1. Understanding the problem is 50% of solving it
There are three important gravitational pulls on a business leader’s time: the need to continually ensure the financial health of the business; avoiding silos between business units; and the need to find and implement the most appropriate technology to help them and their teams do their jobs more efficiently.
For example, shared service centres remain a favoured working model among enterprises, for productivity increases and financial savings. According to the 2019 Global Shared Services Survey Report by Deloitte, 43% of respondents cited only a 5-10% annual productivity improvement achieved by their organization’s shared service centre. 21% cited less than 5%, and 9% said there had been no productivity achievement.
The same survey found that only 20% of respondents invested money saved from their shared service centre in technology. It seems there is a paradox: a need to improve on business productivity, but a missed opportunity to hit that target by investing in technology that will help centres and business leaders achieve their goal.
In the Order to Cash area, traditional ways of doing things like using Excel spreadsheets to carry out collections, manually handling huge volumes of invoices, and setting overdue dunning actions based on familiarity or guess work, aren’t delivering results and lead to inconsistencies.
According to PwC, there is about €1.2 trillion (£1.04 trillion) tied up on balance sheets. If your cash isn’t collected on time then what should be a financial asset becomes a risk in terms of bad debt to be provisioned against or written off, loss of working capital and damaged customer satisfaction because of poorly handled payment experiences.
2. Never forget the cash
It’s natural for businesses to focus on sales, and especially new business development; acquiring new orders and new customers is a demonstration of the prowess of a company. Collecting the cash is seen as less glamorous, but this is an unfortunate disconnect.
A 2019 survey by Gartner looked at CFO effectiveness. It sought to determine what CFOs do with their time, relationships and teams and which work leads to more job effectiveness.
Their conclusion? The most important relationships that drive high performance in the CFO role are those with customers. The study also concluded that customer and sales relationships were a top three priority for CFOs to be effective.
Put simply, credit management should not be seen as a back-office function. It’s a key feature of the customer relationship. A bad payment experience – discrepancy over the invoice amount or payment terms compared to what was agreed at the point of sale, for example – can spell the end of the relationship.
Tools that allow sales, finance, and the customer to communicate easily and in real-time are vital to ensure a seamless order-to-cash process, retain new customers, and get more value from the customer base already there. It means joining up the data and communication between sales and finance.
3. Get more value from your ERP and CRM investment
Your Enterprise Resource Planning and Customer Relationship Management software represent a significant investment made by your organisation. So, the suggestion that more technology is needed can feel like a waste of money and time. However, what is needed, and what the business is asking for, are ways to get more longevity and value from the ERPs and CRMs they have.
A useful software ‘patch’ or ‘overlay’ application that can be fitted quickly, is easy for staff to use, adds value by automating more processes and helps increase your cashflow and profit. So, getting more value from your business data is a no-brainer, right? Augmenting your ERP means working faster, staff time freed for value-added work, better relationships with customers and more cash collected on time.
Data is the ‘oil’ for AI. An add-on that can process business data within an ERP or CRM, and unleash machine learning and natural language processing, is going to give finance and sales leaders previously untapped insight into customer purchasing and payment behaviours. That means insights offered in real-time, in the form of dynamic segmentation of customers that changes as purchase and payment behaviour changes, to address churn and collect cash. It means bench-marking that tells you how your customer pays you compared to how they pay other suppliers, giving you meaningful, data-based for improving your payment terms and reducing days sales outstanding.
4. Embrace ‘boring’ digital transformation
Robots shaking hands and exploding blue brains have been done to death in an effort to show how AI is cutting edge and futuristic. And we all love a story about AI beating humans at video games, creating art, or discovering new molecular combinations. But when it comes to business, it should not be about the newest, shiniest tech.
Identifying the processes and data that will deliver real, measurable return on investment – more work done more accurately money saved, revenue increased, cash collected, satisfied staff, more time for complex and valuable work – is what matters.
We have had AI whitewashing and hype; now it’s about embracing ‘boring AI’. It means identifying the data and processes that robotic process automation, machine learning and natural language processing can automate, and deliver predictions and recommendations to CFOs, sales directors, cash collectors, credit and sales managers.
PwC’s AI predictions 2020 report surveyed 1,062 business leaders, asking them ‘what are the most important AI capabilities their companies will cultivate’? Top answers included: managing risk, automating routine tasks, helping employees make better decisions, gathering forward-looking intelligence, and automating customer operations.
What does that look like in real life? AI and data that can help businesses better manage and predict risky customers when it comes to churn or payment; automating invoice processes; giving CFOs predictive analytics about cash and providing cash collectors with ready-made dunning communication plans. These are exactly what businesses need, and it’s more than a possibility – it’s already happening.
Food for thought
Are your collections at industry standard? Is it measurable, is it consistent? How would you know?
Are you harnessing the power of AI to increase profitability and growth?
Deloitte, 2019 Global Shared Services Survey Report
PwC, Working Capital Report 2019/20
Gartner Study, 2019
PwC, 2020 AI Predictions