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HOW TO REDUCE DAY SALES OUTSTANDING BY 70%

May 22, 2018

By Ray Young

HAVE YOU EVER WONDERED WHY A ROUTINE PROCESS SUCH AS INVOICING CAN BECOME SO COMPLICATED, ERROR PRONE AND TIME-CONSUMING?

Vice President of SBTI Ray Young

A major distributor of fertilizer products faced a dilemma: a widely-variable, time-consuming invoicing process that was vastly different from one location to another. The amount of time to process an invoice and send to the customer varied from 2 to 30 days! How can this be, you may ask? To answer this question, it was discovered that as great as the time varied, so did the actual process involved to complete and send an invoice among 15 different locations.

To exacerbate the situation further, during the peak spring planting season, the variability was reduced to less than 48 hours due to the organization hiring temporary workers to process all invoices — 60% of their revenue is generated during this time period. As a result, a new question arose: why can’t we maintain this 48-hour invoice cycle time year-round?

It was obvious to the managers the reason for the shortened invoice cycle time during peak season was the influx of additional manpower to “muscle” through the complex, redundant electronic invoicing system. With the support of the local managers, a team was formed to investigate the issues around this variability in invoice cycle times. After several meetings of the admins, it became obvious that the process to complete an invoice was not standardized in any way. Training was on an ad-hoc basis, with some of the newly hired admins receiving no training at all, while the seasoned admins were not asked to provide knowledge and feedback to lessen the learning curve.

After data was captured to highlight the variation, the process as it existed was mapped and analyzed by the team to identify areas of improvement and/or elimination. Once completed, a new agreed-upon process was implemented at one of the local sites and measured for effectiveness. After a few adjustments, the new process was validated and implemented at the remaining sites.

TRIALS, TRIUMPHS & TRANSFORMATIONS

A major distributor of fertilizer products faced a dilemma: a widely-variable, time-consuming invoicing process that was vastly different from one location to another. The amount of time to process an invoice and send to the customer varied from 2 to 30 days! How can this be, you may ask? To answer this question, it was discovered that as great as the time varied, so did the actual process involved to complete and send an invoice among 15 different locations. Forming the groups provided challenges as differing personalities and experience levels resulted in several lively conversations. But eventually, consensus was reached and a set of process steps, training requirements and critical measurements were developed. From this exercise, each admin was trained on these deliverables and the new process was implemented and measured for effectiveness. Monitoring for understanding and proper feedback was instituted and minor changes made to the controlling documents were incorporated. A new spirit of cooperation between admins and management was mentioned as one of the key benefits of this exercise.

A transformation took place as standard work and training standards were developed, documented and posted at each location. This documentation highlighted the steps necessary to properly complete an invoice, along with communication with sales staff and local management to maintain consistency and product pricing models.

BENEFITS

Once the new invoicing process was implemented, invoice cycle times outside of the peak spring season dropped from an average of 11.5 days to just 3.5 days with a corporate goal set at 48 hours. The result of this drop in cycle time was a reduction in DSO equating to $350k annually.

To further the impact of the benefits, it was agreed to roll this process out to the other 90 locations in this region, and when fully implemented, will result in a reduction in DSO of approximately $2.5M per year.

SBTI offers a step-by-step proven methodology to capture constraints and issues around most business constraints that often center around human dynamics and a lack of a clear, concise process standard. With our repeatable methods, process complexity can be delineated into manageable chunks, which then can be tactically addressed. We offer a simple strategic model of Listen/Design/Execute, and the Listen step is of no cost to you. We meet with you and your team and have a conversation involving your business goals, profitability needs and to assess our ability to partner with you toward those goals.

 

Ray Young

If you would like to request a listening session for your business, you can contact me, Ray Young, at 615.403.6909, or by email ryoung@sbtimail.com.

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