Guest
Sarika Dua
Financial and Business Systems Director at MasterClass
Episode description
In this episode of the Data for Subscriptions podcast, Sarika Dua, Financial and Business Systems Director at MasterClass, provides concrete insights into how optimizing the Order-to-Cash (O2C) process can unlock revenue potential. She emphasizes that by leveraging automation, accurate credit assessments, and key performance metrics, the O2C process can become a powerful revenue generator. The discussion underscores the critical role of mastering the O2C process in today’s fast-paced business world, particularly in overcoming challenges such as ineffective contract management and data quality issues.
Highlights
Main Bottlenecks of the Order-to-Cash Process
Sarika shares various bottlenecks that can hinder the efficiency of order-to-cash processes. These challenges include inefficient contract management and execution, which result in delays and inaccuracies, as well as delays in customer onboarding that prolong the time to activation and revenue recognition. Sarika also emphasizes the critical role of accurate data maintenance throughout the order-to-cash cycle, highlighting how inaccuracies can lead to billing errors, revenue recognition discrepancies, and customer dissatisfaction. She also points out the need for better systems to improve collections, reduce manual work, and cut down on delays and errors.
Automation and Data Quality
Sarika also dives into the topic of data quality and automation in the order-to-cash process, shedding light on how “dirty data” can be detrimental to O2C processes. She explains how poor data quality can mess up downstream systems because they don’t always talk to each other effectively. Sarika stresses the importance of keeping data clean from start to finish to make sure everything runs smoothly. She suggests that making sure your data is top-notch is key to making automation work well and ironing out any kinks in the process.
Metrics for Monitoring Order-to-Cash Performance
Sarika talks about important metrics to keep an eye on for monitoring and improving the order-to-cash process. She mentions the financial close cycle time, which shows how efficiently a financial period is closed. Sarika also highlights Days Sales Outstanding (DSO) as a key metric that tells us the average time it takes to collect payments. This helps us see how well we’re doing with collecting money. She emphasizes how crucial it is to have accurate financial reports for decision-making by top executives. This includes making sure billing is accurate, recognizing revenue properly, and closing financial periods on time.
Transcript
Optimize Order-to-Cash process to unlock revenue potential
Behdad
Hello, and welcome to the Data for Subscriptions podcast, where we learn and explore how to run better subscription businesses.
I’m your host, Behdad Banian, and today I have the pleasure of welcoming Sarika Dua, Financial and Business Systems Director at Master Class to join us at the show. Welcome, Sarika.
Sarika
0:32
Thanks, Behdad. Hi everyone. I’m Sarika Dua. As Behdad mentioned, I’m working as a Financial and Business Systems Director at Master Class. A quick introduction. In my professional journey, I have worked in multiple capacities in implementing various financial systems and performing various financial transformations in quite a bit of versatile industries with continuous learning all along the way.
Behdad
1:01
So Sarika, today we’re going to spend quite a lot of time to discuss order to cash from all different angles. But the premise of it is how do we build, run and optimize the best order to cash systems to support our business? But before we get into all the various topics that we want to discuss, why don’t we just lay the foundation so that we’re all on the same page? What do we mean when we say an order to cash system? So why don’t we start there?
Sarika
1:27
So in very simple and layman terms, order to cash is a very rhythmic end to end process, right from the inception when the order is placed by a customer until the repayment is received, right. It can be said that it is the heart of the financial ecosystem for any organization and it is quite a bit directly proportional to the cash flow generation. Let’s take a very, very simple example.
Let’s say a customer buys an iPhone and he pays for it right now the life cycle that happens in the back end, right from the start of the process until the payment is received. This whole process is called order-to-cash.
Behdad
2:09
Yeah, most of our followers and listeners, of course, are fairly technical. But needless to say, although with this very simplified view that you gave, we should keep in mind that what we’re essentially discussing are quite complex offerings, quite complex businesses, and not to mention the whole push towards the usage-based billing. Now, of course, AI and AI monetization is on everybody’s mind.
So we should keep that in mind when we’re speaking about order to cash and why we need to make sure that we have the best foundation to support businesses. So the first thing I want to do then get into the topic with you on is what are the most common bottlenecks that we see when it comes to order to cash systems today?
