Current and Future Trends in Customer-to-Cash

Hackett’s 2009 Customer-to-Cash Performance Study identifies current and future trends in accounts receivable, including new technology solutions that support dynamic credit and risk models, workflow and process automation. Approaches to service delivery are evolving, as well: C2C organizations are taking greater advantage of shared services for cash application and collections processes. And, C2C leaders are beginning to acknowledge the limitations of lagging performance measures such as DSO to drive performance. New technology promises to meet their need for more dynamic metrics. Currently in development are solutions that enable reporting and analysis of performance at previously unheard-of levels of the company, leading to understanding of variations at each level and how these are influencing receivables aging and cash flow.

Using Statistically Based Credit Scoring to Identify High-Risk Customers in Your Receivables Portfolio

Credit scoring offers a systematic, non-biased method for evaluating customer risk. However, although today’s economic maelstrom has driven days sales outstanding (DSO) to its highest level in seven years, most companies continue to rely largely on aging to determine their collection activity. Credit scoring predicts payment risk based on a company’s particular customer portfolio. This helps management avoid potential cash-flow pitfalls because those with the highest risk of late or non-payment have been proactively identified and appropriate strategies applied before the account actually becomes overdue.

Improving Collector-Level Effectiveness at Vengroff, Williams & Associates

Superior receivables management is a key factor in propelling world-class customer-to-cash (C2C) performance. Many companies are interested in building a formal program for measuring and improving collector-level effectiveness in an effort to improve receivables management, but as yet few companies have one in place. Vengroff, Williams & Associates (VWA) is a business process outsourcing firm specializing in receivables management. It has extensive experience managing and improving the order-to-cash process for some 3,000 companies, including GE, The Ford Motor Company and Microsoft Corporation. This Hackett Customer-to-Cash Process Perspective details the firm’s management approach, one based on performance measurement, accompanied by a formalized human capital measurement and development program, leading to role allocation based on capability. It uses reporting tools to assist the measurement process, from collector level up to executive performance. A highly incentive-based culture propels staff toward meeting its targets, while the individual’s capacity to meet those targets is assessed through a talent management model developed by VWA. These concepts can be applied within companies handling their own collections.

What Is Keeping Companies from Improving Their Dispute Resolution Practices?

There are certain steps that C2C organizations can take to minimize the occurrence of disputes. These involve minimizing upstream risk of billing and customer data errors; treating the health of receivables as a key indicator of business performance; and standardizing dispute resolution practices and reducing cycle time. All of these steps require technology to one degree or another, but executives should not expect technology to solve all their dispute resolution problems. Instead, development of processes and training on how to use those processes consistently are critical. One client discussed in this research, a $6 billion services provider, slashed its dispute resolution cycle time by 50% and began recovering 15% of the credits it historically had awarded automatically within a year optimizing its dispute management process via process and technology improvements.

InterContinental Hotels Group: Best Practices for Offshoring to India

The questions of how and where to source back-office functions are increasing in importance for senior executives at all types of global organizations. With centralization well established as a C2C best practice, sourcing has become a two-dimensional decision. Organizations must decide whether to outsource processes and functions to another company or handle them internally and where to locate those functions ¯ at home or offshore. The offshore shared services model was the approach taken by InterContinental Hotels Group (IHG). This Hackett case study examines IHG’s experience establishing a shared services organization in India to manage cash application, billing and other transactional processes. By applying best practices such as those listed below, IHG overcame many common offshoring challenges to realize substantial gains in processing accuracy and reduced costs.

Contract Management Impacts Invoice Accuracy and Improves Cash Flow

Many organizations have experienced negative competitive, financial and legal consequences due to poorly performing contract management processes, controls and technology. As organizations enter into increasingly more complex relationships with third parties, a growing number of CFOs have come to realize the strategic importance of excellence in contract management, and that effective contract management is a must for minimizing and managing business risk and complexity. Intelligent contract management approaches ensure, among other things, that companies are accurately billing their customers, that payments are made on time and by the correct method, and that collection and dispute efforts are minimized. Research by The Hackett Group shows that leading companies have invested in contract management practices (organizational, process, technology) that have a positive impact on effectiveness, while reducing risk and enhancing financial performance.

