How CFOs are planning to fund customer experience improvements

In a world where reviews are just a click away, and opinions travel faster than a sales rep’s car, it’s hardly surprising to see customer experience (CX) improvements sitting at the top of the agenda for businesses in 2022.

In a recent study conducted by Forrester Consulting on behalf of Corcentric, it was shown that customer experience improvements ranked even higher than revenue growth as a business priority. The same study also revealed that the majority of CFOs are seeking to optimize cash flows to uncover funding for key initiatives such as customer experience improvements.

From CFOs to vice presidents to managing directors, strategic planning must seek to improve net promoter scores amongst other key performance indicators for customer satisfaction and unlock the funding to do so.

How financial leaders approach optimizing cash flows

CFOs and other financial leaders have come to realize, after the disruptions of the last year, that more holistic and real-time views of cash inflows and outflows are needed in order to successfully optimize these flows.

However, realization is only the first step towards action, and only 5% of the audience in the aforementioned study had partners and/or systems in place to enable holistic cash forecasting, despite 82% of the same audience expressing interest in this area.

AR automation and AP automation are central components of cash flow optimization projects, improving both efficiency and visibility of cash flows in and out of the business. Forrester’s study indicated that 37% of those interviewed either already had AR automation in place or had plans to deploy it within the next 12 months. Similarly, 36% of the same audience either had AP automation in place or plans to deploy it within the next 12 months.

But optimizing cash flows requires more than just automation; AR and AP silos need to be broken down through integration across one platform. Outflows of cash need to be carefully balanced against cash inflows, and holistic forecasting provides exactly the insight needed to optimize this for maximum financial performance.

Digital transformation for CX initiatives needs to be part of business strategy shared with other business leaders in the C-suite. The conversation needs to move beyond the assessment of new technologies and view the challenge as a drive for the right people, process, and technology to achieve progress against CX priorities.

The impact of holistic cash forecasting on customer experience

Holistic cash forecasting metrics and KPIs are expected to yield smarter decision making, improved agility, and improved payment user experience, as well as protecting against disruption and fraud. Overall, these factors combine to propel businesses forward, responding faster to customer demands and market opportunities.

A business with the ability to forecast more accurately can more confidently prioritize working capital for the innovation required to drive customer experience forwards, from pricing and payment user experience through to delivery, support, and every other aspect of the customer lifecycle experience.

Applying working capital to the enablement of digital technologies and process change needed to improve customer experience is undoubtedly a high priority for many businesses. But without holistic cash forecasting, this investment of working capital comes at a risk to liquidity and encourages businesses to play it safe for the sake of cash flow predictability. Meanwhile, competitors with more holistic cash forecasting can press their advantage and drive customer experience forwards more rapidly.

How optimized cash flows yield funding

The optimization of cash flow, through holistic cash forecasting, has the potential to liberate working capital as a funding source for key initiatives, such as customer experience. The working capital tied up in sub-optimal cash flows is one of the easiest, fastest, and lowest-risk sources of funding stakeholders can tap into.

Take the example of cash flow into the business through the payment of invoices. Anything which slows down the process of delivering invoices to the right people (e.g. invoices posted to empty offices during a pandemic lockdown), or prompt payment of these invoices, such as inaccuracies in invoice detail (resulting in disputes), increases days sales outstanding (DSO).

Efforts are often made to drive down DSO through e-invoicing, improvements to payment processes, and AR automation. However, these investments in technology and process improvement tend to yield iterative improvements. Step changes, such as driving DSO down to a permanently fixed figure – like the way Daimler used Corcentric to take DSO down from 37 days to 15 days, permanently – can liberate millions of dollars in working capital instantly.

Similarly, control over days payable outstanding (DPO) through AP automation, supply chain finance or combinations of the two, such as Managed Accounts Payable services, provide businesses with easy access to working capital – funding derived from better control over their own cash flow.

The CFO’s role in combining and optimizing both AR and AP through one process, or ideally one platform, will provide the holistic overview to enable businesses to extract working capital from both sides of the equation at once – reducing DSO and increasing DPO.

The business case for optimizing cash flow doesn’t pertain to bottom line cost savings, but rather the value of growing business through ​improved customer service.

Overcoming process and talent challenges

Given the gulf between where financial leaders want to be and where the majority are at with holistic cash flow forecasting and optimization, it looks like the next few years will see intense activity in this space.

However, talent acquisition across any aspect of business is a major challenge right now – with salaries increasing as businesses compete to attract appropriate talent in what’s seen as a candidate’s market.

Furthermore, the processes for AR and AP automation and uniting these across one platform to achieve holistic forecasting are not widely available. Few vendors can claim expertise in both sides of cash flow, or the payments functionality to unite the two.

One of the most promising business models is working with providers to deploy AR and AP automation through people, process, and technology change, but in addition, combining this operating model with the element of funding, as with Managed Accounts Receivable. This will support guaranteed reduction in DSO or increase in DPO, without needing to pass requirements for earlier or later payment on to customers or suppliers respectively.

The commissioned study conducted by Forrester Consulting on behalf of Corcentric found that 85% of companies are engaging or plan to engage a managed service partner to fill existing talent gaps and leverage best practices. Could it be time for you and your finance team to explore these options?

How to proceed with funding your CX strategy

Optimizing customer interactions throughout the customer journey to improve customer satisfaction as a competitive differentiator may be high on the list of business priorities, but it will ultimately fall to finance leaders to liberate the working capital to achieve these ends.

The research cited in this blog post, from the study conducted by Forrester Consulting on behalf of Corcentric, should provide a few clues as to the opportunities for enhancements within the finance function to provide holistic cash flow forecasting and the associated optimization of working capital.

It is our belief that CFOs and financial leaders can play a central and strategic role in elevating customer-centric improvements to business operations. Download the study The Future of Finance: 360-Degree Cash Flow Visibility and Control to find out more.

To learn more about optimizing cash flow contact us or email us at [email protected].