Is Order to Cash Management Really Working?

Order to Cash is a common approach to managing business; however, the name itself implies that neither profit nor planning is at the center of this management approach.

The Order to Cash (O2C) process does not show a true picture of any transaction. It does not provide any visibility into profit and loss, margins, sales predictions, or future inventory requirements. O2C is a subset of the actual process a business needs to go through in order to be successful.

The Order to Cash Process, or O2C Defined

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  1. An order is placed by the customer
  2. The order is entered in the system and approved
  3. The order is picked/filled, whether a product or a service
  4. The product or service is delivered to the customer
  5. An invoice is created and sent to the customer
  6. The customer remits payment
  7. The transaction is entered into the general ledger
  8. The vendor receives payment

 

It seems simple enough, right?

Unfortunately that’s the problem – it’s too simple.

It Takes More than Order to Cash

The O2C model, while currently an industry standard business process, is fraught with limitations because it has no built-in methodology for dealing with variables like:

  • What products should be carried in inventory
  • When to carry seasonally-related inventory
  • What quantities to maintain
  • Layered inventory
  • Vendor-managed inventory (VMI) costs
  • Invoice VMI (vendor managed inventory)
  • Rebates
  • Manufacturers’ return policies, refunds and deadlines

In other words, Special Price Agreements (SPAs), other Trade Agreements and Vendor Support Agreements are not taken into account.

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Whitepaper: Plan to Profit, A Better Approach

Embrace an analytics-driven culture with a destination-focused business management approach. Focus is shifting to Plan to Profit from the traditional Order to Cash. This Whitepaper highlights the significant benefits of a Plan to Profit approach.

Looking Forward

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Each sale has its own profile which impacts margins, profit and loss. With no way of knowing you’re going to meet the margin you’re hoping for, you’re out of control. You need a full system in place that shows a true picture of any transaction.

Getting to a true profit-based planning model requires evolving from a conventional O2C approach to a powerful business analysis/intelligence focus that will allow a company to find more effective ways to streamline their organization, increase profits and execute on initiatives that drive a competitive edge.

The way to accomplish that is with technology that supports collaboration of the entire supply chain and an organization-wide buy-in. In other words, Plan to Profit.

A Better Approach with Plan to Profit

Until now it would have been difficult to use a Plan-to-Profit approach because software that would give the depth and breadth of functionality required was not available. Thanks to technologies that support P2P (the internet, integrated software for manufacturing, accounting, sales, finance, operations), businesses can now access data that gives them a 360ᵒ view of every transaction. Without that, they have no control over profitability until it’s too late.

These specifics are made identifiable through collaborative input from customers, manufacturers, suppliers, vendors and internal resources. Only by pulling together information gathered from all parties can sales, profits and margins be accurately forecasted.

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P2P Infographic

Adopting a P2P Mindset

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There is no question that in today’s fiercely competitive drive for market share, companies have to be more diligent than ever to withstand ever-increasing pressure to keep margins sharp but still perform better. It is essential that they adopt a data-driven approach to marketing, sales and distribution so they can clearly understand what is driving growth and what is becoming a drag on profitability. Tracking and analyzing in real time is the only real answer to being able to make quick but solid decisions about change.

All over the globe, rich, specific data is analyzed by the business teams that are able to make decisions on derived insights. That direction is then shared with the divisions that can implement business process and even business model changes.

It’s time to establish a culture of thinking differently.

Establishing a Culture of Analytics

The reason to establish an analytics culture is driven by economics – specifically, the ability to compete in this increasingly digital age. Adopting a Plan to Profit environment requires a cultural change that begins at the top and is embraced by all departments across the organization: sales, marketing, operations, IT and finance.

Establishing a dedicated analytics team is not the same as embracing a culture of analytics. In fact, a stand-alone analytics team may very well be set up to fail from the start. The entire organization must buy in to the analytics culture, as their input, usage and accountability to the process is essential. Organizational buy-in is predicated on systems that are easy to use, feature familiar interfaces, integrate seamlessly with other applications and provide the highest degree of data integrity.

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Together, We Plan for Profit

Most software solutions allow you to account for needed industry functionality such as reservations and allocations, but do so as an afterthought – not including it in the planning process. While the information related to the inventory may be accounted for, it is often put in a siloed warehouse and forgotten. This relies on an Order to Cash methodology to manage your business, leaving out key information and ultimately keeping you from hitting your margins. Why not use software that allows you to include everything you need in the planning process so you can Plan to Profit and hit your margins, rather than managing with information and technology subsets? Advanced Supply Chain Software™ for Microsoft Dynamics® was built so you can properly plan and replicates real business process that ties into actual margins. We know how imperative margins are. Experience the comfort that comes from knowing your software will keep you aligned with your margins by contacting us today.

With our 27 years in the business, we’ve never met a distributor we couldn’t help. We know your business, and we know what you need. It starts with recognizing the effect of supply chain ERP capabilities.

We’re dedicated to our client success, and that means YOU!

Webinar: Plan to Profit, a Better Approach

We all know the business world is undergoing major changes caused by digital transformation and disappearing borders. How do you plan to make a profit in this changing environment? Is order-to-cash enough? Are you using all the tools at your disposal to create a 360 degree level of collaboration? When do you know if your plan is solid and that you have buy-in from your supply chain partners? We will analyze and discuss forecasting, pricing and margins, omni-channels, customer and vendor management, and much more!

The #1 Supply Chain Software for Dynamics AX

With Advanced Supply Chain Software™ for Microsoft Dynamics® AX you get more than just an application for managing one aspect of your supply chain, like order management or inventory management. You get a comprehensive end-to-end ERP solution with advanced supply chain functionality built by industry experts to address the full depth and breadth of your supply chain needs. Improve supply chain velocity, exceed customer expectations and optimize your profitability – all with industry proven Advanced Supply Chain Software™ for Microsoft Dynamics® AX that is a fully integrated component of Microsoft Dynamics® AX.

Join the Leading Distributors Who Trust

Advanced Supply Chain Software™ from I.B.I.S.

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I.B.I.S., Inc., A Sonata Software Company, is a member of the elite Microsoft Dynamics Strategic Development Partner program, an honor reserved for those Partners who have demonstrated deep industry and functional expertise.

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Experience You Can Trust

The ibis bird is the last to leave in a storm, and the first to return. We pride ourselves on being here when you need us. In our 28 years in business, we’ve never met a distributor we couldn’t help. We know your business - your needs.

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“When I think about working with I.B.I.S., I think about 2 things: 1. Manufacturing & Distribution Expertise; 2. Customer Service Focused”
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