%
0.102%
0.037%
Overall Database World Class
Process Cost* as % Of Revenue
1.5 0.9
4.0
0.7
2.6
1.1
3.7
0.8
1.7
1.0
13.5
4.6
Overall Database World Class
FTE’s Per $ Billion Revenue
Credit Process Customer Billing Cash Application Collections Dispute Management
The process cost and staffing gap is significant…
64%
66%
Source: 2020 Hackett Finance BenchmarkNote: Process cost = Labor costs + Outsourcing costs
13© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
§ Hackett C2C Process Overview§ C2C Top Performance by process
– Credit Risk Management– Order Management – Customer Billing– Cash Application– Collections Management– Dispute Management
§ C2C Process Crisis ReadinessContents
14© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
World-Class organizations are leveraging sophisticated, automated, and dynamic credit modelling tools to deliver fast, prudent results
3.0
1.0
Overall Database World Class
Automated Versus Manual Credit Modeling and ScoringAverage time that it takes to complete new credit reviews (business days from receipt of credit application to final decision)
10%
75%
90%
25%
Overall Database World Class
Automated ManualSource: 2020 Hackett Finance Benchmark
15© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Involving the Credit team early in the customer acquisition cycle results in a healthier receivables portfolio
38%
24%
17%
21%
Potential Customer Identification / ProspectingProposal or Pricing DevelopmentAfter a firm order is receivedOther
Organizations that involved Credit during the
Proposal or Pricing Development Stage
reported Average Days Delinquent
Lower
Than organizations that assessed customer credit
after a firm order is received
Stage of new customer acquisition when credit review is conducted
“Other” Criteria
All of the above depending upon country
At customer set up
Depends on the customer type
In preparation of submitting order & receiving the credit application
No involvement
When prospect is converted to a Customer
16© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
§ Hackett C2C Process Overview§ C2C Top Performance by process
– Credit Risk Management– Order Management – Customer Billing– Cash Application– Collections Management– Dispute Management
§ C2C Process Crisis ReadinessContents
17© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Standardization and automation have enabled World-Class organizations to optimize costs in the Order Management process
Process Cost* per OrderPercent of orders processed automatically per orders received
Orders per FTE
Source: 2020 Hackett Service BenchmarkNote: Process cost = Labor costs + Outsourcing costs
$8.3
$2.9
Peer Top Quartile
8,518
12,262
Peer Top Quartile
14%
58%
Peer Top Quartile
18© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Top Performing organizations deliver a better customer experience through faster order fulfill cycle times
Top Performing organizations deliver a better customer experience through faster order fulfill cycle times
Source: 2020 Hackett Service Benchmark
8
3
Peer Top Quartile
19© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Top Performers process orders with greater accuracy and reflect less orders requiring modification through the end-to-end order lifecycle
Percent of orders requiring modification per orders processedPercent of orders requiring modification per orders received
15.4%
0.3%
Peer Top Quartile
14.4%
11.0%
Peer Top Quartile
Source: 2020 Hackett Service Benchmark
20© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
§ Hackett C2C Process Overview§ C2C Top Performance by process
– Credit Risk Management– Order Management – Customer Billing– Cash Application– Collections Management– Dispute Management
§ C2C Process Crisis ReadinessContents
21© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
World-Class organizations reflect lower billing process costs and cycle times however opportunities exist to increase automation
Source: 2020 Hackett Finance BenchmarkNote: Process cost = Labor costs + Outsourcing costs
0.030%
0.005%
Overall Database World Class
3
2
Overall Database World Class
Average Time it Takes to Bill (i.e., days from order fulfillment to bill
being sent)?
