Boosting efficiency in order-to-cash with intelligent automation

Introduction

As chief financial officers (CFOs) and their teams are looking to improve cash flow management, reduce risk and contain costs, it is important for organizations to optimize the order-to-cash (O2C) process. This will also lead to improved customer experience and result in business growth.

Join us at PEX Live: Finance & Accounting Process Automation 2022 online on 8 – 9 December 2022 to learn how to enhance the efficiency of your financial operations

O2C is a complex end-to-end process involving several departments and teams, following a selection of manual tasks, which makes it challenging to optimize. Companies need to create a strong O2C strategy and roadmap that involves the use of methodologies to analyze and improve processes, the implementation of intelligent automation (IA) technologies and buy-in from stakeholders.

This PEX Network report, created in collaboration with YayPay by Quadient, provides insights into why it is critical for companies to optimize the O2C process and how they can succeed by leveraging IA technologies and process excellence (PEX) methodologies. It features real-life stories and recommendations from experts from Maersk, Cheetah Digital, LyondellBasell and YayPay to help companies improve efficiencies, save costs and achieve customer excellence.

Optimizing the end-to-end process to align with new customer expectations

The Covid-19 pandemic has shifted the way customers interact with companies. As many businesses had to close branches and offices to limit the spread of the virus in 2020, they had to turn to online channels for processes that were traditionally customer-facing. As revealed in PEX Report 2022, customer service was the top department driving demand for process improvement as a direct result of the pandemic.

Read PEX Report 2023: Global state of process excellence

It is important for companies to optimize the O2C process. Its key goal, according to Enrico Dispenza, global process owner of O2C at LyondellBasell, is to make customers happy by making their life easier while enhancing the cash conversion cycle.

“Efforts should be made to make the process smooth and to allow customers to make an order and trace its status, receive an invoice via electronic data interchange (EDI) and pay in a simple and quick way online,” he notes.

Read PEX Network report: Maximizing business growth through P2P innovation

At LyondellBasell, Dispenza is trying to limit touchpoints to make the buying part of the O2C process leaner. He says: “We are evaluating innovative ways to allow our customers a real-time experience offering features so far limited to online or start up business: that is a revolution for traditional companies and something we have never thought of before the pandemic.”

Digitizing the process, he explains, is a challenge “for big companies because of the change in the business model it entails”, but is necessary for those looking to keep a competitive advantage in the new Covid-19 context.

One particular challenge is aligning practices and processes across departments, which companies may not have time for, but it is crucial, says Anthony Venus, chief strategy and product officer, accounts receivable automation at Quadient.

“Companies need to have a clear vision of what they want for their process, who needs to be involved and what the workflows will look like to determine the areas that can be streamlined,” Venus says.

Standardizing processes is a big focus of Maersk’s O2C three-year strategy, called “four Cs and one E”, that focuses on five pillars: cash, cost, controls, customers and employees. The goal of the initiative set up in 2019 is to increase order compliance, accelerate the process for customers and equip staff accordingly.

The cash application process of O2C was, according to Vineet Mehra, General manager, product head and functional process owner of O2C at Maersk, “not a very happy process”. Multiple variations existed due to manual work and the lack of a standardized way for employees to receive payments and checks, usually sent by customers via emails or SharePoints.

After Mehra’s team spent a few months value stream mapping the process and laying out non-value activities, the findings were shared with senior leaders and the CFO to review dependencies and inefficiencies. This resulted in the elimination of a few activities and cost savings, and the company is now looking to implement tools to further improve the process.

Read PEX Network report: Leveraging intelligent automation to link strategy with process improvement

The next section of this report explains the benefits that companies can gain by implementing intelligent automation (IA) technologies into the O2C process to achieve customer excellence and improve efficiencies.

Leveraging intelligent automation technologies to provide business value

In the last 20 years, many platforms have entered the O2C space. According to Quadient’s Venus, they often provide capabilities for different parts of the process, such as credit risk analysis, invoice presentment and payment application, leading to multiple disparate systems that organizations need to tie together to get a complete picture of their OTC process.

One such solution can be an automated accounts receivable (AR) platform that helps with collecting payments and improving communications across departments and with customers. Cheetah Digital, an enterprise marketing technology company founded in 2017, had an entirely manual cash collection process where follow ups on invoices were either late or not happening.

The collectors were all new and managed their portfolios differently, leading to inconsistent spreadsheets and system reports. The sales team had to manually source customer information from the AR team and had no access to the company’s ERP system. This impacted the frequency at which they could retrieve updates on customers and led to them missing important information.

After implementing YayPay’s smart AR platform, transparency on customer accounts and collaboration on joint workflow from the AR and sales teams increased. Finance teams were able to provide accurate reports to their C-level, helping to create a robust collections strategy.

Chris Pearce, international finance director EMEA and APAC at Cheetah Digital, explains: “We have seen payments come in faster and a better customer experience because we are able to address things quickly.”

Cheetah Digital’s days sales outstanding (DSO) decreased by 25 days, and is now between 45 and 50 days, meaning customers are paying within 10 to 15 days of their due date. The spread of debt overdue more than 60 days is now less than five percent and global overdue AR has decreased by more than 40 percent, from US$17mm to $10mn.

Become a PEX Network member and gain exclusive access to our upcoming digital events, industry reports and expert webinars

It is no surprise that companies are looking to optimize the payment part of the O2C process. As revealed in PEX Report 2022, the finance department is the third department that has seen more demands for improvement since the outbreak of the Covid-19 pandemic.