The Impact of Revenue Cycle and Overall Finance Processes and Best Practices on Sarbanes-Oxley Compliance

The Hackett Group's finance benchmark has traced a clear rise in finance costs at peer-group companies as a result of Sarbanes-Oxley (SOX) requirements. Meanwhile, world-class firms have continued to shave finance costs while increasing overall finance performance. The Hackett Group has objectively quantified the ability of top performers to achieve SOX compliance more efficiently and effectively. They have fewer but more accurate key controls; they spend less time performing them and they have fewer exceptions to manage; the net result is a lower cost of compliance. In this Hackett Perspective, we discuss why and how SOX has disproportionately impacted typical companies in terms of overall finance processes and specific revenue cycle processes. Further, we examine the impacts of specific best practices as utilized by world-class finance organizations. Finally, we outline tangible steps that companies can take to use SOX as a vehicle for supporting broad-based finance transformation.

Offshoring vs. Outsourcing - Which Will Lead the Globalization of Invoice-to-Cash?

To achieve significant and sustainable improvements in both efficiency and effectiveness, companies must make the globalization of the back office a strategic imperative. The pre-election controversy over the loss of American jobs to countries such as India, China and the Philippines has subsided. The globalization of services has been elevated to corporate board rooms across the US and Europe. The resulting flood of work is driving explosive growth in sourcing advisory firms. This Hackett Perspective examines results of The Hackett Group's 2005 BPS Survey, which was completed by 58 companies across a broad spectrum of the marketplace - more than 100 companies have participated in this ongoing study since 2004. The median participant company had $6 billion in revenues with approximately 28,000 employees. Sourcing options, associated issues and key findings of this recently completed comprehensive survey are explored as they relate to invoice-to-cash processes and sub-processes.

Offshoring vs. Outsourcing -- Which Will Lead the Globalization of Invoice-to-Cash?

To achieve significant and sustainable improvements in both efficiency and effectiveness, companies must make the globalization of the back office a strategic imperative. The pre-election controversy over the loss of American jobs to countries such as India, China and the Philippines has subsided. The globalization of services has been elevated to corporate board rooms across the US and Europe. The resulting flood of work is driving explosive growth in sourcing advisory firms. This Hackett Perspective examines results of The Hackett Group's 2005 BPS Survey, which was completed by 58 companies across a broad spectrum of the marketplace -- more than 100 companies have participated in this ongoing study since 2004. The median participant company had $6 billion in revenues with approximately 28,000 employees. Sourcing options, associated issues and key findings of this recently completed comprehensive survey are explored as they relate to invoice-to-cash processes and sub-processes.

Improving the Discrepancy Resolution Process, Part I

Discrepancy resolution is one of the major contributors to the cost of Invoice-to-Cash (I2C) processing. Hackett research shows that a methodical approach to identifying, collecting and leveraging critical information gained is the basis for understanding why errors occur and what practices can reduce A/R discrepancies, and using this insight to your advantage. This advantage can result in improved processes, great cross-functional collaboration, lower cost of operations and increased customer satisfaction. Statistical controls, root-cause analysis and enhanced automation are keys to error reduction and improved transactional process efficiency. This Perspective is the first in a series discussing ways to shrink the volume of discrepancies and subsequently the cycle times and business costs along the end-to-end I2C stream.

Improving the Discrepancy Resolution Process - Part I

Discrepancy resolution is one of the major contributors to the cost of Invoice-to-Cash (I2C) processing. Hackett research shows that a methodical approach to identifying, collecting and leveraging critical information gained is the basis for understanding why errors occur and what practices can reduce A/R discrepancies, and using this insight to your advantage. This advantage can result in improved processes, great cross-functional collaboration, lower cost of operations and increased customer satisfaction. Statistical controls, root-cause analysis and enhanced automation are keys to error reduction and improved transactional process efficiency. This Perspective is the first in a series discussing ways to shrink the volume of discrepancies and subsequently the cycle times and business costs along the end-to-end I2C stream.

