Order-To-Cash 2020: Focus Areas For Improvement, Metrics and Best Practices For Transformation

Speakers

Saurabh Chopra

Director Business Process Management, C2C Transformation,
Honeywell

Transcript

[0:00] Moderator:

Hello everyone here we have Saurabh Chopra from Honeywell and he’s going to be presenting focus areas for improvement, metrics, and practices for transformation. Saurabh believes in the global transformation team for credit to cash for Honeywell and has exposure in managing global order to cash teams and driving enterprise-level transformational products to boost working capital and drive business outcome metrics. He plays a crucial, critical role that leads to business development, revenue growth operations and strategic planning.

[0:29] Moderator:

So, you have the stage.

[0:36] Saurabh Chopra:

Hello, everyone.

[0:39] Saurabh Chopra:

So, I think we covered briefly on the introduction part but you know, I wanted to make sure that we talked about the critical part of order to cash like most of us like at times, think like, if we are heading for transformation, what is that, you know, the key focus areas that we want to look upon. So when I joined Honeywell, that was four years back, you know, it was something like, you know, I could figure out like focusing on credit to cash. So, that was a bit of a surprise factor to me because if you have to transform your process, and if you want to improve on your working capital DSO, you need to make sure that you’re looking at the end to end order to cash. So, with with the new changes that we applied in Honeywell, our focus has shifted from C to C to order to cash and with that, what we are doing is we are making sure that even if order management and dispute management, you know, this is part of the customer excellence organization, how we can engage them in the journey of order to cash to drive right metric improvement.

[1:56] Saurabh Chopra:

Okay, so in this session, we are going to talk about the What are the top five priorities of order to cash, aligning team metrics and KPIs with business objectives? I think this is something that Sashi also covered in yesterday’s presentation. I think that was cool. Because if you talk about like, you know if your business outcome metrics are not tied to your day to day operations, something is lacking. So it’s very important like, you know, you have your business outcome metrics defined, which is coming from the top leadership. And then how do you make sure that the critical KPIs or GPI is when I say KPIs, we all know the definition those are key performance indicators. GPI could be like a general performance indicator, which feeds into your KPI metrics. So how do you make sure that you have the right metrics to drive pieces on the operation side as well? So let’s take some time and talk about the top five priorities for the order to cash. So in 2010, You know, the buzz was all about moving to SAP platform, right? Moving on to FSCM. But when we started to look at Honeywell. So Honeywell is a kind of organization where we do a lot of acquisitions. So we inherit a lot of processes that are not standardized with different legacy systems. So one of the key things that we identified was, we had like a hundred and 50 ERP systems or different instances of systems that we were working upon. So how should we make sure that from a Technology Roadmap perspective, as you know, we can churn out these ERPs and consolidate into one single roadmap as part of that, so what we did in I think that was 2017 and 18. When we started to, you know, think about what we need to do to move on a more mature platform. So, another step we move forward with HighRadius, we went forward integrating our SAP platform into their bolt-on solution for, which is, ACA and DCA for collections in dispute for cash app we opted for, you know the cloud solution again, we just focused primarily on SAP reason why we focus primarily on SAP because as an interim Honeywell team is also working on integrating some of this legacy system into the core ERP system. So we wanted to make sure that we are not making early moves. So let’s focus on what is already there on SAP, bring it on the platform and then take it forward. So as so now where we are from an auto cash performance perspective like Honeywell was at 42%. Now we are running somewhere around 70 to 75%. There’s still a lot of ground to cover. And I will talk about it in in a little bit like you know what, what are the key things that we need to look upon when you have to boost your auto cash performance so Now what we are thinking about is, as part of my vision, which is linked to, you know, our CFO and the chairman, we want to move into more artificial intelligence and digital transformation, how do you get there? To get there, it is very important, like, first of all, you should have the right policy processes to define your Technology Roadmap. And as we move on to the next slides, we will talk more about it. So our vision for 2020 is to think about opportunities that can drive synergies transformation across credit to cash, but not leaving behind order management because that’s a very, very critical element to drive your DSP improvement.