At Maersk, a platform called MyFinance was created in-house before the pandemic and is hosted on the company’s website. It provides omnichannel self-service for customers to view invoices, pay through credit cards and other methods such as epay wallets and bank transfers, which standardizes customer payments and provides the ability to also raise a dispute in case of disagreements.

Robotic process automation (RPA) creates a work bench for users to access once a customer has shared payment proof information that allows them to process in a systematic order and provides productivity visibility for supervisors to allocate and optimize the work. They are now testing a cognitive optical character recognition (OCR) technology to read documents.

Before the pandemic, Maersk’s customers had to come to counters to deposit checks and get payment receipts, which proved impossible when the counters had to be shut down in 2020. To help launch the platform and manage the change with customers, the logistics company hosted virtual promotion sessions with customers and posted videos on Facebook and LinkedIn to promote it and explain how it worked, which helped it succeed to the point where it won a “Asset Asian Award 2021” in APAC.

“Today, we have almost a 50 percent penetration in few countries in APAC – customers love it as it is faster for them to pay and they only need to enter some details to do so,” Mehra says. “It also eliminated a lot of volumes coming into the shared services organizations.”

Through Maersk’s start-up accelerator program called OceanPro, which targets disruptive technology, Mehra’s team built an AI-based predictive customer behavior model focused on AR and the collection process aspect of O2C. His team collected a small data size of a few customers through a built-in tool that collects data automatically from letters sent to customers, and from data manually input by collectors including historical payment data and receivable situation.

Machine learning (ML) and AI algorithms were then run on the data to test four different models: customer behavior toward collection strategy; using that strategy to predict whether they will pay on time; whether the customers are reliable when it comes to paying or whether they need reminders; and predict cash flow through these models.

Mehra says: “We were able to achieve a good accuracy level from the data points for the months we predicted and we are now scaling up this activity with small iterations by launching an auto alert feature to key stakeholders when a customer accounts goes to a critical zone due to non payments.”

At LyondellBasell, Dispenza leverages a process mining tool that has data analytics capabilities to develop KPIs and root cause analysis, and to look at process flows and see the number of tasks performed. He says: “We can now see how transactions are performed in the system so we can look at deviations from standard processes and that has increased our analytical capability.”

Read PEX Network report: Unlock operational excellence through data 

He argues, however, that in order to optimize the process, although technology is important, PEX practitioners should look at methodologies too to optimize O2C.

“As a Six Sigma black belt, I am a big believer in using a structured approach toward continuous improvement,” Dispenza remarks.

According to Dispenza, using an 80–20 approach (Pareto) is helping focusing on the right opportunities without dispersing efforts on low return cases. Big projects are broken into small pieces and results are reported back to management after a short period of time, typically 90 days, following the Agile methodology.

The next section of this report will discuss how optimizing the O2C process feeds into the organizational strategy of a company and provides recommendations for success.

O2C optimization as part of a wider organizational strategy

O2C process optimization efforts can be set as part of a wider organizational strategy set by the C-suite. LyondellBasell’s O2C initiative is embedded in an overall program that started three years ago covering all end-to-end processes across the company and is driven by the company’s goal to pursue customer and process excellence.

According to Dispenza, customers should look at LyondellBasell as their “supplier of choice” not only for the quality of products but also for the smoothness of the offered buying processes and overall customer experience.

In order to identify the right improvement opportunities, Dispenza’s team uses the heat map approach to look at all the variables across the lead to cash cycle, KPIs, benchmarking and stakeholders’ input on pain points throughout the process.

“We describe the issues we have, develop the vision we have for the process and based on the to-be status, we identify what we need to develop and improve – that is where we start listing the potential initiatives that can help us bridge the gap between where we are and where we want to be,” he explains.

Maersk’s Mehra emphasizes the importance of connecting all stakeholders of the process to the initiative to overcome internal reluctance to change and used a “two-in-a-box” approach where two people from different departments work together for the common goal.

“My advice for any company wanting to transform is to make sure every corner of the organization is connected to the mission agenda,” Mehra says. “I would suggest sitting down with, discussing and marketing the strategy to the employees most impacted by it, so they are on our side when managing potential issues with customers. Although our decisions on the process were going to make it smoother for at least 98 percent of them, there was a risk some would be unhappy.”

At Maersk, monthly engagement sessions are held to discuss the progress of the strategy and roadmap, and the company has trained 50 percent of its shared service population to be Agile-traded. Mehra says: “Now, everybody is thinking about objectives and key results and discussing scrums in the context of the clearly defined mission statement for O2C.”

Read PEX Network report: Managing change during uncertainty

To achieve this, multiple POCs were created, surveys were conducted to gain feedback from the employees and training sessions were held for using Power BIs. Mehra also made conscious calls on what not to automate with the “start, stop, continue” approach.

As technology evolves and becomes increasingly implemented across companies, in the future, Quadient’s Venus expect to see less “busy work” as steps along the process become automated. Businesses will be able to focus on customer experience, since employees will have more time for value-adding tasks.

“Business will start focusing on growing their customer base and keep their customers engaged and happy and this cannot be easily automated or managed by a robot,” he states.

While IA technologies will help optimize the end-to-end process, companies should always keep leveraging methodologies alongside them to help structure their initiative. Finally, strong management and stakeholder buy-in throughout the organization will also help put the strategy to fruition, while managing the change with customers and ensuring they are happy will be key for success and business growth.

This report was originally published on September 30^th, 2021.

What steps are you taking to optimize your O2C process? Let us know by leaving a comment below.