Overview
The client, valued at $39B, is a diversified manufacturer of consumer electronics, lighting, domestic products, semi-conductors and medical systems. After experiencing an excessive influx of chargebacks, the client engaged DLC to assist with the redesign of their order-to-cash (O2C) process.
Business Challenges
A $500M operating unit within the company was experiencing excessive chargebacks against Accounts Receivable, totaling over $5M. The chargebacks stemmed from discrepancies between the amount that the company charged and the price the customer believed it owed for a given transaction.
This resulted in reduced working capital and cash flow challenges, excessive administrative and operating costs, reduced value of sales staff and overall customer dissatisfaction.
Approach
After conducting a thorough analysis of the O2C process, DLC determined that the majority of the chargebacks were related to pricing and quantity, resulting in overstated invoices received by the customer.
The DLC team worked closely with the client to expedite the record of the negotiated price and vastly increase the accuracy of the outgoing invoices.
In addition, as no uniform system had ever been implemented to account for the gain or loss of an investment, DLC designed, implemented and documented an entirely new RMA process.
Results
Within 6 months of implementation, the total number of chargebacks was reduced by over 50% to approximately $2M. Because billings were accurate, customers also paid on a timelier basis – and although disputes still occur, they were more easily resolved.
This provided management and other high-level executives with the assurance that the company’s financial statements reflected both improved accuracy and more efficient operations.
Additionally, the company reduced personnel costs because the two full-time positions previously dedicated to chargeback resolution were no longer necessary. Salespeople were free to spend more time engaged in revenue-generating sales activities instead of using their valuable time on chargeback resolution and maintenance of good will.
Before DLC
- Excessive chargebacks & operating costs
- Cash flow issues
- Customer dissatisfaction
After DLC
- A uniform process for O2C
- A reduction in personnel costs
- Accurate invoices