[5:46] Saurabh Chopra:

So these are some of the top priorities and we will tap on each of those when we move further. So improving the end customer experience. I think like you know if you have to target to make sure that your cash flow is like you are a cash flow rich country, the company then it is very important that you know, you focus on the customer experience part. Standardized policy process technology for transmission. I think this is one of the most critical elements, a lot of time like what companies do as a mistake they had for a technology transformation. They think like, you know, there’s something cool and market, let’s go get it. But what we do as an error. So we forget like we don’t have standard policy and process in place to drive technology transformation. That’s the error that most of the companies due to, you know, make sure that they are achieving interim, quick hedge or quick wins. And then you realize when you are heading into the Technology Roadmap, you will come across those challenges. When you are progressing with your go-lives or something, you will realize that you know, something is not working right. So you need to make sure that your policy processes are in place before you even head for your Technology transformation, increasing the AI capability to cash for optimizing cost reserve, you know, let’s take an example you know order management, how your processes are covered for order management, how much of it is on the web portal, how much of it is on EDIs, how much of it is manual orders, how much of it is, you know, driven through OCR. So, these are some of the critical aspects and obviously, the accuracy of order management has an impact on the downstream process of collections. So, if your orders are getting processed correctly, obviously, you will have better past user results-driving employee engagement and higher internal team productivity. So, like you know how you bring your team on board when you apply a change in a policy process, technology. It is very important to get your team on board, and how to make sure that you know you have a mechanism to drag on the team productivity. Contributing to net revenue and profitability. I think that’s a no brainer. Like you know, this is one of the key priorities for most organizations. So, when we talk about improving customer experience, what are the key processes you know, within order to cash that we need to tap upon? So let’s start with the customer master setup. It’s very important like you know, let’s talk about how these are also related to your collection process. How will you achieve an auto correspondence? If you don’t have your customer master celebration? How will you achieve knowing our production process or dispute resolution process? If your customer master setup is not done right. So, these are some of the very very critical aspects now that Honeywell is thinking birds are moving digital. So we are moving from an application form to a digital application form so what we are going to do is lead the customer in the details, let that come as a first pass input to us, we validate these inputs and then we process it further. So how can you automate this process even before it arrives at Honeywell employees? So, that is going to at least help us you know drive some kind of improvement. And then obviously, you have standard fields defining those templates. And, as you know, it saves time productivity for employees then order management, like in this lot of pressure for order management I’m sure like, you know, people who are from collections background, they feel that pressure coming from businesses that we have order like you know, setting and like you know, that has to be released and you have to release those orders even you know, that customer is a bad pair, or like you know, or could be, you know, the credit limit is not set up correctly. So, how can you make sure that adding the first time setup itself, as you know, those pieces are resolved, rather than so you have orders going on. Whole only for the justified customers not for customers were like, you know, they are paying as well and it is blocking because of the credit limit. And, as I said earlier, the accuracy of order management is one of the key aspects you need to focus upon because this has a ripple effect on your dispute process.

[10:20] Saurabh Chopra:

Credit management so, you know, that’s again like you know, and that’s somewhere in between of order to cash, but it plays a very important role, because if you do your credit evaluation, right, it has an impact on your collection process, but as a credit organization, what happens most of the time, you always get into a dilemma of whether to focus on revenue or whether to focus on the bad peers and focus on the cash flow for the company. So, those are the things like you have to know, make those decisions and entire processes, what you see here that has to be tied to your very robust policy framework and we will talk about that in a moment. Billing and payments obviously, like perfect invoicing can be a result if there is a perfect order. So, if there is no perfect order, how will you have the right billing in place? So, you know, that results in pricing issues, shipment issues and all the issues that you can think about, which impacts your disputes and past years. Flexibility in the mode of payment, obviously, now, you know, like Honeywell, we are already thinking about moving with EIPP, which is an electronic invoice presentment portal. So what we are thinking is our tier three customers so we have segmented customers, tier one, tier two and tier three. Tier One is like you know, contributing to 70% of the revenue. Then you have tier two which is under 20% of the revenue then you have a bottom, which has 10%. Moving all those big customers not in not in terms of AR or value, but in terms of volume. So when you do you’re at 20 another is you will see that your tier three customers are like maybe in thousands or, you know, I don’t know, depending upon the size of the organization. But in Honeywell, that’s, that’s quite a huge number in terms of count of customers, especially when we look at you know, some of our SVGs is where HBTs and SPS, you know, those volumes are high. So we are moving all our tier three customers on an EIPP. That’s the roadmap we have for 2020 and 2021. So what it will help us is so first of all, there is no collection effort required for our tier three customers, let them come up with a big one, the invoice if they want invoice copies, they can fetch it from the portal itself, they can go in and make a payment. They have the flexibility to make a payment through ACH or credit card and you can set up an auto direct debit as well. Cash obligation, I think that’s one of the areas where we are still struggling with customer behavior. So we are you know, defining some You know, critical parameters that we are going to tap upon in 2020 as part of my transmission roadmap, that how do we want to increase the adoption at the customer level to drive automatic rate because our target is to get at not 80% we wanted to go beyond 90% because that’s where your digital transformation starts taking into play. So there’s a lot of things we are looking into from your top customers who are like, you know, causing failure modes, which is impacting your auto match rate. And we are looking to those customers and defining a process how we can automatically generate correspondence sending out to these customers, and how we can make sure that these customers are informed about their behaviors, deduction management again, you know, that’s if your other processes go right, you will have fewer deductions coming through. They so you know, as I said, like, you know, you need to fix it. Upstream processes to drive efficiency and production management. collection management we want to as I said, EIPP is one of the things that like we are looking at then we are also looking at a collection competency-based model to have a focus on our top revenue customers, followed by a tier two customers, and I’ll talk in detail about it when we move further.

[14:23] Saurabh Chopra:

So enabling the best customer experience to cash with automation. So for example, like how you can have more benefits coming out of your credit obligation when your risk agency data is enabled, and integrated with your RP system, or the cloud platform or any other tools or features that you use. How do you make sure that you have a proactive credit review or automatic credit review defined for smaller customers? Are there any thresholds that you can, you know, think about? What is the threshold you can define by bit is to make sure that you you know, get away with some known value add credit reviews, where you know that you’re going to give this X amount of credit limit automated collection emails, I think like we all are aware, like, you know, correspondence is in the market right now. But beyond that, what else can you do to improve your correspondence? So, first of all, to improve your correspondence, you need to have the right customer master setup, like with all the right details of emails, and like customer details to make sure that you know, you’re not sending it to the wrong customer or the wrong email. So, you know, that’s one of the areas to focus upon. And, from a perspective, we want to improve cash forecasting, because that’s, you know, a very critical thing that we focus on in Honeywell, our past due deduction targets are defined like 50% past due deduction for 2020. I’m sure like, you know, it’s pretty aggressive. To get there. You know, you need to have some kind of a strategic plan to drive it. Self-service portal, you know, as I mentioned, so what we are doing there are two platforms that we’re working on. So one is the jewel platform, which is for order management. It’s an internal Honeywell driven initiative, where we are onboarding customers to come and place orders. So moving customers from manual orders to automated web portal orders. So what we are doing is to make sure that you know, now this is something like you know, when we talk about the handshake between order to cash processes, so what we are doing is, from collections perspective, we have identified what our tier three customers which will move on EIPP we don’t want like we have a different set of customers for EIPP. And then you have a different set of customers for order management for web portal orders. So what we are doing to drive change management Dale, we are going to share this list of customers with what we have identified for EIPP and hand it over to the order management guys. Make sure that these reconsiderations of these customers, we want the customers to go on the self-service portal. So, when they are placing an order we will link the EIPP platform plug it into our Honeywell jewel platform to drive more efficiency and effectiveness, cross-team collaboration workloads, so, you know a lot of times what happens is when we are driving these processes, I don’t know how many of you are aware of reverse SLAs, are you okay? So what is reverse SLA is like how do you measure performance between your cross functions? So, if there is a service level agreement between collections and cash ups, so when cash is not getting remittances on time, do you have a measurement criteria on collections that I need these remittances back within five days? Do you track that those are called reverse SLAs similarly, as you know, reverse SLAs can be different depending upon what type of processes you’re operating on? So these are very critical methods like you know, that should be focused upon As we move forward.