Sarika:
2:53
So the bottlenecks could be different, right. It depends on what type of industry you have, what is their size of industry, If it’s a start up, late start up, if it’s a well blown public company, how the business processes are laid down, What are the different systems that are supporting these business processes being in the operational side of it. So the major bottlenecks considering all these things in my mind are the inefficient contract management and execution.
If you do not have a good contract management, you know solution in your business process, it can take way take way longer and inaccurate data, right. Similarly if we come to the next point, it would be you know delays in when you are doing a customer on boarding for example, when we say OK, this is a new customer per se and we’ll have to do the customer onboarding and followed by the order processing for that good customer onboarding.
If there are delays and again inaccuracies and information of the data that is being put in that can lead relate to the order to cash process which could be delayed and inaccurate in that manner as well. The most important that I have come across, you know, working with various companies is inaccurate invoicing, right?
If your invoicing is inaccurate, it can lead to frustration, you know, with the with the customers, partners or resellers you’re working with. So it is very important to have the accurate data on the invoicing side. Now the next part that comes in the with the invoicing is collections, right? With the collections, if your process is completely broken, that can lead to a lot of bottlenecks in your order to cash process.
4:40
The whole AR process as a whole including things like credit risk assessment and everything if it’s if it’s not up to par and not very seamless integration between all the business processes within order to cash, it can lead to multiple issues. And again, the frustrations with the customers and partners, the material weaknesses that can occur can lead to unproductive teams’ efforts. You have material weakness, you are continuously working, your team is continuously working on that, but rather than they can use those productive hours towards something else and all of these issues at the end which is our major end product leads to the frail reporting.
So these are some of the common bottlenecks with very, very, you know, issues pertain to lot of other things which can create a lot of fragmentation among the team and among the whole process. Yeah.
Behdad
5:39
And unfortunately what you just described is quite often the reality for many businesses. And for that reason, I think we want to pick some of those issues and bottlenecks and double click and go a little bit deeper to uncover a bit more to untap your basically your insights. One of the areas I wanted to ask you was let’s go into the topic of revenue leakage. By that I think again, we mean that there is revenue on the table that you’re basically not being able to recover.
Now it can go both ways. So, it can be a frustration from the company side, meaning that you’re actually offering a service that you’re not fully billing for correctly. But it could actually equally be from the other side, meaning that as a customer you’re actually over consuming or you’re under consuming and there’s some form of a mismatch between what you’re consuming, what you’re paying for. And that can also create its own set of problems. But it’s from your point of view, how would you explain the main issues that lead to revenue leakage? And if you would go into the details here for us?
Sarika
6:50
Oh, sure. So for our audiences, let’s first understand what the revenue leakage is. The one aspect is that you already explained Behdad, so even if the company has gone through an extensive sales cycle which can be overhauling sometimes right turning the prospects into the customers signing the contracts, but they are still unable to get the earned revenue. So that is what revenue leakage is.
7:14
So, and there could be multi fold, you know, reasons for revenue leakage, billing issues as we, as I touched based upon earlier as well that billing issues with inaccurate invoices, which can when I say inaccurate invoices, I’m talking about the details on the invoice, for example, the amount, the tax amount, the subtotal of it. These small, small things, you know, contribute a lot to how the billing operations could be. Then one thing could be the age-old and inefficient business processes that are there. Those can lead to reconciliation issues.
Let’s take an example for example, if you have a manual handover between one business process to another, the reconciliation between the two processes or the two systems could be a lot sometimes and takes a lot of teams effort as well and results on the revenue leakage, Churn can also lead to revenue leakage as you mentioned that the frustration that could come through the inefficient methods or risk processes or the systems not supporting them as well.
Behdad:
8:21
And you mentioned churn now and you’ve talked about inefficient billing a couple of times. How important would you say the smooth experience of billing have you seen being the correlation towards reducing, for example, churn and revenue leakage? And if you can be specific with, for example, some of the examples that you’ve seen and been part of.
Sarika
8:44
Yeah, so specifically talking about example, let’s take a very simple example. A customer buys a subscription with some products, right? One subscription and there are some standalone products with it. Now having clear notes in on the contract for the billing, like if it’s a multiyear deal, if it’s having a recurring multiple invoices and those invoices have specific dates, specific amount, those products, specific products that the customer has bought, some specific has some specific or special things attached to it.
