Order-to-Cash Transformation Best Practice and Priorities for 2022
The last two years have seen plenty of transformation across business processes, order-to-cash (O2C) included. But we wanted to summarise some of the best practice and priorities we are seeing in this area for 2022, as we emerge from the pandemic and strive for more resilient and efficient business growth.
Automation of O2C processes is hardly a new topic, but as businesses constantly strive to do more with less, O2C automation initiatives are a common priority for transformation in 2022. Robotic Process Automation (RPA) has proven its worth (globally $2.65bn in 2021 and poised to grow at a compound annual growth rate (CAGR) of 27.7% from 2021 to 2030) in many aspects of business, so comes the turn of order-to-cash processes.
Many accounts receivable departments face a daily challenge of uploading, or re-keying, invoice data into buyers’ accounts payable (AP) portals. Ironically, this increase in manual process has been driven by the digital transformation of AP solutions to streamline and automate invoice processing and payment.
In-house automation initiatives often result in IT resources tied up for months (or worse) and lack to nuance and control of the manual processes they replace, so best practice is to involve an automation partner to outsource the complexity and shorten time to value, with minimal disruption to this critical business process.
Unleash Cash from Working Capital
With the supply chain crisis affecting global business, profitability down and cash flow stretched further than ever, businesses are looking for ways to optimise cash flow and extract cash tied up in working capital. Two of the most common initiatives are to drive down days sales outstanding (DSO) or extend days payable outstanding (DPO), however, both come with the risk of negatively impacting customer or supplier relationships.
Whilst faster and more accurate delivery of invoices, along with speedier dispute resolution, can encourage more timely invoice payments, these incremental gains are frequently overshadowed by the dramatic cash flow optimization possible through supply chain financing – for both AR and AP departments.
At Corcentric, we have seen a massive increase in clients opting for our Managed Accounts Receivable (MAR) solution which provides the advantages of a non-recourse invoice financing solution with a full-managed service to provide e-invoicing presentment and payment (EIPP) as a white glove extension of their own order-to-cash process. You can find out more in our short webinar on the topic of fixing your DSO for certainty in uncertain times.
Security and Delivery Process Improvement
With the rise of invoice redirection fraud and spear-phishing, often taking advantage of quickly-deployed e-invoicing solutions to cope with remote working during the pandemic, we see 2022 as the year where invoice security rises to the fore.
More secure invoice delivery goes hand-in-hand with improved deliverability and better visibility of delivery metrics. KPIs for O2C in 2022 should include delivery and security performance for the sake of cash flow and customer experience.
The last two years saw too many businesses scramble to get electronic copies of their invoices out directly from ERP systems or via standard email platforms. With paper invoices reaching empty offices, electronic invoicing was the only sure fire way to get invoices through and preserve cash flow, but 2022 should be the year these businesses reflect on the shortcomings of their solutions and look at more nuanced, secure and effective EIPP solutions instead.
Seeing invoices delivered, opened and read in real-time, or having access to this insight in an easy report or dashboard is a considerable process improvement for many O2C departments. This enhancement of delivery tracking is an enabler for automated resends and follow-ups to ensure payments are made on time to drive down DSO and improve cash flow.
Transformation Management and Business Process Change
What has COVID-19 crisis changed in O2C Management, and were there any short-term changes which would have benefited from an more thought out transformation journey? How can process owners wrangle sub-optimal workflows into transformation for the greater good?
Stakeholders may question some of the process changes applied rapidly over the last couple of years, with a call to review and develop a roadmap for more effective O2C transformation and the change management needed to optimise this.
With order-to-cash as a shared service, many businesses have found managed service solutions the most effective way to rapidly deploy process improvements – outsourcing the development and deployment challenges, whilst maintaining direction and control of the process management.
Digital Transformation after the Pandemic
As the world settles into the new normal following the COVID-19 pandemic, we see a commitment to build back better, to establish more resilient and future-proof solutions. How has this change of outlook adjusted business prioritization of digital transformation projects?
With cash flow strained by the opposing forces of the supply chain crisis and the need to invest and grow, average DSO has increased considerably across almost every line of business and bad debt is more prevalent than ever before.
The digital transformation of order-to-cash needs to prioritise improvements in delivery, visibility and the control to improve cash flow and forecasting in these uncertain times. Which transformation methodologies ensure maximum control and success in these areas and how can these fit with existing business processes?
AI and the Order-to-Cash Process
Artificial intelligence has promised to revolutionise virtually every aspect of business and order-to-cash is no exception. Machine learning will crunch data from credit scoring through to order management, invoice payment and the impact on profitability, cash flow and working capital.
Embracing end-to-end digitised O2C processes will provide the raw input for this algorithmic enlightenment, with predictive analytics enabling you to streamline and optimize ahead of competitors slower to embrace well-structured digital O2C processes.
2022 may not see a full AI revolution in order-to-cash, but businesses would do well to establish the groundwork through digital transformation to provide the data and control for machine learning and AI to leverage in years to come.
Optimization for Simplicity of O2C Processes
New technologies and the transformation of business processes can sometimes spiral in complexity, but it is normally businesses with the simplest processes who come out on top (and are preferable to work with).
Financial leaders should strive for simplicity throughout the O2C process. Technology should simplify and enable, not complexify. Explore how to leverage automation to create efficiencies that drive revenue and strategic growth, without forcing your customers to change their behaviour.
Lead your organisation into an era of efficiency by reducing manual data entry and increase the time available for activity which adds real value. With the recruitment challenges businesses face in 2022, it’s wise to embrace and empower your O2C staff to deliver every ounce of value they can bring through human insight and interaction – not time spent grappling with unnecessary manual processes.
Connect pricing, discounts and rebates with invoicing processes, simplify cash application and automate all the nuances which support your dedication to customer service excellence, but leave this complexity to underlying service layer – every touchpoint and overall management of the O2C process should be as simple as possible.
The aforementioned drive towards automation and streamlining of O2C processes naturally frees up staff to deliver more human value to their customer interactions – something the machines have yet to master.
Every customer touchpoint across the O2C process, from ordering, to order processing, to receipt of goods and invoice and then payment, or even dispute resolution, is an opportunity to elevate the customer experience. O2C transformation should have customer satisfaction as a guiding principle to balance out the other areas of value to the business.
Benchmarking and tracking your customer satisfaction through net promoter score or similar methodology is one of many important KPIs for O2C transformation success.
The CFO’s Perspective on O2C Transformation
O2C transformation is a means to an end for most CFOs. The task is handed off to the O2C process owner in order to meet KPIs around cash flow, access to working capital, forecasting or profitability through improved process efficiency. Don’t expect a CFO to care how you take information from your ERP system, deliver this as invoices and encourage customers to pay on time. However, your CFO may care that the cost of a SAP engineer to do this runs to many multiples of the cost of a managed service solution though.
If a CFO can see your O2C transformation agenda promises cost reduction as well as access to more working capital, this may enable them to achieve their strategic objectives to invest and grow the business faster. Speak to their higher-level financial objectives, rather than expounding the wonders of how AI can generate insight that may elevate customer interactions. There’s much on the agenda of O2C transformation in 2022 that may empower a CFO, but it’s the business value of the change which will compel them to support your digital transformation journey.