Customer Billing Cost* % of Revenue
70%
80%
Overall Database World Class
Percent of “Handsfree” Customer Invoices(Invoices generated and distributed electronically)
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World-Class organizations are more effective, by having less errors and disputes in the Customer Billing process
2.5%
2.0%
Overall Database World Class
2%
2%
2%
1%
Overall Database World Class
Volume Based Value Based
Percent of Invoices Related to DisputesPercent of Customer Invoices Corrected for Billing Errors
Source: 2020 Hackett Finance BenchmarkNote: Process cost = Labor costs + Outsourcing costs
23© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
§ Hackett C2C Process Overview§ C2C Top Performance by process
– Credit Risk Management– Order Management – Customer Billing– Cash Application– Collections Management– Dispute Management
§ C2C Process Crisis ReadinessContents
24© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Twice the percentage of “hands-free” Cash Application transactions provides a significant World Class advantage
Source: 2020 Hackett Finance BenchmarkNote: Process cost = Labor costs + Outsourcing costs
44%
80%
Overall Database World Class
$3.2
$2.4
Overall Database World Class
Process Cost* per Customer Remittance
Automatic remittance posting match rate
22,659
26,002
Overall Database World Class
Customer Remittances per FTE
25© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
The Cash Application Process Challenge Is Not Just Payment Automation But Also Electronic Receipt Of Remittance Advice (Coupled Is Ideal)
Source: 2020 Hackett Finance BenchmarkNote: Process cost = Labor costs + Outsourcing costs
$6.55
$4.82$4.52
$4.04
$5.08
$3.80
$2.74
$1.89
$2.72$2.47
$1.06
$0.64
>=25% 25%-60% 61-95% >95%
Electronic Cash Remittance VS Cash Application Cost per Transaction
Bottom Quartile Median Top Quartile
26© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
§ Hackett C2C Process Overview§ C2C Top Performance by process
– Credit Risk Management– Order Management – Customer Billing– Cash Application– Collections Management– Dispute Management
§ C2C Process Crisis ReadinessContents
27© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
World-Class organizations deliver more effective receivables portfolio management
Source: 2020 Hackett Finance Benchmark
9
3
Overall Database World Class
80%
91%
Overall Database World Class
Percent of Credit Sales That are Collected Within TermsAverage Days Delinquent (DSO less Best Possible DSO)
28© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Achieving higher productivity rates and lower costs per contact
Source: 2020 Hackett Finance Benchmark
7,661
19,133
Overall Database World Class
$10.4
$2.5
Overall Database World Class
Process Cost per Collection ContactCollection Contacts per FTE
World Class organizations
have redefined
collections. Many
customer interactions are service
oriented that prevent
disputes and aging AR.
Autom
ated
Proactive
Strategic
29© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Customer segmentation should be defined to enable a ‘Fit for purpose’ approach to collections management rather than a one size fit all
A1 High Sales Good
Payer
A2High Sales
Average Payer
A3High SalesSlow Payer
B1Average Sales
Good Payer
B2Average SalesAverage Payer
B3Average Sales
Slow Payer
C1Low Sales
Good Payer
C2Low Sales
Average Payer
C3Low Sales Slow Payer
Payment Behaviour Poor PayerGood Payer
Reve
nue
High
Low
§ Proactive approach
§ Customer visits to focus on relationship
§ Dunning candidates
§ Customer profitability assessment (potential growth candidates)
§ Past due recovery
§ Frequent & early contacts
§ Total account coverage
§ Involve sales / escalate
§ Sell via other channel
§ Credit card / direct debit for identified candidates (i.e., small / poor payer accts)
30© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Collections strategies can be then be developed and customized based on the defined customer segmentation
Billdispatch
Bill receivedby customer
A2A3B3
A1B1B2
B+10days
B DD-7days
Billdispatch
Bill receivedby customer
Due date:No payment
B+10days
B DD-7 / -14days
D+1-5days
D+2-7days
D+9-14days
D+16/21days
Proactivecall made
by Collector
Due date:No payment
Follow-upcall made
by Collector
Dunning letter sent
Possible 2nd
call byCollector
Internalescalation
C1C2C3
B+10days
B DD-7days
Billdispatch
Bill receivedby customer
Due date:No payment
Dunning letter sent
D+30 / 35 days
D+1-5days
D+2-7days
D+9-14days
D+16/21days
Follow-upcall made
by Collector
Dunning letter sent
Possible 2nd
call byCollector
Internalescalation
Dunning letter sent
D+30 / 35 days
D+2-7days
D+16/21days
Dunning letter sent
Internalescalation
Dunning letter sent
D+30 / 35 days
Automatedreminder
SMS
Key Call Dunningletter
EmailMessage
SMS Escalationint/ext
B Billdate
D Duedate
31© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
§ Hackett C2C Process Overview§ C2C Top Performance by process
– Credit Risk Management– Order Management – Customer Billing– Cash Application– Collections Management– Dispute Management
§ C2C Process Crisis ReadinessContents
32© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
What is a Dispute?
