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6 ways to improve order-to-cash with process mining

The order-to-cash process varies depending on the type of company, but improvement is almost always needed. Learn how process mining can identify areas for improvement.

Order-to-cash is a complex business process that helps ensure companies are properly compensated and customers are satisfied. Order-to-cash includes a lot of potential for delays or problems, and process mining can possibly help address some of those issues.

Order-to-cash (OTC) tools are often included in ERP software. To help improve order-to-cash, process mining can analyze transaction logs across ERP software and other tools, and the analysis can provide insight into how companies can improve their services and save money.

Learn more about the order-to-cash process and how process mining can help improve it.

Steps in the order-to-cash process

The order-to-cash process can vary depending on a company's type of product or service sold, tax requirements and accounting process. For example, complex B2B sales that require the client to execute procurement processes and approve invoices before payment will involve a different OTC process than simpler sales made online.

Here is an example of the order-to-cash process for a typical online customer purchase of an item:

  1. The customer places the order.
  2. The customer makes the full payment online or agrees to a payment plan.
  3. The ERP system confirms order data, including checking that the ordered item is in stock.
  4. The ERP system generates an invoice that details the cost of the product, taxes and shipping.
  5. The company ships the item to the customer.
  6. The ERP software confirms product delivery and records it.
  7. The ERP system confirms that the customer has completed their payments or begins a collection process if they have not.

6 ways to improve order-to-cash with process mining

Process mining can potentially help improve order-to-cash processes in several different ways, which can cause overall company operations to run more smoothly.

1. Process mining can identify bottlenecks in OTC processes

New OTC bottlenecks can appear as company and customer habits change. For example, shipping products to customers may take longer than it used to because the company is having trouble hiring delivery truck drivers.

Process mining can help identify these bottlenecks, said Bhrugu Pange, managing director of technology services at AArete, a global management consulting firm located in Chicago. Users can then determine how to address them.

However, ensuring that the process mining software is accurately reconstructing the processes can be a major challenge, Pange said.

Users must confirm they're not making business decisions based on faulty analysis.

2. Process mining can analyze invoice accuracy

Carrying out the order-to-cash process usually involves multiple applications and systems, and critical data can fall out of sync when traveling between these systems, leading to invoicing and cash collection errors.

Process mining can help identify the causes of invoicing mistakes, Pange said. For example, a common cause of invoicing errors is lack of uniformity in the data, which can occur if customers ask for custom invoices or changes to products and services.

Although process mining can help highlight errors, users must also continue to follow other data governance best practices, Pange said.

3. Process mining can help correct process variations

Different employees may carry out order-to-cash processes in different ways, or using different company systems may lead to a variety of OTC approaches.

Process mining can discover these variations and give insight into how to avoid them if necessary, said Marshall Kelley, associate director of technology consulting at Protiviti, a global consulting firm located in Menlo Park, Calif. Companies can then implement standard procedures and continue to monitor OTC processes for any further variations.

4. Process mining can help improve compliance and risk management

Process mining can also identify potential compliance issues and help users prioritize risk management efforts. For example, process mining may identify product types that require special tax calculations or local laws that prohibit companies from shipping certain items to particular areas, such as California, which does not allow the shipment of various types of produce into the state.

Once process mining has given insight into risk indicators, companies can implement safeguards, such as automated alerts if users encounter compliance issues, Kelley said.

For example, software can alert users at a produce company if they attempt to place a customer order to California.

5. Process mining can help increase automation

Automation can help reduce delays and human error, and order-to-cash processes are a good fit for automation. However, data variations may prevent systems from carrying out automation.

Many company leaders are unaware that factors like different document types are making it impossible for their software to automate processes, said Gretta Hermes, North American process transformation lead at Accenture, a professional services company headquartered in Dublin. Process mining can help identify these problems and provide more opportunities for automation.

6. Process mining can reduce product rejections and returns

Any company that ships products attempts to reduce product rejections and returns as much as possible, and process mining can potentially help organizations do so.

Process mining can analyze factors like availability-to-promise, which is the amount of inventory that a company expects to possess in the future, Hermes said. If a fluctuation in availability-to-promise leads to a large amount of order rejections and returns, process mining can identify the connection so leaders can act on it.

George Lawton is a journalist based in London. Over the last 30 years, he has written more than 3,000 stories about computers, communications, knowledge management, business, health and other areas that interest him.

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