Personnel cost to perform the order to invoice processes per process FTE

This measure calculates personnel cost per process full time equivalent (FTE) to perform processes "invoice customer", "manage sales orders", and "process customer credit". Personnel cost refers to employee personnel compensation (salaries and wages, bonuses, overtime and benefits) and fringe benefits (e.g. contributions made towards the employees' government retirement fund, workers compensation, insurance plans, savings plans, pension funds/retirement plans, stock purchase plans), and special allowances such as relocation expenses and car allowances. The Process "invoice customer" includes [Preparing detailed reports of customer purchases. Prepare a commercial document between the seller and customer with details about transaction. Detail the quantity purchased, price of products/services, date, parties involved, unique invoice number, and tax information.]. The Process "manage sales orders" includes [Taking, receiving, processing, and acknowledging new customer orders or amendments to outstanding customer orders. Monitoring status from order receipt to customer delivery/customer invoicing.]. The Process "process customer credit" includes [Evaluating and processing requests for advances. Evaluate credit requests by customers requiring loans to buy products/services. ]. This Cost Effectiveness measure is intended to help companies understand this cost expenditure related to the process group "Perform revenue accounting".

Benchmark Data

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Measure Category:
Cost Effectiveness
Measure Id:
105963
Total Sample Size:
593 All Companies
Performers:
25th
Median
75th
Key Performance
Indicator:
Yes

Compute this Measure

Units for this measure are dollars.

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(Personnel cost to perform the process "manage sales orders" + Personnel cost to perform the process "process customer credit" + Personnel cost to perform the process "invoice customer") / (Number of FTEs who perform the process "manage sales orders" + Number of FTEs who perform the process "process customer credit" + Number of FTEs who perform the process "invoice customer")

Key Terms

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FTE - (full-time equivalent employee)

To calculate the number of full-time equivalents employed during the year for each respective process or activity, you must prorate the number of employees and the hours spent performing each process/activity. Assume that a full-time worker represents 40 hours per week. Provide the average number of full-time equivalents employed during the year for each respective process. Include full-time employees, part-time employees, and temporary workers hired during peak demand periods. Allocate only the portion of the employee's time that relates to or supports the activities identified for an applicable process. Prorate management and secretarial time by estimating the level of effort in support of each activity, by process.

For example, a part-time secretary in the finance department for XYZ, Inc. charges all of his time to finance department activities. He works 20 hours per week. The secretary splits his time evenly supporting employees working in the general accounting process and the financial reporting process. Thus, his time should be allocated by process. So, if he works throughout the year and supports these two processes, his time would be split evenly as:

20hrs/40hrs = .5FTE * 50% for general accounting = .25FTE for general accounting

20hrs/40hrs = .5FTE * 50% for financial reporting = .25FTE for financial reporting

Personnel Cost

Personnel cost is the cost associated with personnel compensation and fringe benefits of employees (i.e., those classified as FTEs which includes both full-time and salaried/hourly employees) contributing to each respective process. Personnel cost should include all of the following costs.

Employee Compensation: Includes salaries and wages, bonuses, overtime and benefits.

Fringe: Includes contributions made towards the employees' government retirement fund, workers compensation, insurance plans, savings plans, pension funds/retirement plans, and stock purchase plans. This should also include special allowances, such as relocation expenses and car allowances.

Cost Effectiveness

Cost effectiveness measures are those in which two related variables, one of which is the cost and one of which is the related outcome related to the expenditure are used to determine a particular metric value.

Median

The metric value which represents the 50th percentile of a peer group. This could also be communicated as the metric value where half of the peer group sample shows lower performance than the expressed metric value or half of the peer group sample shows higher performance than the expressed metric value.

Measure Scope

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Cross Industry (7.2.1)