§ Dispute Management focuses on disputes related to bills§ Disputes have a value tagged to them and therefore impact payment§ Dispute Management does not tend to focus on the wider field of CRM
> Specific problem that will prevent payment of all or part of a bill
> Problem relates to quality of the product, delivery or documentation
Dispute> Serious issues which are
the result of particularly poor service or treatment
> Usually addressed to senior management (i.e. Chairman etc..) for resolution
Complaint> Can relate to almost
any function in an organisation
> Does not usually indicate that the customer is in any way dissatisfied
Enquiry
ü û û
“Any unmet customer expectation, real or perceived,that results in short or non-payment of a bill.”
33© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
What is Dispute Management?
Identify§ Everyone throughout the organisation
can identify a dispute§ The other functions are pre-determined
depending on the nature of the disputeResolve§ The person or function who is most
appropriate to solve the issue will be responsible for resolving the dispute
Analyse§ Tracking and measuring disputes
is the only way to monitor the size, duration and nature of the problems
Prevent§ The whole objective is to stop the same
problems from happening over and over again
Predict Prevent
Perform
IdentifyIdentify disputes
early andpro-actively Capture
Capture all info& Categorisethe dispute
PrioritisePrioritiseresolutionby value
EscalateEscalate alldisputes not
resolved withintarget
MeasureMeasure & report
on processperformance
EradicateAnalyse
& eradicateroot causes
TargetSet timetargets to
drive activity
AllocateAllocate disputesto clearly defined
responsibilities
An effective disputes management process will increase level of customer satisfaction whilst also reducing overdue debt
34© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Top Performers have end-to-end C2C processes that result in a lower percentage of disputes and have a faster cycle time to resolution
Source: 2020 Hackett Finance Benchmark
Average cycle time (in days): Dispute Identification date to Resolution date
2%
1%
Overall Database World Class
Percentage of invoices that result in disputes(Based on invoice value)
18
15
Overall Database World Class
35© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
A dispute management scorecard allows continual tracking of dispute types, values, volumes and resolution performance
Example Dashboard
Disputes initiated every month. Each bar on the chart should have up to 2 colors, one indicating the disputes that were initiated but closed at the time of the report while the other indicates disputes that were initiated but still open at time of report
This line of charts represents the Value of disputes
This line of charts represents the Volume of disputes
This line of charts represents the Weighted Days Open for disputes
Breakdown of open disputes by Category / Reason (Open Disputes as of Date of Report)
Breakdown of open disputes by Dispute Status. Each bar on the chart should have up to 3 colors. First indicating Open Disputes within Targeted Resolution Cycle Time. Second, indicating Open Disputes in the Escalated Status.
Disputes as % of total invoices and Weighted time disputes have been open during the Initiation phase.
