Author: Evelyne Legaux, Finance OTC Consulting Ltd
Digital transformation of your Order-to-Cash process
Part 2 – What Next After Covid-19?
Post Covid-19, companies have no option but to re-assess their priorities going forward. At a high level, the following focus areas can already be observed:
- More robust scenario-based cash flow forecasting with increased frequency;
- More responsible approach to vendor payments, materialising in increased frequency & reduced delays;
- Adjustments made to Inventory management to ensure stock levels reflect the needs of changing demand & supply market conditions,
- Better governance based on an operational review of processes and re-definition of KPIs;
- Increased amount of resources assigned to key working capital processes.
It is clear however, that to move further beyond a tactical approach towards mature & sustainable WCM, companies will need to develop a cross-functional concerted strategy and instil a strong cash culture throughout their organizations to make it successful.
Additionally, companies will need to address the following challenges:
- Access to data visibility about their WCM & cash performance consistently across business lines and geographies;
- Aligned & standardized working capital operating processes across the board;
- Get the many functions involved to cooperate together & ensure that each function understands its own impact on Working Capital;
- Have sufficient resources dedicated to WCM with clear governance rules in place.
So, what does it take for companies to address these challenges?
Harnessing digital tools and implementing effective governance systems are now crucial for companies to leverage WCM enablers & drive efficiency gains. This is particularly important looking at the O2C leg of WCM which has so far been largely overlooked by companies. In the present uncertain times, optimizing the complex cross-functional O2C process to minimize risk & maximize efficiency is critical.
Implementing a digital platform to manage the O2C process can benefit companies in different ways: boost revenue, reduce costs, be cash efficient, improve customer satisfaction & free up valuable resources for analytical & other value-add activities.
With many variants driven by industry, product, geography, transaction type & market segment combinations though, streamlining the end-to-end O2C process proves to be a major challenge and finding a one-size-fits-all technology solution remains impossible today.
Yet, companies now expect to have visibility over real-time data any time throughout the entire O2C cycle, and want their key pain points (outlined below) addressed:
- Siloed systems owned by the various functions involved along the O2C process segments (Quote-to-Order, Order-to-Invoice, Invoice-to-Cash) & related key activities (order processing, credit management, order fulfilment, warehousing & shipping, customer billing, collections, cash application, dispute management, stock returns);
- Lack of streamlined workflows due to multiple applications;
- Lack of processing time data with people being used to make up for shortcomings;
- Slow & inefficient process that includes manual steps;
- Legacy IT systems make identifying root causes & fixing broken processes difficult;
- Heavily customised ERP systems are very complex & costly;
- Data scattered over a myriad of legacy systems hindering a single view of that data;
- The business function being dependent on IT understanding & availability to drive process improvements.
Moreover, in the present highly competitive business environment, giving third-party customers every reason to be satisfied and remain loyal is vital. Hence the increasingly compelling need for companies to implement a fully integrated O2C platform that unites the various functions involved through the entire process.