  • 9.2.1 - Process customer credit (10742) - Evaluating and processing requests for advances. Evaluate credit requests by customers requiring loans to buy products/services.
    • 9.2.1.1 - Establish credit policies (10789) - Creating guidelines for providing advances. Set up credit standards, credit terms, and collection policies.
    • 9.2.1.2 - Analyze/Approve new account applications (10790) - Checking and accepting new requests based on eligibility criteria. Analyze the status of applicants and requirements to be met for a new account.
    • 9.2.1.3 - Analyze credit scoring history (14187) - Reviewing past credit scores to determine the if a line of credit will be extended to potential customers. This could also include extending additional credit to existing accounts.
    • 9.2.1.4 - Forecast credit scoring requirement (14188) - Planning credit score requirements based on established credit policies.
    • 9.2.1.5 - Review existing accounts (10791) - Evaluating existing account holders and their past performance. Regularly review existing accounts to get the required information about the status at present.
    • 9.2.1.6 - Produce credit/collection reports (10792) - Preparing account payable reports about payments to be made according to accounting rules and principles, and providing the reports to management.
    • 9.2.1.7 - Reinstate or suspend accounts based on credit policies (10793) - Closing or restarting accounts according to changes made in credit policies.
  • 9.2.2 - Invoice customer (10743) - Preparing detailed reports of customer purchases. Prepare a commercial document between the seller and customer with details about transaction. Detail the quantity purchased, price of products/services, date, parties involved, unique invoice number, and tax information.
    • 9.2.2.1 - Maintain customer/product master files (10794) - Creating and updating a record of customers and the products being purchased by them in a database. This process element requires the organization to maintain a database of customers and their purchases. Such a master-file can be used to ensure customer touch point, enhance customer satisfaction, explore cross selling opportunities, and identify future trends. This database will include several particulars about the personal details of the organization's customers and a tracking of the products being sold.
    • 9.2.2.2 - Generate customer billing data (10795) - Preparing detailed reports about products purchased by customers. Record and generate a detail account of transactions made by customers fat a particular time and location. Include all details about products such as price, quantity, and name.
    • 9.2.2.3 - Transmit billing data to customers (10796) - Providing information to customers about purchases made by them. Communicate the details of purchases. Provide customers with a copy of details for their reference.
    • 9.2.2.4 - Post receivable entries (10797) - Registering transactions and their scheduled payments.
    • 9.2.2.5 - Resolve customer billing inquiries (10798) - Checking and solving billing queries raised by customers.
  • 9.2.3 - Process accounts receivable (AR) (10744) - Processing payments due from customers. This includes all processing of funds received, whether by check or electronically. This does not include the generation of invoices.
    • 9.2.3.1 - Establish AR policies (10799) - Creating rules and regulations to be followed in case of credit sales to customers. Create rules and procedures to follow at the time of sale (e.g., the allowable number of installments).
    • 9.2.3.2 - Receive/Deposit customer payments (10800) - Collecting cash from customers. Deposit it into bank account. Make entries into the books of accounts.
    • 9.2.3.3 - Apply cash remittances (10801) - Checking and moving funds between countries for business activities, typically through authorized remittance agents.
    • 9.2.3.4 - Prepare AR reports (10802) - Preparing reports that detail balances due or what to collect from customers at a certain point in time.
    • 9.2.3.5 - Post AR activity to the general ledger (10803) - Preparing the general ledger for account receivables from journals. Place all journal entries related to accounts receivables in the general ledger accounts of a business.
  • 9.2.4 - Manage and process collections (10745) - Posting entries to respective accounts, and preparing accounts for receivables. Manage the cash collected by the business from its debtors. Record it in the books of accounts to provide clear information about the availability of the cash.
    • 9.2.4.1 - Establish policies for delinquent accounts (10804) - Creating a process to follow in case of a failed payment by account holders. Create rules and regulations for the account holder who has failed to make at least the minimum monthly payment by the due date.
    • 9.2.4.2 - Analyze delinquent account balances (10805) - Examining balance statements of accountholders who failed to make required payments. Study or review the account details of customers' past payments when preparing negotiations policies.
    • 9.2.4.3 - Correspond/Negotiate with delinquent accounts (10806) - Determine ways for customers in default to repay debts (e.g., allowing more time or discounts).
    • 9.2.4.4 - Discuss account resolution with internal parties (10807) - Determining rules for handling accounts. Discuss and plan with internal parties (department heads, managers, and senior management) about rules to follow in coming months.
    • 9.2.4.5 - Process adjustments/write off balances (10808) - Maintaining reserves for write-offs and adjustments. Adjust or write off certain expenses and losses.
    • 9.2.4.6 - Perform recovery workout (14007) - Renegotiating the terms of a loan agreement in order to recoup money from a default account.
    • 9.2.4.7 - Manage default accounts (14008) - Managing accounts that have not met the requirements agreed upon to pay off outstanding debts.
  • 9.2.5 - Manage and process adjustments/deductions (10746) - Creating and providing funds for necessary adjustments and deductions, including all expenses that were required for the business at certain point in time.
    • 9.2.5.1 - Establish policies/procedures for adjustments (10809) - Creating guidelines to follow in case of adjustments to business processes.
    • 9.2.5.2 - Analyze adjustments (10810) - Checking changes made in accounts during the year. Examine the alterations made in final accounts to rectify errors/omissions.
    • 9.2.5.3 - Correspond/Negotiate with customer (10811) - Providing suitable offers to customers. Present different offers (e.g., discounts) available for customers or buyers.
    • 9.2.5.4 - Discuss resolution with internal parties (10812) - Discussing and planning with internal parties (department heads, managers, and senior management) about rules to follow in coming months.
    • 9.2.5.5 - Prepare chargeback invoices (10813) - Creating a mechanism for consumer protection in case of a higher price charged. When a supplier sells a product at a higher price to the distributor than the price they have set with the end user, submit a chargeback to the supplier to recover the money lost in the transaction.
    • 9.2.5.6 - Process related entries (10814) - Recording business transactions as they occur in order to provide a balanced accounts for financial reporting.