Achieving O2C (order to cash) process improvement is crucial for businesses planning to migrate to S/4HANA. These complex, customer-facing critical processes evolve over time, which often means the reasons behind the current processes are unclear - “it’s the way we’ve always done it”.
O2C processes are usually a heavily customized part of the SAP ERP Central Component (ECC) footprint. Therefore, conducting a pre-migration analysis is essential to identify inefficiencies and tailor the ERP (Enterprise Resource Planning) system for enhanced O2C operations.
Pre-migration discovery: Complete a review of the existing O2C process
A Pre-Migration Discovery phase involves a comprehensive review of the existing O2C processes. It seeks to identify bottlenecks, inefficiencies, and areas of improvement. This is important because it provides a clear picture of the current state of the O2C process, which is necessary for planning the migration to S/4HANA. Without this, businesses risk migrating to a new system without fully understanding the implications and potential challenges.
Enable O2C process improvement by benchmarking against best practices
Benchmarking against best practices is a crucial step in achieving O2C process improvement. By measuring performance against industry standards, businesses can identify gaps and uncover opportunities for improvement. This process ensures that O2C operations are efficient, competitive, and ready for a successful migration. Together, these steps provide a clear roadmap for transforming the O2C cycle and achieving sustained operational excellence through an optimized migration to S/4HANA.
The goal of any O2C project is to optimize order processing time and minimize invoice rejection. To achieve this goal, invoices must be correct, and customers must receive their products on time. Customers want clear invoices that match their order forms to help them understand what they are being billed for. They typically also want a summary and then a separate, detailed list. If your customers are global, then showing them 15 different invoice formats and templates will not enhance their assessment of your capabilities. For most of us, paper invoices are a thing of the past and in many countries, companies are legally bound to provide an e-invoice. But it’s fair to say that most errors occur before invoice generation, in the upfront sales process, or in a rekey somewhere between the initial order and the invoice production.
Review quote-to-cash processes
For many of our clients, the end-to-end process from ‘quote to cash’ is not well documented and varies between different business units and products. There are multiple opportunities for information to be entered incorrectly as the systems aren’t always well linked together. Process mining can help discover the process when the system data is well structured, and each process step has a timestamp and a transaction ID. However, we find this technique works better with core finance processes than in the quote to cash space, where we encounter non-linear, often manually intensive processes, in systems that aren’t optimized for process mining.
We have encountered several examples of these issues. For instance, we discovered that account data was regularly being overwritten for one of our customers, resulting in invoices being sent to the wrong addresses repeatedly and a consequent increase in debtor days. Another example is the use of multiple CRM tools in the quote-to-cash space, which results in errors in the invoice generation process, meaning thousands of days of rework a year.
To address these challenges, organizations should conduct a comprehensive review of their quote-to-cash process, focusing on integrating systems, minimising manual interventions, and leveraging tailored tools to streamline workflows and reduce inefficiencies.
Action a discovery to identify O2C process improvements
An effective discovery process has to cover several key areas. These include quotes, fulfilment, pricing and revenue optimization and master data, the foundational data that drives the O2C process. Ensuring the accuracy and consistency of this data is crucial for the efficiency of the O2C process.
Quoting is another critical area of the O2C process. It involves providing the customer with a quote for the products or services they wish to purchase. Errors in this stage can lead to incorrect invoices and customer dissatisfaction.
Fulfilment is the process of delivering the products or services to the customer. It is a critical part of the O2C process because it directly impacts customer satisfaction, and delays or errors in fulfilment can ultimately lead to lost sales.
Finally, price and revenue optimization are critical aspects of the O2C process. This involves ensuring that pricing of products and services is optimized to maximize revenue. This involves striking a careful balance between pricing competitively and ensuring profitability.
It is clear why it’s important to achieve O2C process improvement ahead of migrating to S/4HANA. A pre-migration discovery phase and benchmarking against best practices are essential steps in this process. They ensure that O2C processes are optimized for efficiency and competitiveness, leading to a successful migration and sustained operational excellence.
If you’re looking for help to improve your O2C processes, get in touch.