[18:03] Saurabh Chopra:

Now, as I said earlier, we, in Honeywell, have defined our transmission approach. So this is our transmission model that we have applied to make sure that before we think of technology transmission, we fixed up the policy process. Right. So we did one policy, we did one policy for an end to end order to cash. I drafted that policy, socialized with the SPGs, socialized with the cross-functional leaders, making sure that you know, everybody’s on the same page, getting their feedback, and getting approval. Nobody lives in the Honeywell CFO. So we got that approval in place. Then, as a next step, policies. Step one. Now you need to have standard processes in place. So we define around 40 to 45. process flows, which we’re focusing on standard process mapping and How we did that, we went through alignment to an impact assessment stage. So, we did an alignment, identified like, you know, these are the best practices based on whatever market studies are done or with my team. And then we said like, you know, these are the methods that you need to apply for having your standard processes in place. And then we did an impact assessment, we were getting pushed back. No, you know, I can’t change this process, you know, something will not work for my business, then you get into a five by modes to understand why you can’t do that. And then when you narrow that down, you will see that the exceptions which will be listed like 150 or something, will come down to 20 or 10. Right. So, we standardized the processes at the granular level, took a sign off made sure that like you know, these are provided to the SPGs and this is further cascaded to the team. Then what we did to make sure that you know, it is reaching people on the ground, we created around 45 modules. Which was contributing to training modules across order to cash, which was leveraged from these policies and processes that we define? So and so, you know, that’s the way you drive change management. So, you know, it implies for them, it was mandated to go through these training modules, go through this material, and make sure that they understand what is coming their way. Then key metric improvements. You know, I’m a big fan of what he saw yesterday on 360 analytics 360. I think that’s very important. You know, if you look at your objectives at a business level, if you don’t tie it down to the bottom process level, it will not work. So, you know, that’s one of the key focus areas for us. More control and visibility, obviously, like, you know, how you make sure that you bring more visibility at various levels. So our presentations are, you know, going all the way to the SPG CFOs, then Honeywell CFO, and even to the chairman So these are the top five steps that we took even before policies. So what do you define your standards? How do you define what is best in class? So we did an internal assessment, evaluating current SPGs policies like what exists in the current setup to get the understanding of business. Let’s not throw something which you know, people don’t understand. So, we did that evaluation for the views data from Hackett, APQC you know, to define benchmarking to care space as you know, there are around 200 metrics, right 200 metrics, which can be looked upon, but from benchmarking perspective, what are the business outcomes you want to achieve is very important. So, we did benchmark to compare like, where do we stand compared to other companies, and we did not just a standard benchmarking, we did an industry-specific because Honeywell has a different kind of business model. So, we did an industry-specific benchmarking exercise. If a patron can legally industry a leg, you know, what is their DSO best in class, worst in the class median, and then comparing with the remaining stuff what we have. So I think you know, cost to serve is one of the key things we want to focus upon as part of the next step. And, by eliminating some of the manual work that you do some of the changes that you want to drive, it is very important to focus on cost reserve. As I said, like AI is going to be one of the key impactful projects that you know, we are going to drive. We want to make sure that we automate collection processes in the background. But we don’t want to tap those on tier one customers, but probably using our AI capabilities to tap on the cash forecasting, like to see like based on the customer behavior when they are paying, what time they are being, and if they’re being as on any specific time, how we can exclude them from the collection process.