Is there a PS or a professional services element that is, you know, sold along with the subscription? Like some of the companies, they have their own PS professional services product that is packaged along with the subscription. Does PS need to be billed upfront while the subscription goes over the term of the contract? So these are some questions that need to be answered before while the contract is being signed. That will help you have a frictionless billing experience so that you have all the source data, you know, recorded very accurately.
And that will lead to having a reduced churn now. Reduced churn. I know this is a very hot topic these days as well. It can lead to overall superior health of the reducing the churn can lead to overall superior health of the business, right? So it’s very important churn being there, even if you enhance your product lines or anything, if you have the churn, it could be your biggest enemy, right? And it can be resolved by deploying very simple and efficient, efficient business processes, systems that support it and the methods that you undergo with it.
Behdad:
10:38
So let’s shift our feet a little bit from the identified challenges and problems. Let’s talk about how we build to kind of avoid this. So as a starting point, how does an ideal order to cash system look like in your view?
Sarika:
10:53
Yeah, an order to cash system, if it’s ideal, again, it depends on what kind of business processes is followed, what kind of industry you come in. But the major thing that for an order to cash process is that is your process streamlined, is your resource, does your resources or manpower know which what they are responsible of the handover between various for example, you have an AR team, you have an AP team, you have GL team.
Is there a seamless integration between these three teams to understand how the manual handover is going to be taking place if it’s not a manual handover, if it’s a system handover, that should also be seamless. So depending upon what kind of methodology or things your company is taking care of it has to be a seamless integration between the manual handover or the systems again. And the second part is then how you lay down your processes flow by flow. For example, in order to cash first how your order management is being done but look for the loopholes.
I would actually go to the extent and say that try to have a heat map of your hold order to cash process for different modules for your receivables, for your payables for your GL and then see based on that heat map that which is the process that needs more, the more love and care, right? And the other ones you might not need that much and focus on those processes that will also help you, you know, bring down your cycle that will also help you enhance your order to cash model your process end to end right from the start till the end.
Behdad:
12:37
How important is automation through and within an order to cash system? Important when you look at it from being ideal, and I should have been clear by saying ideal, we of course mean capability wise, right? That’s what we’re discussing. But how important is automation of work flows within?
Sarika:
12:56
Yeah, so automation is very important because if you do not have that automation, the manual work power that is. I’m not talking only about AI, we are also talking about automation. When you have a process, and you have some inbuilt or prebuilt export systems out there that can do that stuff seamlessly without any errors and they are audit friendly too. So it it depends what kind of automation you are doing and you are clear in your mind what use cases you have to go upfront, what are what are the business use cases that you want to automate.
Once you have all that knowledge and things cleared out in your mind, then pick up the right solution based on your business use case. And after picking that right solution, the implementation of it.
13:46
Now why I’m talking straight away into the automation is it is important to automate to bring down your, you know, close cycle to, to streamline your order to cash process, to have a frictionless billing experience. Whatever bottlenecks we talked about earlier in order to cash system automation is one step ahead in that way to reduce all those bottlenecks.
Behdad:
14:13
Of course, you’ve mentioned before the manual handovers. So the reality for most companies is, I mean we’re of course painting up for the point of the discussion what sounds like a simplified view of an order to cash.
Sarika
14:28
Reality is for most businesses that they have a very complex and multi-layer order cash. They have so many different systems within. If you have been around for 50 or 100 years, you of course have lots of systems legacy that you’ve carried with yourself. Now you’re looking at monetization or potential AI application.
Suddenly you need modern tooling for that as well at the same time.
Then of course, between the different systems, none of the systems are really built to speak with each other.
This is why some of us in business talk about different formats.
So these are not built to talk to each other by nature. They were built to do their job individually. This is the reality of why you have tons of people that need to sit there manually making sure that all the right data points that are being passed back and forth are correct. And this is where the issues actually start to emerge because this is where errors start to occur.
Sarika:
15:30
That’s absolutely true. And this holds true specifically in terms of data, right? If your data right from the start is not accurate, you have not maintained the data in a way that it can talk to your downstream systems as well. If from the inception the data is, is, is dirty, then you will, you’re going to have problems in all the downstream systems when they talk to each other or even if you’re doing a manual handover. So maintaining the quality of that data, investing your time and money there would always lead to a very, you know, a cherry on top in The Who will order to cash process.