0
200
400
600
800
1000
1200
1400
1600
ME Jan 06 ME Feb 06 ME March 06
Volume of Open CQTs
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
ME Jan 06 ME Feb 06 ME March 06
Value of Open CQTs 0%
25%
38%
33%
2% 1%1%
Collections Order / Invoicing Payment / Terms PriceShipping Freight Charge Tax
Value by Problem Description
1%
37%
6%
40%
8%1% 7%
Collections Order / Invoicing Payment / Terms PriceShipping Freight Charge Tax
Volume by Problem Description
0
10
20
30
40
50
60
70
80
90
ME Jan 06 ME Feb 06 ME March 06
Days
Weighted Age of Open CQTs
0
20
40
60
80
100
120
140
160
180
Collections Payment /Terms
Shipping Tax
Days
Weighted Age by Problem Description
0
100
200
300
400
500
600
ID Review Adjustment Approval PendingCompletion
Volume by CQT Status
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
ID Review Adjustment Approval PendingCompletion
Value by CQT Status
0
5
10
15
20
25
30
ID Review Adjustment Approval PendingCompletion
Days
Weighted Age by CQT Status
0%
1%
2%
3%
4%
5%
6%
7%
8%
ME Jan 06 ME Feb 06 ME Mrch 06
Percentage
Dispute Amount as % of Invoice Amount
0%
2%
4%
6%
8%
10%
12%
ME Jan 06 ME Feb 06 ME Mrch 06
Percentage
Number of Disputes as % of Total Invoices
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
ME Jan 06 ME Feb 06 ME Mrch 06
Days
Weighted Identification Cycle Time
Select Prob lem Description:
These charts will show the breakdown of disputes by Status within the Resolution process. The selection can be made for “All” Categories or for each one.
36© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
§ Hackett C2C Process Overview§ C2C Top Performance by process
– Credit Risk Management– Order Management – Customer Billing– Cash Application– Collections Management– Dispute Management
§ C2C Process Crisis ReadinessContents
37© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Hackett COVID-19 Crisis Quick Poll Key Points
Finance gets high marks for maintaining critical operations through the crisis. 100% immediately transitioned to remote work. • Automate more processes to operationalize the virtual workplace• Expand VPN bandwidth to ensure data security• Embrace cloud solutions to broaden access to tools and data
Remote works!
Cash preservation/margin protection are top of mind. 75% took immediate steps to improve working capital management.• Take a strategic approach to managing AR to accelerate cash• Deploy cloud-based solutions to improve visibility into the E2E cash
process and use advanced analytics to improve cash forecasting
Make Cash king
38© 2020 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Hackett COVID-19 Crisis Quick Poll Key Point
Organizations are doubling-down on existing efforts to go digital; most inflight projects are on track. 64% are launching select new initiatives.• Leverage increased IT investment commitment to secure funding• Start by focusing on efficiency/quick ROI new projects• Bolster business case with business unit support
Accelerate digital
init iat ives
Aim for a “better ”
normal
75% said the long-term impact will be a transition to an agile operating model; the goal is not just a return to normal, or the next normal, but a “better” normal. The crisis proved bold and rapid changes are possible.• Redesign the SDM for the future, e.g., agile teams, enterprise COEs,
and transition of all TX activity to GBS organizations
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Quick Poll Question
The 2020 Covid-19 crisis impacted organizations in different ways, broadly in three categories. Which one applies to your organization?
Select the most appropriate response for your organizationq Significantly Disrupted
q Moderately Disrupted
q Minimally Disrupted
Significantly Disrupted:Companies that experienced significant revenue impacts, i.e., organizations that have been affected by forced closures of stores, sites, etc. As incoming cash has dropped significantly, they are liquidity strapped.
Moderately Disrupted:Companies whose customers are struggling, leading to weakening in demand and slower payments, which in turn affect their ability to pay suppliers.
Minimally Disrupted:Companies that are doing well because they provide goods and services needed to react to the coronavirus crisis, which should be preparing for the ‘new normal’ while ensuring supply chain sustainability.
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Introduction
Customer-to-Cash Crisis Readiness Imperatives
Against the backdrop of Covid-19 disruption, “Cash is King” is center stage.
There is a clear need to immediately evaluate and address deficiencies in
policies, processes and procedures to protect working capital, optimize cash flow,
and make prudent credit term extension decisions. Within the following slides are
a series of near-term actions you can take to improve both the visibility and
management of your receivables.