[23:03] Saurabh Chopra:

So, as we move on to 2020 you know these are going to be critical self-evaluations you are doing as an employer, what is the value you are creating in the work-life of your employees? So, do you have the right training model? Do you have the right growth defined for them? Do you have the right competency model defined for them? Do you have an internal team focused on improving employee experience? So, this is where we decided like you know, let’s create a transformation team for Honeywell which came directly from the CFO he said like let’s have a transformation team to drive those improvements. So now I have a pool of people reporting to me globally who contribute to this transformation journey. So no brainer happier employees have better productivity. So you know you don’t need to provide automation which is broken automation and later on employs a struggling that. Did you make my life easier or worse? right because our diamonds What we do is we provide technology but it’s a broken technology and it rather creating a positive impact it creates a ripple impact contributing to the overall revenue and profitability, you know, that’s where the order to cash plays in you know in terms of ROI, do you have a positive ROI you know, what what are they, you know, various methods that you can apply to make sure that you have high revenue and how do you control revenue leakage because revenue leakage is one of the key components of any organization. So, now moving on to aligning team metrics, you know, with business objectives, so, you know, that’s one of the key things we are looking at. So, we define business objectives, this is a target, how we can break it down to employee level targets and how we can link employee targets with a reward-based model. So we are unit defining a collection model which is let’s say comprises incentive plan but that incentive plan is not just as a matter of fact, like, you know, coming as a reward, it is going to be a forced ranking based model where people will be rewarded based on their performances. If they are not able to achieve performance, then they’re not getting incentives for that, but that’s the motivation we are trying to add to the employees. Again, you know, we have covered all of them, but you know, it is very important like what KPIs you identify for, for your organization, for your teams, whether it is specifically covered and that cannot be quantified, is that insightful? Is that aligned with your business objective is that something like you can verify, right, and most importantly, you should have a standard process to drive or create your metric. It should not be something like you know, one business one region is defining and calculating it differently and the other one has a different method to looking at it comparable, like, you know, you need to compare it with your peers, you need to compare it within different strategic business groups in your organization to make sure that you know how each of the groups are performing. But to make that happen, what is the most critical thing that you need to have in place, you need to have a data warehouse, you need to have mechanisms to bring visibility to these numbers metrics. And that’s one of the key things like what we are driving in Honeywell, we are working on a platform or thinking about how we can integrate reporting at a global level and how we can integrate data from different RP sources and make sure that there is a standard reporting dashboard available real-time. So I think you know, those are the top order to cash KPI for 2020. So your KPIs are dependent upon some critical aspects. These are some critical aspects that we have kept in mind when we were defining KPIs. For Honeywell, so customer experience, then automation capabilities cost to serve, you know, again, as you go to benchmarking, you see empty bubbling of revenue operating ratio. These are some really important features or metrics to look upon team productivity. That’s, I think, like known to everyone, revenue, and profitability. So we have distributed our KPIs across all these value streams to make sure that we have optimal results coming out of it.

[27:31] Saurabh Chopra:

Now, you know, these are the questions that you need to ask yourself whether you have too many KPIs or you have few. Do you have the right KPIs that are flexible to changing business needs? How easy or difficult would it be to communicate with the team? Does your team understand KPIs? Do they have awareness of what KPIs you’re driving for achieving outcome results? How reliable is the KPI based on assumptions made to quantify it, do we need to have reverse SLAs, reverse SLAs something like not many organizations taps on that. But I think that’s one of the key things from order to cash prospects that should be focused upon because, within order to cash, you have performances coming as a result of your upstream process or a downstream process. So you need to make sure that you have reverse SLAs and make sure that you have KPI performances taken care of. I think that’s all that I have anything else you have as part of the questions I’m happy to answer.

