Agenda. - Why have metrics related to O2C. - What can impact O2C metrics. - What questions should you consider before starting? - KPIs to consider

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1 Agenda - Why have metrics related to O2C - What can impact O2C metrics - What questions should you consider before starting? - KPIs to consider The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 1

2 Why have metrics related to O2C? The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 2

3 Questions to consider before starting - 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? The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 3

4 Different Types of Metrics Production Profitability Business Specific The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 4

5 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: 5

6 Metric: DSO (Days Sales Outstanding) 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 Trend is more important than an individual value Tracking direction of DSO (increasing vs. decreasing) Important to benchmark against other companies in same industry The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 6

7 Metric: Trade AR & Net Sales Open Receivables attributed to 3 rd party sales Net Sales to 3 rd party customers 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 The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 7

8 Metric: % Current Trade receivables that are not considered past due per payment terms 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 The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 8

9 Metric: Customer Orders 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 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 The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 9

10 Metric: Total Cash Received Measure cash received for 3 rd party receivables 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 The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 10

11 Metric: Discrepancies # and $ value of customer payment 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 The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 11

12 Metric: Unearned Cash Discount by Customer # and $ value of discount amount taken by customers outside of discount payment terms 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 The Accounts Receivable and Order-to-Cash Expo Conference is produced by: 12