Close Relationships with Business-Unit Customers Smooth Migration Path of Invoice-to-Cash Processes to Shared Services

The deployment of shared services organizations (SSOs) is a longstanding best practice for managing the transactional activities of finance organizations. Hackett research shows that the use of SSOs is an increasing trend in the invoice-to-cash (I2C) process area. I2C practitioners are seeking ways to use shared services for cost reduction and increasing the business value of their processes, such as improving working capital, reducing days sales outstanding and eliminating billing errors. Migration, though, is often met with resistance from the business units. Best practices demonstrate the importance of I2C practitioners working closely with business-unit leaders to communicate, then quantify, the benefits of centralization. This Perspective provides action steps for overcoming cultural resistance. It discusses how an end-to-end process view closely involving business-unit customers in designing and managing the I2C SSO solution can result in measured success with business buy-in.

Quantifying the Benefits of Electronic Invoice Presentment and Payment

If generating and sending bills were a stand-alone business, it would rank in the Fortune 50-US businesses spend annually between $20 and $30 billion, generating 26 billion bills and spending $17 billion in postage-somewhere between number 34 (at $37 billion, just below Costco and number 22 (at $47 billion), just ahead of AT&T. This represents an enormous cost and a virtual rainforest of paper. Electronic invoice presentment and payment (EIPP) represents one way to control these costs, by providing and receiving payment for invoices electronically, without the need for paper, postage, or paper handling. Eliminating paper and manual intervention are two of the enduring themes in best practices in finance. As technologies have evolved, so have the opportunities to implement these principles in increasingly more elements of the various finance processes. The advantages to the invoicer are obvious: reductions in float, non-payment, processing errors, postage, and paper. The challenges, however, are also material-particularly inasmuch as the customer may see the potential benefits as asymmetrical and weighted toward the supplier.

September 2005 Performance Metrics and Practices of World-Class Companies: Executive Insights in Finance, IT, HR, and Procurement

September 2005 Performance Metrics and Practices of World-Class Companies: Executive Insights in Finance, IT, HR, and Procurement

July 2005: Optimizing a Return on Business Complexity: Performance Metrics, Practices and Strategies of World-Class Companies

July 2005: Optimizing a Return on Business Complexity: Performance Metrics, Practices and Strategies of World-Class Companies

April 2005 World-Class Defined: Realized Performance Based on Proven Best Practices

April 2005 World-Class Defined: Realized Performance Based on Proven Best Practices

March 2005: 2004 Performance Metrics and Practices of World-Class Procurement Organizations

March 2005: 2004 Performance Metrics and Practices of World-Class Procurement Organizations

March 2005: 2004 Performance Metrics and Practices of World-Class Information Technology Organizations

March 2005: 2004 Performance Metrics and Practices of World-Class Information Technology Organizations

December 2004: Performance Metrics and Practices of World-Class Human Resources Organizations

December 2004: Performance Metrics and Practices of World-Class Human Resources Organizations

November 2004: 2004 Performance Metrics and Practices of World-Class Finance Organizations

November 2004: 2004 Performance Metrics and Practices of World-Class Finance Organizations

August 2004: Performance Metrics and Practices of World-Class Companies: Executive Insights in Finance, Information Technology, Human Resources and Procurement

August 2004: Performance Metrics and Practices of World-Class Companies: Executive Insights in Finance, Information Technology, Human Resources and Procurement

Improving Cost Requires Both Process and Technology Best Practices

Recent Hackett research has revealed that companies who have top-quartile cost performance share a number of best practices. In this Hackett Perspective, we will look at several practices related to policy and technology and answer the following questions... What are these best practices? How do first-quartile companies differ in their use of these practices? What are some implementation issues? We will also briefly comment on the inter-relationship of these practices.

For Greater A/R Productivity, Target Higher Rate of Automatic Matching of Remittances to Invoices

A Hackett-Certified(SM) Practice that all productivity-focused A/R managers should take steps to incorporate is automatically matching at least 80% of all customer remittances to the appropriate invoices. This percentage represents payments that are completely applied, resulting in zero manual effort required. Depending upon the nature and complexity of the business, measuring the percentage of closed invoices (80%) can be an equally effective measure. Achieving this level of remittance-matching greatly reduces the manual workload for accounts receivable. However, it is not easily achieved, and is highly dependent upon sales, pricing strategies and complexities, invoice formatting, frequency, payment methods, matching algorithms, write-off and adjustment tolerances, among other variables.

