Implementing Lean - Accounts Receivables

This is in continuation of my article on Implementing Lean.

There are many ways in which the consultant can help the company implement lean in an organization. Here are a few ideas.

1. Top 10 (20) debtors report: These are standard reports that any ERP application has in its library. However, many organizations do not use the standard reports and hence do not make use of this tremendous potential. A regular review of this report with corrective follow up actions can help in two ways. One obviously is that this helps in keeping debtors to a minimum and two, it helps in identifying the customers who are persistently high debtors.

2. Use of dunning letters: Most of the application provides the facility of sending dunning letters based on the required parameters and based on the nature of the relationship with the customer. Most organizations do not use the dunning letters and if at all they use the same, it is arbitrary in nature and not as per an appropriate schedule.

3. Use of ABC analysis (similar analysis) of customers: Many organizations do not have a standardized procedure for tracking high value customers. Especially at the beginning of the implementation, the consultant is told that all the customers are equal. This results in the consultant providing the same focus to a one time customer as he does to very high value customers. One example of this is that you wait to upload the complete data for all the customers (like statutory details, updated address etc) and the data load process is delayed since the organization do not have this information for a few low value customers. Remember, when it comes to ERP implementation, all customers are not alike....

4. Matching of Invoice and credit notes: Customer returns lead to your organization returning money to the customer in the form of a credit note. It makes sense while matching collections to match the invoice against the credit note and collect the net amount. Many a time, I have observed that this process is not happening and when your invoice goes to the customer, he will remind you of the pending credit note and ask you to resend the invoice after incorporating the credit note. The net effect is a delay in the recovery of debtor balances from the customer and a 'Fat' debtors.

5. Not netting off Customer and Supplier Balances: If your customer is also one of your suppliers, it helps to reduce both receivables and payables if you can net off the Customer Invoices (and credit notes) to Supplier Invoices (and debit notes). Many a times, these do not happen (because of different persons in charge of receivables and payables) leading to 'Fat' creditor and debtor figures.

6. Working in Silos despite the ERP: In any organization, there is a silo to take the order, another silo to approve it, another to pick the material, another to pack and dispatch it, another is to send the invoice and another to track the collections. Since ERP integrates these processes, it makes sense to use the power of ERP to have a single window view to the entire Sales operations. However, in the power and incentive dynamics of the organization, the silos exist despite the ERP. This leads to significant delay in the O2C Cycle.

7. Configuration Localization requirements: In many countries, including India, there are a lot of localization related configurations, transactions and reporting to be followed by the organizations related to the receivables processing. Most of the time, the users who are handling the localization are not brought into the implementation at the initial phases of the project and hence there is no focus on localization during the ERP implementation. The end result is that despite the ERP features of handling your localization requirements, all the localization tasks are done outside the ERP. This resulting in waste of ERP potential and further waste of resources in managing the localization outside the ERP system and final resource wastage in integrating ERP information to the localization information.