[28:42] Saurabh Chopra:

So we have implemented the cloud solution for cash apps. And we have only tapped upon email and America’s for now. Now we are going to further expand it to A-pack and other legacy systems which are going to be not legacy rather deeper systems because we had like one 50 systems of we are going to land up with core eight or nine ERP systems. So whatever was not on HighRadius is what we are going to move on for cash apps, collections and disputes we have their premise solution, which is ACA and DCA. We have their baby aggregation and web portal integration, which is a cloud service for collections and disputes. But as part of the future roadmap, we are thinking to move completely on the cloud, then EIPP, something I’ve already got a sign off from my business President and I think I’m going to kick that off sometime in July.

[29:40] Audience 1:

FSCM is not the solution that you’re using?

[29:43] Saurabh Chopra:

So that’s FSCM is the solution that we have in the current setup and the accelerators that we are using from a HighRadius. Those are sitting on FSCM in the ACA advanced correspondence accelerator and dispute correspondence accelerator But FSCM is something now, for me it is becoming too old fashioned now. Yeah, you know, it is not something that creates excitement in the life of a collector. You know, the look and feel are becoming different. And obviously like you have to look at it from a digital transformation perspective it doesn’t provide you much flexibility in terms of the usage, you can have cash forecasting coming out of your collection worklist in FSCM. So, those are the things we want to think about when we are prioritizing a worklist. So we want to move to a cloud solution. I would say that FSCM started somewhere in the medium category. Yeah, but not not the best in class.

[30:43] Audience 1:

In your presentation, talk about the online portal and the payment method there and credit card being the one so Honeywell being the kind of organization level, the credit card fees, does that make a good business? A sense of your tier two and tier three people go and pay by credit card.

[31:06] Saurabh Chopra:

I think if you look at the cost of collections, do you want to invest in the cost of the collections of people making those calls? Or do you want to focus on the credit card fees, which are, you know, the transactional level, which is very nominal, and you have to focus on the next-generation model. I think we have done all those calculations in the background. Like I’m a typical finance guy. Before I move ahead with anything I look into the numbers, we have tapped into all those pieces, and seen like, you know, what is the benefit Valley, we’re assuming and the numbers look quite good.

[31:41] Audience 1:

Okay, thank you.

[31:44] Moderator:

I think we’re short on time here. I saw a lot of you taking pictures of the slides. They will be made available on our website. So feel free to take pictures, of course, but they’ll also be available.

[31:56] Moderator:

All right. Thank you, everyone.

[0:00] Moderator: Hello everyone here we have Saurabh Chopra from Honeywell and he’s going to be presenting focus areas for improvement, metrics, and practices for transformation. Saurabh believes in the global transformation team for credit to cash for Honeywell and has exposure in managing global order to cash teams and driving enterprise-level transformational products to boost working capital and drive business outcome metrics. He plays a crucial, critical role that leads to business development, revenue growth operations and strategic planning. [0:29] Moderator: So, you have the stage. [0:36] Saurabh Chopra: Hello, everyone. [0:39] Saurabh Chopra: So, I think we covered briefly on the introduction part but you know, I wanted to make sure that we talked about the critical part of order to cash like most of us like at times, think like, if we are heading for transformation, what is that, you know, the key focus areas that we want to look upon. So when I joined Honeywell, that was four years back, you know, it was something like, you know, I could figure out like focusing on credit to cash. So, that was a bit of a surprise factor to me because if you have to transform your…

What you'll learn

  • Best practices to drive the top 5 finance priorities in 2020
  • Designing KPIs that support these goals, and communicating them to the whole team

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HighRadius Integrated Receivables Software Platform is the world's only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It 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 and 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. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway - covering the entire gamut of credit-to-cash.