So getting that data ready for to be able to talk to other systems, maintaining the quality throughout the cycle. It’s not that one time project yet. You clean up your data and you’re good. You have to maintain it towards the whole process.
Behdad:
16:28
Let’s stay on the topic of data for a few minutes because this is where I was going to go next. So usage is something that of course is very hot, has been for a couple of years, but I would say more so than ever. So I guess the first question I wanted to ask you is, if we think about usage as like the measurement of usage of our products, where does that occur in the order to cash system in your view?
Sarika
16:57
Usage data is very important. I can actually say it’s like peanut butter in our PB&J sandwich, right? If your organization has a usage-based billing model, the accurate collection and processing of usage data metrics can help reduce issues like revenue leakage and churn.
If we understand how and what part of a product or service is being used by customers, it can significantly reduce churn. Properly harnessed and metered usage data allows businesses to identify bottlenecks or issues, ultimately bringing various benefits across the entire order-to-cash cycle.
18:09
The most compelling reason to automate this process is the large volume of data businesses need to handle—be it from customers, partners, or employees—for subscriptions, renewals, or upsells.
18:23
This isn’t just about acquiring new deals; it’s also about managing renewals and upsells. Usage data is crucial, and harnessing it accurately opens doors to monetization and effective metering.
Behdad
18:45
My understanding is that MasterClass, where you’re currently working, operates purely on a usage-driven model. Is that correct? Maybe you could explain how, in light of MasterClass, the theoretical concepts you’ve just shared unfold in practice for measuring, tracking, and acting on usage data.
Sarika
19:08
Yes, that’s right. MasterClass offers courses taught by experts in their fields. Coming from the entertainment industry, it’s important to analyze how consumers and businesses are using the content provided by MasterClass.
By collecting data on how many consumers log in, use their subscriptions, or engage with the content, businesses can gain insights. These insights can then inform decisions on enhancing future courses, products, and business strategies.
19:53
This could mean changes to content management or adjustments to the order-to-cash process. Accurate data collection enables MasterClass to use that information for multiple purposes—streamlining business processes, developing future product lines, and improving overall operations.
Behdad
20:26
To summarize, the goal of an effective order-to-cash system is to make it as seamless and automated as possible. Automation reduces manual errors and costs while improving data quality.
20:58
My next question is around the build-versus-buy debate. Should businesses build systems in-house or opt for purpose-built solutions? What has your experience been, and how do companies decide?
Sarika
21:15
That’s a great and very current question. Should we build in-house, or buy a prebuilt solution?
21:25
If your team is IT-heavy and ready not only to build an in-house tool but also to maintain it, then in-house can be an option. Maintenance includes handling upgrades, integration changes, and other ongoing updates.
21:55
On the other hand, a prebuilt product often comes with expertise built into the system—not just in technology but also in business processes. For example, as your business scales and requires more features, a prebuilt solution might already have those features available, along with a network of users to share tips and best practices.
22:46
There are also challenges with in-house systems, like version handling when integrating with other systems. Upgrades and scalability become critical factors, as does the knowledge transfer within IT teams to avoid gaps during transitions.
23:56
For some companies, an in-house solution might work if they have the IT resources to support it year-round. For others, leveraging a prebuilt system makes more sense.
Behdad
24:12
One additional perspective to consider is data security and integrity. With the rise of usage-based models, businesses increasingly face challenges in handling this data securely.
24:55
From what we’ve observed at DigitalRoute, even IT-heavy businesses often ask themselves: What is our core business? For most, it’s not to build and maintain in-house data systems.
26:00
Speed and agility are key. Businesses need to adapt pricing and packaging quickly, but internal ticket handling with IT teams can slow things down. These delays hinder businesses from being agile and responsive.
26:37
Ultimately, an order-to-cash system should support the business, not act as a blocker.
Sarika (26:48): That’s absolutely true. These days, these prebuilt systems come with advanced customer support, enhanced support, and even premium tiers available through subscriptions to help maintain the system. Maintenance is crucial because of business growth and scalability. When you implemented the system, you may have had a limited number of products, but it should scale to accommodate new product lines. For that scalability, it’s important to have a prebuilt system with expertise already built in, enabling it to grow alongside your business.