1 Enhance cashflow and receivables visibility
2 Industry scan
3 Communicate and collaborate with customers
4 Invoice frequently, accurately and electronically
5 Manage requests for extended payment terms
6 Expedite receivables
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Near-term actions to improve both the visibility and management of receivables (cont’d)
Customer-to-Cash Crisis Readiness Imperatives
Managing requests for extended payment terms
Examples of Credit Policy language relative to term extension requests:
§ Example 1 - Extensions:- Credit limits are always temporary, and their starting date and expiry date should be registered. If temporary extensions are granted,
the limits must be reviewed prior to the end of the extension period. If a credit limit is not reviewed prior to its expiry date, the credit limit must automatically be set to zero and remain zero until such time that the credit limit is reviewed and approved.
§ Example 2 - Requests for extended terms- Extension of payment terms has a negative impact on ABC Co. cashflow, therefore should be avoided. Where required, a business
case quantifying the incremental benefit for revenue, margin and cash flow must be completed by the business unit and the following approval matrix applies:
Outcome ApproverClear economic benefit to ABC and cashflow
impact less than $150KGBS Regional Credit & Collections manager
Clear economic benefit to ABC and cashflow impact equal to and more than $150K
Regional controller
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Near-term actions to improve both the visibility and management of receivables (cont’d)
Customer-to-Cash Crisis Readiness Imperatives
Expedite Receivables§ Prioritize your customer touchpoints based on a combination of value and risk§ Check that your invoices have been received and payment has been processed§ Ensure robust mechanisms exist to capture customer contact history and payment promises § Make sure credit risk processes are robust and up to date with the latest information, whether that be external information or internal
information§ Monitor payment behaviour changes, if a customer always pays on a specific day of the month and they pay even one day later than
usual it should be flagged and considered a warning signal§ Establish cross-functional teams to triage and look to resolve disputes and invoice related queries§ Where your customers are struggling to pay and your own cashflow permits look to be creative in terms of agreeing and establishing
payment plans (both for existing and potential new customers)
Remember your customers have multiple suppliers requiring payment, and if they have cashflow issues they will need to think about what services and goods are more critical to them and prioritize their payments accordingly. The closer you are to your customers and the better you understand their situation from an operational and cashflow perspective, the better placed you will be to manage and optimize your own cashflow.
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Foundational Customer-to-Cash best practices are crisis critical:
Customer-to-Cash Crisis Readiness Imperatives
1 Standardized process for credit decisions on a company wide basis
2 Increased efficiency and effectiveness of account review process by minimizing manual efforts
3 Ability to increase frequency of reviews through automation provides advanced early identification capabilities
4 Reviewing by exception allows for targeted focus on areas of higher risk
5 Proactive credit limit adjustments
6 Improved visibility of customer risk with associated reduction in future write-offs
7 Consistent and accurate response sponsors strategic partnership with Sales
8 Improved internal controls (SOX compliance)
9 Improved customer service
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Questions?
Thank you !
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Statement of Confidentiality and Usage Restrictions
This document contains trade secrets and information that is sensitive, proprietary, and confidential to The Hackett Group the disclosure of which would provide a competitive advantage to others. As a result, the information contained herein, including, information relating to The Hackett Group’s data, equipment, apparatus, programs, software, security keys, specifications, drawings, business information, pricing, tools, taxonomy, questionnaires, deliverables, including without limitation any benchmark reports, and the data and calculations contained therein,
may not be duplicated or otherwise distributed without The Hackett Group Inc.’s express written approval.
www.thehackettgroup.com
Reproduction of this document or any portion thereof without prior written consent is prohibited.
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Atlanta | Chicago | Frankfurt | Hyderabad | London | Miami | Montevideo | New York
Paris | Philadelphia | Portland | San Francisco | Seattle | Sydney | Vancouver
Bryan DeGraw
Phone: + 1 770 653 6524 [email protected]
Global Customer-to-Cash Program Lead
For follow-up discussions please contact
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