News: General News

Part 1: Best Practices in Project Management: Project Selection – Fastest Time to Value

Thursday, April 30, 2015  
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By: Mollie McIntyre, Cforia 

Many credit managers and order-to-cash (OTC) teams wield a great deal of sway over how key 2105 CFO business objectives are being accomplished. Particularly in the area of a company's “plans and analytic approaches”, “strategies and systems”, and most specifically “strengthening corporate balance sheets”.

Faced with the challenge of OTC project identification, definition, selection and successful implementation, this article focuses on observable OTC operational activity across 200 companies.  These will help you identify project ROI's and fast time to value engagements. It also covers business best practices, which you can compare and contrast with your own operations, to get a solid feel for where the improvement opportunity may exist.

1. Accounts Receivable Collections Methodology

What we have observed around collections methodology is that on average only 50 to 60 percent of the accounts receivable (A/R) portfolio is being touched within each 30 day OTC cycle. The collections methodology is primarily call-centric, which means that there is little automation within the process. This lack of automation leaves A/R departments working off of disparate, paper-driven processes.


Best practice environments use reporting, analytics, dashboards and automated workflows in order to streamline OTC sub-process and critical steps that deliver the biggest working cash impact. This is true of not only resource activity/productivity, but of automated communication and electronic calls-to-action to your clients. 

These A/R collections methodology best practices yield on average a return-on-investment (ROI) of 10 to 25 percent reduction in days past term (DSO), 40 to 50 percent improvement in overall portfolio coverage, 20 to 80 percent reduction of inbound call volumes regarding invoice related issues, 15 to 40 percent improvement in OTC resource productivity and have enabled these best practices teams to absorb significant sales volume growth rates, without having to add corresponding headcount.


2. Invoice Dispute and Deductions Resolution Handling

What we have observed around invoice dispute and deductions resolution handling is that typically disputes are not identified “in-term”, not until seven to 10 days post term. ERP systems do a poor job of tracking disputes, making this process a manual one. Disputes are recorded in spreadsheets making it difficult to track and report on.

Best practice environments are using an A/R automation tool tightly integrated with their ERP and supporting evidence, such as POD’s, imaging and digital documents. This integration allows a tracking case to be created and routed to resolution support teams. Cases are prioritized by type, value and risk making root-cause analysis by code now possible.

These invoice dispute and deductions resolution handling best practices yield on average a ROI of 10 to 50 percent reduction in dispute resolution cycle times, 100 percent dispute and deduction tracking and 30 to 90 percent improvement in root-cause tracking to help eliminate chronic recurring upstream issues.

3. Order Hold/Decisioning and Processing

What we have observed around order hold/decisioning and processing is that companies typically have multiple FTE’s reviewing and releasing customer held orders. These ‘nuisance holds’ are generated by lack of treatment, segmentation, seasonality and back-log calculators.

Best practice environments are utilizing software platforms that integrate collections processes and online payments with order release. Current and accurate credit exposure is calculated to minimize nuisance holds.

These order hold/decisioning and processing best practices yield on average a ROI of 25 to 50 percent reduction in order decisioning cycle times, 40 to 50 percent more accurate risk-based order decisioning and 20 to 60 percent increase in resource efficiency.

4. Application of Invoice Payments (Cash Application)

What we have observed around the application of invoice payments (cash application) is that typically auto-apply rates are below 90 percent. Much of the cash application process is done manually, using dual cash application systems and screens. In addition, SWIFT MT940/942/95’s are managed by people and not automation systems.

Best practice environments are experiencing a 90-plus percent match based on algorithmic cash application methodology. They utilize hierarchical cash app approaches with flexible matching rules for maximum hit rates. The dual screen is eliminated, improving not only match rates and exception ID handling, but also resource efficiency.

These cash application best practices yield on average a ROI of 15 to 80 percent operational cost savings, one to two day(s) reduction in DSO, and 20 to 50 percent reduction in inbound call volumes about payment related issues.

5. Lockbox Handling

What we have observed around lockbox handling is that typically there are high merchant bank lockbox fees and high manual lockbox related activity. Due to all of the manual processes involved, companies see a one to three delay in payment processing and application. Keying errors and data transfer issues cause further reduced hit rates.

Best practice environments are experiencing low or $0 lockbox related fees. This is done by implementing OCR solutions with auto-cash automation. These automated solutions provide minimum payment latency.

These lockbox handling best practices yield on average a ROI of 30 to 90 percent reduction in lockbox related fees, 60 to 70 percent elimination of data transfer and keying errors, as well as 15 to 50 percent faster payment processing and cash application.

This is part one of a two-part series. Stay tuned to learn more.