Key KPIs to track in O2C to become a strategic GBS Leader

CONTENT

Chapter 1

Strategic Metrics

Chapter 2

Individual Performance Metrics

Chapter 3

Process Health Metrics

Chapter 01

Strategic Metrics

01. Process Cost Per Invoice

STRATEGIC METRIC
Definition:

An indication of the overall process cost of the entire Order to Cash cycle, i.e., from generating customer invoices to delivering them.

WHY MEASURE IT ?

Process Cost per Invoice has a direct impact on the bottom line. Businesses can minimize this cost by:

Improving productivity across O2C
Collecting on time
Reducing deductions through discipline in upstream processes
Reducing write-offs and tolerances
Keeping track of the overall cost of the process

02. Unbilled Revenue

STRATEGIC METRIC
Definition:

Unbilled receivables, also called “accrued receivables,” are products and services delivered for which invoices have not been generated.

WHY MEASURE IT ?
When dealing with project-based businesses, unbilled revenue has a key role in working capital management. Keeping close tabs on the contracts that govern accrued receivables ensures that the invoices are sent on time and that the revenue is realized as quickly as possible.

03. Days Sales Outstanding (DSO)

STRATEGIC METRIC
Definition:

DSO represents the value of receivables outstanding or waiting to be collected from customers, expressed in the equivalent number of days of revenue.

WHY MEASURE IT ?
This metric is an accurate indicator of the current performance of the accounts receivable department.A lower DSO indicates that a company has a stringent credit policy, which may hamper sales performance. A higher DSO is an indication of inefficiency in the analysis of applicants for open accounts.A healthy DSO is no more than 5-10 days longer than weighted average payment terms. Another way to determine if a DSO is healthy is to benchmark against DSO numbers of companies in the same industry.

04. Top-Five Reasons for Deductions/Chargebacks

STRATEGIC METRIC
Definition:

A report that generates the most frequently occurring disputes.

WHY MEASURE IT ?
The dispute team could refer to this report and take corrective action by drilling down into the source of the disputes and preventing them from happening in the future. Some examples include creating sales orders with the wrong pricing details or finding that a particular carrier delivers damaged goods more frequently than others.

05. Bad Debt Write Off %

STRATEGIC METRIC
Definition:

This metric keeps track of the bad debts that are a result of uncollectibles.

WHY MEASURE IT ?
While maintaining a healthy bad-debt reserve is a best practice, keeping closetabs on the bad-debt write-offs figure is vital, as the company needs to sell more orders (depending on the gross margin) to make up for the loss in uncollected revenue.

06. Monetary Value of Dispute Cases

STRATEGIC METRIC
Definition:

The disputed value of the dispute case that the customer has specified.

WHY MEASURE IT ?
This metric is valuable because it gives a number on the value of deductions that an organization is processing. In conjunction with the next metric, which is ‘as a % of A/R,’ this metric will be particularly useful in estimating revenue leakages and understanding the cost of doing business in terms of allowances for deductions.

07. Total Dollar of Disputes as a Percentage of Total A/R

STRATEGIC METRIC
Definition:

This metric evaluates the dollar value of all disputes raised as the percentage of total A/R.

WHY MEASURE IT ?
This metric is helpful for identifying process gaps and failures, which can be benchmarked against companies in the same industry – either as a % of total A/R or as a % of total sales.

Chapter 02

Individual Performance Metrics

08. Credit Applications Processed

INDIVIDUAL PERFORMANCE METRIC
Definition:

The percentage of new applications that your credit analysts have completed processing or the percentage of new customers that they have onboarded.

WHY MEASURE IT ?
This metric is valuable in evaluating the performance of a credit analyst, which is determined based on the number of applications they process.

09. Number of Exceptions Processed

INDIVIDUAL PERFORMANCE METRIC
PROCESS HEALTH METRIC
Definition:

Since most cash application processes have some form of automation involved, an analyst’s productivity can be measured by the number of exceptions they process.

WHY MEASURE IT ?
This metric enables GPOs to manage analysts more efficiently, letting you know the rate at which exceptions are being handled. In addition, this KPI will also allow you to optimize the cash application process by evaluating the most frequently occurring exceptions and remedying the root causes.

10. Invoices Issued per FTE

INDIVIDUAL PERFORMANCE METRIC
Definition:

A measurement of the average number of invoices received and processed per full-time equivalent (FTE) team member in the accounts receivable department.

WHY MEASURE IT ?
Some analysts have multiple job roles across credit, collections, and billing, so it is essential to examine individual metrics for the different processes that analysts perform. Invoices issued per FTE are a helpful measure of the productivity of each employee in billing, enabling GPOs to effectively compare performance across the department.

11. Percentage of Disputes Resolved per FTE

INDIVIDUAL PERFORMANCE METRIC
Definition:

The number of disputes resolved per full-time equivalent (FTE) team member, with respect to the total number of disputes raised across the organization.

WHY MEASURE IT ?
Deductions backlog is a big issue that can impact profits, especially in the consumer goods industry. Looking at the number of deductions resolved per analyst will allow GPOs to compare efficiency among analysts to take action on the deductions backlog.

Chapter 03