Behdad (27:28): Yeah. But we also want to keep this conversation frank and not make it sound like we’re pushing any shameless plugs. Any business, regardless of the role, already has plenty of software and tools. That’s why discussions about bloated middleware or software arise. For any business building an ideal order-to-cash system, you should challenge vendors and ask: If I’m bringing this in, what is it offloading? Earlier, you mentioned one of the bottlenecks being too many full-time employees locked into manual tasks. These employees should be freed to perform higher-value tasks instead of just solving problems. This is a good starting point: pressure the company selling you a solution to show how it reduces the need for full-time employees tied to these issues.
Sarika (28:30): Yes, for sure. When considering a solution, think about where to look, how to evaluate it, and what it should solve. Always align potential solutions with your business use case. If you’re attending demos, ensure the system you’re evaluating solves your primary business needs—not just offering extra features, dashboards, or bells and whistles. A good solution should also reduce the hours spent on repetitive tasks. This doesn’t mean employees lose jobs; it means their time is better used on enhancing business processes, supporting new product lines, and contributing to company goals. Instead of handling outdated tasks like managing bulky Excel sheets, they can focus on more strategic work.
Sarika (29:59): Here’s a tip: when evaluating systems, listen to the sales pitches but also talk to trusted, impartial advisors. Speak with other customers who have implemented the system and seek referrals. This approach can be instrumental in finding the right fit for your needs.
Behdad (30:28): Let’s take a question from Ali. Thank you for posting it. Ali asks how a more effective and agile order-to-cash system can contribute to launching new projects.
Sarika (30:56): For launching a new project, understand your end goal. For example, if it’s about improving collections or billing, figure out the outcome you want. Are you automating customer notifications for overdue invoices or upcoming due dates? Plan the project with a clear timeline, assign a project manager, and outline necessary resources. Define the steps to achieve your goal and automate processes to streamline workflows. If we missed something, Ali, let us know in the chat so we can address it further.
Behdad (32:12): I’m curious: what are the essential factors you monitor to assess order-to-cash performance improvements?
Sarika (32:24): Several metrics are critical for this. One key metric is the financial close process. If it takes longer than the average 4-8 days, that’s a red flag for areas needing optimization within the order-to-cash cycle. Once bottlenecks are identified, they can be resolved systematically, leading to performance enhancements. Other important metrics include the DSO (Days Sales Outstanding) calculation and the accuracy of financial reports, which are vital for executive decision-making.
Behdad (33:41): By DSO, you mean Days Sales Outstanding, correct?
Sarika (33:44): Yes, that’s right.
Behdad (33:47): These are indeed crucial metrics. We discussed them in a previous episode and will include them in the show notes for easy reference. One case we discussed involved reducing time to billing by half, largely because of issues with impure data. This data required significant manual intervention before billing could proceed, delaying the process by days. Moving towards usage-based models introduces additional challenges, especially with forecasting, but there are exciting developments addressing this. We encourage listeners to explore that episode for deeper insights.
Behdad (35:14): I have two final questions. First, how often should businesses review their order-to-cash strategy?
Sarika (35:22): Ideally, this should be reviewed monthly. If not, at least quarterly. The enhancement of order-to-cash processes should be tied to company OKRs, ensuring all employees contribute to this goal. Regular reviews help identify gaps and opportunities for improvement.
Behdad (36:03): From a strategy perspective, an annual or biannual review might suffice, but you’re saying performance metrics should be monitored monthly—or even more frequently—to ensure everything is on track.
Behdad (36:24): To wrap up, what are the top three takeaways for building an ideal order-to-cash system?
Sarika (36:39): First, prioritize process and system optimization. Don’t postpone it for other initiatives like product launches or financial close. Optimized processes and systems support long-term goals seamlessly. Second, maintain data hygiene. Without accurate data, even the best optimizations will fail. Third, build and refine business use cases. Identify pain points—like slow report generation—and address them systematically. Clear, actionable use cases lead to effective solutions and improved daily workflows.
Behdad (38:33): Great. Thank you so much, Sarika, for this insightful discussion, and thanks to everyone who tuned in. If you’d like to learn more, drop a hashtag #OrderToCash on LinkedIn or reach out through our channels. We’d be happy to dive deeper into today’s topics.