FOCUS 11
IT IS ESSENTIAL THAT THE BUSINESS UNDERSTANDS THE RELATIVE CREDIT RISK OF ITS CUSTOMER BASE AND THAT THE ORDER TO CASH CYCLE IS OPTIMISED TO REFLECT THAT UNDERSTANDING.
Order to cash (O2C) Entering a new territory also raises questions in relation to how companies engage with their customers. It is essential that the business understands the relative credit risk of its customer base and that the order to cash cycle is optimised to refl ect that understanding.
• Are terms aligned to the market you are operating in and do opportunities exist to further improve terms?
• Is there a sophisticated segmentation of customers relative to their credit worthiness?
• Is credit management and credit control robust and appropriate relative to your market?
• Is the dispatch and invoicing process effi cient or do opportunities exist to shorten this element of the cycle? As an example, the certifi cation process on dispatch is often a bottleneck.
• Is there a minimum order quantity in place in order to maximise effi ciency of delivery?
• How effi cient is the shipping operation? © 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
Other areas
Opportunities go beyond the three core operating cycles. Businesses should be considering all other aspects of the operations that tie up cash:
• Are capital expenditure projects profi led effi ciently with appropriate milestones that optimise cash payments relative to progress?
• Are there excess assets that could be sold?
• Are treasury practices optimising management of liquidity on a day to day basis?
Ben Tatham Director, KPMG in the UK T: +44 20 76943801 E:
ben.tatham@kpmg.co.uk
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CASH MANAGEMENT
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