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Hackett Research Summary

15 Hackett Recommended Metrics to Evaluate Your Team and Process

This e-book outlines the 15 metrics recommended by Hackett group to benchmark against World-Class organizations.

CHAPTER 01

Executive Summary

Hackett Value Grid: World Class Finance Performance on an Empirical Level

Comparing your organization to peer group and world-class organizations

The Hackett Value Grid shows how your baseline performance compares to your peer group and to world-class performers. World-class performance is defined to be the top quartile performance in operational efficiency and effectiveness process metrics.

 

What is World-Class?

What does it look like, how is it different?

EFFICIENY

World-Class organizations are more efficient, by having:

  • Lower total costs
  • Faster cycle time
  • Higher Productivity

EFFECTIVENESS

World-Class organizations are more effective, by having:

  • Accurate decision making
  • Better alignment to business
  • Optimized working capital

Monitoring performance helps the organization identify process issues before they become a major problem that affects business outcomes.

Hackett group has identified top 15 metrics and benchmarked against the World-Class companies based on efficiency and effectiveness of the processes. In this e-book, we delve deeper into how best-in-class organizations compare with the rest in the order-to-cash (O2C) cycle.

 

 

CHAPTER 02

Order-to-Cash Process Metrics

Credit Management

1. Average Days It Takes to Complete New Credit Reviews

Efficiency Metric

Best Practices from World-Class Organizations:

  • Implementation of best-of breed online credit application
  • Automated  correspondence for missing information such as bank/trade references, backups
  • Providing real-time tracking of application status

Benefits:

  • Improve customer experience with greater visibility
  • Reduced manual errors

 

2. Automated Versus Manual Credit Modelling Tools

Efficiency Metric

Best Practices from World-Class Organizations:

  • Automated stakeholder correspondence for all credit decisions
  • Integrating with country-specific and industry specific credit agencies, public financials and Insurance bureaus
  • Automated capture of the fields from  the credit application form

Benefits:

  • Standardize credit operation across various platforms
  • Improved productivity to work on high value customers

 

Billing and Invoicing

3. Percent of Invoices Generated & Distributed Electronically 

Efficiency Metric

Best Practices from World-Class Organizations:

  • Adopt automated e-invoicing portal
  • Deliver invoice according to customer preferred channel such as portal and e-mail
  • Track conversion of customers from paper to   e-invoice

Benefits:

  • Self-service customer portal saves print+ mail costs
  • Eliminate low-value tasks in billing and invoicing such as dealing with paper, doing back-and-forth

 

4. Average Time It Takes to Bill

Efficiency Metric

Best Practices from World-Class Organizations:

  • Self-service customer portal for viewing invoices
  • Using a single portal which includes all relevant backup documents such as PODs, BOls
  • Streamlined collaboration between internal teams

Benefits:

  • Lower payment cycles
  • Improved customer experience

 

5. Percentage of Invoices Corrected for Billing Errors

Effectiveness Metric

Best Practices from World-Class Organizations:

  • Automated invoice generation from ERP open invoices
  • Inbuilt correspondence templates and packages with auto-attached documents

Benefits:

  • Lower deductions
  • Faster collections
  • Better customer experience

 

6. Percent of Customers Who Access Accounts via Web-based Application

Effectiveness Metric

Best Practices from World-Class Organizations:

  • Invoicing customers electronically via email, portals
  • Allowing customers to pay in electronic payment formats ACH, Credit cards and e-Checks through payment portal
  • Offering incentives to customers to bring them onto Web-based portals

Benefits:

  • Faster payments
  • Improve E-adoption
  • Better customer experience

Cash Application

 7. Process Cost per Customer Remittance

Efficiency Metric

Best Practices from World-Class Organizations:

  • Standardized processing for different e-remittance types
  • Automated aggregation of remittances from portals,e-mails and EDI

Benefits:

  • Easy e-adoption in payments
  • Lower cost in process payments

8. Automatic Remittance Posting Matching Rate

Efficiency Metrics

Best Practices from World-Class Organizations:

  • Template-agnostic remittance capture
  • Aggregating the remittances from multiple sources( mails, EDI, web-portals)
  • AI enabled payment matching & exception handling

Benefits:

  • Reallocate users
  • Reduced costs

Deductions Management

9. Average Dispute Resolution Cycle Time

Efficiency Metric

Best Practices from World-Class Organizations:

  • Identifying deductions at Cash Application
  • A single repository for all the backup documents such as notes, claims across internal and external teams
  • Track deductions aging

Benefits:

  • Improved recovery of invalid deductions
  • Better adherence to big box retailers such as Walmart

10. Percent Of Dispute Are Not Resolved By The Initial Resolver

 & Needs To Be Escalated Within The Management Team

Effectiveness Metric

Best Practices from World-Class Organizations:

  • Providing visibility into resolution status and progress of the dispute
  • Seamless collaboration between internal teams
  • Easing the research process by having all the documents at one single place

Benefits:

  • Lowers DDO
  • More bandwidth to work on invalid deductions

 

Collections Management

11. Process Cost per Collection Contact

Efficiency Metrics

Best Practices from World-Class Organizations:

  • Providing a prioritized worklist for collectors
  • Adopting automatic correspondence approach versus dial for dollar approach
  • Having single source of truth across various platform to access backup documents such as invoices copies, claims documents

Benefits:

  • Design scalable collections operation
  • Facilitates reaching out to a broader customer base

12. Collection Contacts per FTE

Efficiency Metrics

Best Practices from World-Class Organizations:

  • Inbuilt correspondence templates and packages with auto-attached back-up documents to save time
  • Sending pro-active reminder to customer prior to the payment due date
  • Automated correspondence to different customer buckets

Benefits:

  • Restricting phone calls to only select high-risk customers
  • Reduce aging/ past dues

13. Average Days Delinquent

Effectiveness Metric

Best Practices from World-Class Organizations:

  • Sending automated proactive reminders before payment due date
  • Predict when the customer is about to pay using Artificial Intelligence
  • Provide customers with self-service portal for viewing invoices and making payments

Benefits:

  • Improve working capital
  • Reduce dependence on banks for short-term banking

 

14. Percent of Credit Sales Collected within Terms

Effectiveness Metric

Best Practices from World-Class Organizations:

  • Provide incentives for early payments
  • Enable payment features such as auto-pay, schedule pay

Benefits:

  • Improve Days Sales Outstanding
  • Minimize missed payments

Order-to-Cash

15. Process Cost as Percent of Revenue

Efficiency Metric

Best Practices from World-Class Organizations:

  • Ensure high employee productivity by eliminating manual error prone tasks
  • E-adoption from paper
  • Keep a track on high-risk customers to ensure there is minimal bad-debt and write-off

Benefits:

  • Improved working capital and cash flow
  • Easier cash management

 

CHAPTER 03

Conclusion

What Drives World-Class A/R Performance?

What should your digital transformation initiative focus on?

It is beyond the point where companies are able to debate whether or not to initiate digital transformation. The question is whether someone disrupts using digital transformation or get disrupted by someone else’s digital initiatives.

To start with the digital transformation journey, finance execs should consider heavy investment in the following areas:

Automation of clerical repetitive tasks across C2C

Core automation means that costs are low and effort is allocated in the right tasks

Single, integrated platform

More effective in delivering services to internal and external stakeholders

AI-driven automation technology

Low-error rates in tasks

Integrated reporting and analytics

Better decision making and insight

Using big-data and machine learning

Improved outcomes of A/R actions – faster, more effective collections

Conclusion

Digital transformation can play a major role in helping peer-group organizations catch up to their world-class competitors. But the reality is that the definition of world-class will continue to evolve as leading finance functions deploy smart technologies to transform themselves.

Thus, the quest for achieving world-class status never ends. Its future will require continuous improvement of cost structure, effectiveness and stakeholder’s perceptions of how finance adds value to the performance of the enterprise.

 

CHAPTER 04

About HighRadius

HighRadius is a Fintech enterprise Software-as-a-Service (SaaS) company. The HighRadiusTM Integrated Receivables platform reduces cycle times in the order-to-cash process through automation of receivables and payments across credit, electronic billing and payment processing, cash application, deductions and collections.

Powered by the RivanaTM Artificial Intelligence Engine and FredaTM Virtual Assistant for order-to-cash teams, HighRadius enables organizations to leverage machine learning to predict future outcomes and automate routine labor-intensive tasks. The radiusOneTM B2B payment network allows suppliers to digitally connect with buyers, closing the loop from supplier receivable processes to buyer payable processes.

HighRadius solutions have a proven track record of optimizing cash flow, reducing days sales
outstanding (DSO) and bad debt, and increasing operational efficiency so that companies may
achieve strong ROI in just a few months. To learn more, please visit www.highradius.com

HighRadius’ Integrated Receivables Platform

Integrated Receivables optimizes accounts receivable operations by combining all receivable and payment modules into a unified business process. The Integrated Receivables platform provides solutions for credit, collections, deductions, cash application, electronic billing, and payment processing – covering the entire gamut from credit-to-cash.

The HighRadiusTM Integrated Receivables platform stands out by enabling every credit and A/R operation to execute real-time from a unified platform with an end goal of lower DSO, reduced bad-debt, and faster dispute resolution while improving efficiency and accuracy for cash application, billing, and payment processing.

HighRadiusTM Integrated Receivables leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes. The Integrated Receivables platform also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier Accounts Receivable process to the buyer Accounts Payable process.