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The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 1 3/31/2016
- Why have metrics related to O2C
- What can impact O2C metrics
- What questions should you consider before starting?
- KPIs to consider
Agenda
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 2 3/31/2016
Why have metrics related to O2C?
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 3 3/31/2016
- Who is going to track the KPIs? - Will you be partnering with other teams and
combining KPIs? - What audience is going to receive the KPIs? - Why are you tracking the KPIs?
- Are you trying to make a business case? - Track process bottleneck and successful resolution? - Track team success
- Why does the KPI matter? - What story does it tell and to who?
Questions to consider before
starting
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 4 3/31/2016
Different Types of Metrics
• Production
• Profitability
• Business Specific
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 5 3/31/2016
What can impact O2C metrics?
Things to consider
• Multiple systems
• Multiple locations
• Multiple departments &
jobs/roles
• Multiple stakeholders
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 6 3/31/2016
Metric: DSO (Days
Sales Outstanding) • Trend is more important than an
individual value
– Tracking direction of DSO
(increasing vs. decreasing)
• Important to benchmark against
other companies in same
industry
A measure of the average number
of days that a company takes to
collect revenue after a sale
Can indicate the amount of sales in
a period
Can indicate how quickly customers
are paying
Can indicate how effective credit &
collections efforts are
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 7 3/31/2016
Metric: Trade AR & Net
Sales
• Trade receivables are amounts
billed to its customers when it
delivers goods or services to
them
– Should be classified as current
assets if expecting payment within
1 year
• Net Sales reflects the amount of
sales generated after the
deduction of returns, allowances
and discounts
Open Receivables attributed to 3rd
party sales
Net Sales to 3rd party customers
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 8 3/31/2016
Metric: % Current • Important to measure % current
along with $ past due
– For example, a larger customer
could be 95% current but have
$500,000 past due
– Tracking $ past due alongside further
assists meeting overall % current
goal by collecting larger amount of
cash due
Trade receivables that are not
considered past due per payment
terms
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 9 3/31/2016
Metric: Customer
Orders
• Metrics should give insight to customer
service and efficiency of placing
accurate orders
• # of New Orders
• # of Open Orders
• # of Orders with Errors
• On Time Delivery %
– Highlight issues for customers that
won’t start payment process until
product is received
Various metrics that cover the
efficiency of the order process
High volume of billing errors will
have negative impact on DSO due
to customers receiving inaccurate
delivery and/or invoice
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 10 3/31/2016
Metric: Total Cash
Received • Metric should include total $ and
total # of payments received
• If possible, auto application of
cash should be considered as a
metric
• Provides insight to cash
application needs and process
Measure cash received for 3rd party
receivables
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 11 3/31/2016
Metric: Discrepancies
• Discrepancies impact % current
• Discrepancies can point to
break down in process such as
pricing issues, billing errors,
customer credit issues and so
forth
• Discrepancies can cause
escheatment/unclaimed
property issues for customer
credit balances
# and $ value of customer payment
discrepancies
The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 12 3/31/2016
Metric: Unearned
Cash Discount by
Customer
• Unearned cash discount is cash
“left on the table”
• Determine what customers are
taking discount outside of
discounted terms
• When tracked by customer it
allows better information for
payment term and pricing
negotiations
# and $ value of discount amount
taken by customers outside of
discount payment terms