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Business Credit Concepts All Articles • Home |
How to be Proactive in Driving Revenue Assurance
Like the nonstop drip of a worn out faucet, revenue leakage - steady,
incessant and ultimately costly-can only be stopped completely by fixing
the leak. Organizations today are at risk of losing a significant percentage
of gross revenues because of leaks, gaps and undetected errors in their
business processes. The sales order management process and the entire
quote-to-cash cycle have become increasingly complex, due to rising
sales volumes, intricate product pricing and configurations, fast-changing
promotions, and the impact of the internet. Fragmented across disparate
systems, applications and organizational boundaries, the quote-to-cash
cycle and associated processes are now fertile ground for profit loss
in the form of late pays, charge backs, write-offs, penalties and unearned
discounts. Often errors aren't even detected till much after the fact
resulting in revenue erosion. Even when errors are detected, it's usually
too late to fully recover the lost days sales outstanding and productivity
costs.
It's easy to see why the leaks come about. Quote systems, contract management
systems, order management systems, product configuration tools, enterprise
resource planning systems - the quote-to-cash cycle rests on a string of disparate
transactional systems and applications. The gaps between them are typically
bridged by manual processes and numerous individuals in different reporting
hierarchies. Consequently, the potential of inconsistencies and errors abounds
upstream in the quote-to-cash cycle. An unearned discount here, a mis-priced
product there, erroneously providing free shipping when it's not called for
in the contract, a wrong tax code - these types of incidents add up and, worse,
are frequently repeated. And it only gets worse each year as sales volumes
rise and processes become even more complex over time. No wonder Finance loses
sleep - plugging leaks instead of focusing on higher value added initiatives.
Unlock capital, stop revenue leakage and reduce operational costs.
Effective revenue assurance rests on business policy exception detection
and resolution, continued process improvement initiatives based on
actionable visibility to transaction data, and automation of receivables
and collections functions. Put these three key elements together and
significant capital can be unlocked, no matter how complex an organization's
quote-to-cash cycle may become.
It is important to think of a holistic solution to this problem. Forward thinking
companies use a combination of order-to-invoice quality and collections automation
technologies to arrest this growing source of profit erosion. It's imperative
to identify inconsistencies and errors in orders and invoices before they flow
downstream and plays havoc with profit margins and customer relationships.
Simultaneously, it's best practice to enable click-through, real-time visibility
into forecasts, up-to-date status across various reporting hierarchies, and
all events and transactions as they take place throughout the business process.
And finally, it's important to automate the process of managing late payments,
resolving disputes, and accelerating collections to reduce DSOs and operational
costs.
Proactively identify exceptions and stamp out revenue and capital leakage.
The first step towards this goal is to centralize and correlate all
order-related information. This includes quotes, purchase orders, change
orders, and sales orders and other key transactional documents as they
are generated, and as they flow across various transactional systems
and organizational boundaries. The next step is to provide a consistent,
easy-to-use, and simple-to-understand interface to this information
in order to enable holistic visibility into the process, end to end.
This ensures that all data and transactions that fuel key business
processes are accurate, and that the processes themselves are auditable.
Once data and transactions have been correlated, transaction monitoring and
exception identification can take place. Exceptions occur because business
data, rules and policies are applied improperly or not at all. In a dynamic
environment, new policies are often inconsistently documented and are difficult
to keep up with changing policies and contractual commitments. An automated
business rule capability with algorithm-based problem detection and exception
based reporting can monitor and highlight those exceptions likely to result
in late pays, charge-backs or unearned discounts. These rules can include pre-set
tolerances for automatic approval, and can also trigger alerts to warn of developing
problems. And the key process owners can configure the rules directly, without
having to go through a centralized and protracted IT process.
All this enables exceptions and issues to be proactively address before they
flow down stream and otherwise cause revenue leakage, high DSOs, customer dissatisfaction
and become costly to resolve.
Drive continuous process improvements and achieve best-in-class performance.
In the spirit of ISO, Six Sigma and other business quality improvement
initiatives, the insights derived from having actionable visibility
into the quote-to-cash cycle can be marshaled to drive continual business
process improvements. It is not enough to simply detect and resolve
problems within the quote-to-cash cycle. It's just as important that
once a problem is detected, to identify, analyze and eliminate its
root cause.
In turn, process improvements have a positive effect not just on cash flow,
but also on employee productivity and morale, and even on customer relations.
No customer likes to be pestered over persistent order and invoice quality
issues, and cutting off revenue leakage and sources of charge-backs and penalties
helps keeps customer relationships on a higher value-added plane.
Automate your receivables and collections management efforts to reduce DSO.
Equally important is addressing the mud that comes with the leak.
Unaccounted for discounts and deductions, unreconciled charge-backs
and penalties, and significant delays in payments - all rack up costs
in revenue leakage and locked-up working capital. Worse still, the
receivables and collections teams end up cleaning up the mess with
severely inadequate tools. Too often multiple enterprise resource management
systems with different data hierarchies mask easy visibility to the
total positions. Much of the actual forecasting, prioritization and
communications work in collections is done manually - using individual
spreadsheets, pencil and paper. As economic environments change, consistently
and immediately changing credit and collections policies is tricky
at best, and auditability of the entire process leaves much to be desired
in the world of increasing focus on compliance and governance.
These issues can be solved and their resulting impact on high DSO and high
operational costs can be eliminated through the use of collections management
tools. Process automation technologies for collections management can drive
dynamic customer segmentation and auto-application of collections strategies
- with automated communication, action-items and comprehensive audit trails.
Various stake holders can access secure compartmentalized information across
enforceable hierarchies - at transaction, account or portfolio levels - in
real time. And an intuitive user-interface, easy to access reports and KPIs,
and a workbench to facilitate inter-departmental communication can take over
much of the heavy lifting from the collections teams - enabling them to focus
on higher value-added and strategic tasks.
Real value in the real world - a reality today.
In order to prevent revenue and receivables leakage, an increasing
number of forward looking organizations are implementing solutions
that can arrest this problem now. Indeed technology solutions that
monitor and help fix errors and exceptions in the order to cash process,
automate the receivables and collections management process, and deliver
real-time click through visibility across the financial transactions
are delivering tremendous returns - in revenue assurance, unlocking
working capital, reducing operational costs, and improving customer
interactions. And finance professionals in these companies are spending
more of their time working on strategic finance initiatives that deliver
higher value-added to their corporations, rather having to plug the
leaks with their fingers.
About the Author: Sanjay Srivastava is COO for Aceva, and works directly
with many of Aceva's global clients, spending significant time in their direct
and outsourced finance and sales operations departments - helping them benchmark
and catalyze operational efficiency, implement technology-enabled solutions,
and re-engineer processes around industry best practices.
Reprinted with permission of The Covering Credit Newsletter, 10/1/04 Edition.
Provided by anscers Encyclopedia of Credit
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