Hackett-Certified™ Practices Help Eliminate Unnecessary Complexity in Intercompany Transactions

An unfortunate and often unnecessary consequence of organizing large firms into relatively autonomous divisions, business units or SBUs (strategic business units) is the complexity this move brings to internal transaction processing. Each unit is mandated to act as if it were an independent business. In many respects this is a powerful organizational concept, and one that has become a standard part of the business landscape. When Division "A" treats Division "B" as if it were a completely unrelated party, even when both divisions' transactions are being processed in the same shared service center, the company as a whole has crossed over into the realm of unnecessary complexity. In this issue of Hackett Perspective, we examine a number of proven ways for reducing this complexity.

Top Performers Choose Shared Services

Recent Hackett research has revealed that companies who have top-quartile cost performance share number of best practices. In this Hackett Perspective, first of a two-part series, we will look at several related to organization and responsibilities to the following questions: - What are these best practices? - How do first quartile companies differ from peer groups in their use of these best practices? - What are some implementation issues? Quartile 2 Best Practices Discussed: - Use of shared services over outsourcing. Hackett data has long shown that consolidating transaction processing together lowers costs and improves quality. This is something that first quartile companies recognize well. - Having a single dedicated process owner. If we regard invoice-to-cash as an integrated process and not as a discrete series of activities, it follows that a single individual with responsibility for the entire revenue cycle would be more able to create the cross-activity efficiencies and process connections that create lower cost and better quality. - Having dedicated resources for discrepancies. This is another practice that demonstrates that common sense often is a hallmark of finance best practices. Since the revenue cycle is generally a highly automated activity, it follows that greater efficiency comes when the non-automated portions have dedicated resources for each discrete activity.

Hackett-Certified™ Practices Quicken Cash-Inflow Cycle, Reduce Costs of Invoice-to-Cash Process

The ultimate vision of an invoice-to-cash process should be products and services provided to customers according to a clearly defined, agreed upon contract for which payment is received in full, within terms, without the need of an invoice or the management of an open receivable item, otherwise known as ERS. Then there's "the next best thing." The next best thing is a realistic goal for most, and an important performance indicator for all. The next best thing can be defined as invoices delivered electronically without errors, and paid in full within terms. The Hackett Group's Invoice-to-Cash benchmark data indicates a significant opportunity for most companies to refocus upon the next best thing. The reality of today's invoice-to-cash process is that the median company expends nearly 58% of invoice-to-cash resources on just two sub-processes: authorizing credit and collecting payment.

Avery Dennison Tames the Sarbanes-Oxley Beat with Real-Time Transaction Monitoring Software

Federal law requires businesses to constantly monitor their transactions for financial irregularities and disclose any that occur. They also must document how well their business controls spot these problems and then fix or improve the ways their controls work. Yet the compliance dilemma facing businesses today is that most of the self assessment programs they have attempted have failed. In this Hackett Perspective, we will examine how Avery Dennison, a Hackett Group client, has installed a real-time software solution to this dilemma, and is currently extracting a level of benefits and strategic value from the system that outweighs its costs. Best Practices Discussed: - Automation technology and oversight software was installed, and ultimately saved the company time, and helped its shared services managers perform better. - Continuous auditing, using data analytics was implemented, allowing for easier monitoring of controls and compliance with Sarbox.

The Cost of Quality: Companies Attaining First-Quartile Performance in Discrepancy Resolution Can Capture $419,000 in Savings Annually

According to the Hackett database, the average billion-dollar company processes 257,126 vendor invoices annually, and has to correct 5% of them because of errors. Clearly, there is significant room for improving discrepancy resolution, an important subprocess of AP that aims to ensure that discrepancies in invoices are resolved and that only approved invoices are paid. Discrepancy resolution, combined with the activity of responding to inquiries from vendors ("Why hasn't our invoice been paid?") together make up 20% of total AP cost. The average cost per transaction in AP is $2.59, compared to the Q1 cost of just $1.63.

Transaction Processing -- Revenue Cycle

Transaction Processing -- Revenue Cycle