I have some good news. Ready? For those of us who care about receivables, we’re finally seeing broader recognition of what order-to-cash has to offer. For years, articles, reports, and conference presentations have largely focused on the payables side of the house. And that made sense, for a time. Processing invoices faster really could help reduce labor costs — to a point. Paying invoices early really did help companies save money, and sometimes a lot of it. The business case was simple to construct and the realistic ROI was compelling. P2P won the day and O2C had a tough time keeping up.
Caution: Personal Opinion Ahead
I may veer towards skepticism fairly often, but I’ve always said that P2P wins out in the competition against O2C because of it’s superior business case. With AP, efficiency means less headcount (for relatively small labor cost savings) and more discounts (for relatively large savings). For AR, efficiency only means you get bills out faster. There’s no guarantee that customers will pay you any sooner; it’s all speculative. DSO reduction is a goal, but it’s outside of your control. And since this case is less straightforward, with a less reliable ROI, AP projects get funding (and providers marketing to acquire them.) But the times, they are a-changin’.
Back to Our Regularly Scheduled Logic
Well, it may not be the times a-changing; it may just be the goals. When the conversation was dominated by efficiency and savings, it was AP’s game. But there’s been an incredibly interesting change in the market in the area of recurring business models. With the growth of (and media attention to) businesses with service-based models, there been a lot more discussion of customer satisfaction — of customer “delight.” This used to be reserved to analysts talking about the customer service department or call centers. But now customer satisfaction and attrition have Finance’s attention. They’re at the core of business projections and valuations. They’re figures you need to have a firm grip on when looking for funding. When your business relies on your customer to come back tomorrow, next week, next month, and next year in order for your metrics to work out, you spend a lot more time thinking about their day-to-day experience. And that brings us back to Order-to-Cash.
It may not have been part of the plan, but the recurring revenue discussions championed by folks like Zuora and Vindicia have had a very welcome side effect: the emphatic introduction of customer satisfaction into the world of customer billing. In the process, order-to-cash has gotten a new target, and a new justification for investment. It’s somewhat of a cultural shift. As more service-based businesses pop up, and existing manufacturing firms look to ramp up product-related service offerings, we all seem to be moving towards the same destination. Thankfully, that’s a place that keeps the customer front-and-center and recognizes the potential impact–whether positive or negative–that the order-to-cash process can have on customer relationships.
One Degree More
If we take one step back, we can talk about Quote-to-Cash. That’s a perspective that guides the annual webinars I’ve been fortunate to co-present with John Choate of ASUG. It’s a perspective that encompasses customer interactions with Sales, Order Management, Credit, Fulfillment, Customer Service, Billing, and (hopefully not) Collections. Aside from marketing, that’s pretty much every touch-point a customer has with your company, and it’s all fair game for O2C. That combination of customer service focus and custom-centric process is starting to drive increased attention to the area. It’s an idea I floated last month at IOFM’s inaugural Order-to-Cash Summit in Chicago. The response made me pragmatically optimistic. Even in sessions that had nothing to do with recurring models, customer service was prevalent.
It’s still new, of course. Corporate investment priorities won’t change overnight. But this is the brightest spot I’ve seen in the past few years for O2C to get the recognition it deserves in strategic discussions. Supplier Finance is working hard to keep P2P’s seat at the table secure, but if nothing else, I don’t think it will be all too long before it’s a fair fight.
Until next time,