How new Technology transforms Work in O2C!

This article aims at helping raise awareness of profound changes affecting Working Capital management, within the community of O2C & Credit professionals, and how those changes ultimately align with the evolving purpose of the wider Finance function.

by Evelyne Legaux on 17-05-2022

The 4^th technological Revolution is here!

You may have heard or read this lately, and it is indeed everything but a joke…

The Covid-19 pandemic crisis has been a significant accelerator of Digital Transformation for businesses, by creating an unprecedented need for most people to work remotely.

 

Don’t be left behind!

According to two recent surveys conducted by Enterprise Ireland & Deloitte respectively:

. 80% of 2,000 businesses in scope view Digital Transformation as a priority in 2022,

. while 73% of companies have already embarked in some kind of Intelligent (process) Automation.

Besides, experts in that field expect a hockey-stick momentum of adoption of emerging technology over the coming years.

So, clearly the message here is: Digital Transformation is not just a thing for the most technical, trendy or advanced businesses… Instead, the ambition of it has already gone mainstream!

 

But, why is this? Because companies that are digitally mature prove to be more resilient & better equipped to master rapid change or disruption.

 

In other words, those that are not taking action to evolve, will sooner rather than later be left behind by their competitors!

 

Working Capital Management (WCM) at the heart of Digital à the Future is Now!

The pandemic has highlighted how critical a proper WCM strategy is, to survive a crisis of that nature and any future crisis alike. By elevating Cash to a Board-level topic, it has also outlined the need for that WCM strategy to be sustainable going forward.

 

This is a deep change compared to the 2007/09 financial & economic crisis that witnessed companies merely taking tactical emergency measures to improve WC, the impact of which faded away very quickly thereafter.

Why did that happen back then? Because the complex cross-functional nature of WCM drives the need for a comprehensive action plan that includes leveraging the power of Artificial Intelligence (AI), Machine Learning (ML) & Intelligent process Automation (IA) to identify the true drivers behind process inefficiencies & gain access to real-time insightful data/KPIs.

 

No matter the leg of WC at stake, this is where Digital technology comes in… and why it is here to stay…

 

A new World of Opportunities for O2C professionals

Not only has the pandemic crisis:

• been a catalyst to placing Credit management at the heart of Enterprise Risk Management (ERM) strategy & creating the crucial need for reliable Cash Flow forecasting…
• but it has also driven people to rally behind business top priorities, thus fostering cross-functional collaboration & acceptance of

 

And if that were not enough, the war in Ukraine continues to darken macroeconomic skies & bring further trade disruptions, volatility & uncertainty, thus making optimization critical for companies.

So, all in all, the most fertile of grounds for emerging technology to flourish…

 

A game-Changer in operational process Efficiency & Accuracy

For much too long, the O2C process has been overlooked for improvements due to its inherent complexity. However, companies now look at it as a ‘golden goose’ that ought to be cash-efficient & cost-effective while maximizing revenue & boosting customer satisfaction - all at the same time…

But clearly, O2C cannot deliver such benefits to the business if it continues to be supported by siloed systems & applications that host inefficient processes, broken workflows & multiple sources of data.

In addition, the relationship between IT & functional teams typically suffers from misunderstandings or conflicting priorities, with limited ability for the business organisation to innovate as a result.

Here is the good news: the era of siloed-thinking is now behind… for those who understand how to leverage Digital technology & are willing to embrace a game-changer!

 

With Digital indeed, come limitless opportunities for O2C professionals to evolve the end-to-end process for the better.

Whether it is Cash applications, bank account reconciliations, Credit terms approval workflows or cash Collections strategies, IA combined with AI & ML enable teams to automate any repetitive & rule-based tasks and optimize process efficiency.

Likewise, Digital solutions enable a higher degree of precision & the potential for added sophistication, compared to what can best be achieved without it. This is particularly relevant for Credit risk scoring models that need to become more intelligent & deliver a holistic view of the customer across the entire portfolio, to support fast smart decision-making.

But wait, there is more…

 

Invaluable Transparency & Visibility across the end-to-end process Cycle

Playing a pivotal role within the business organization, O2C must build trust & gain support from both the Sales & Operations organizations.

To achieve this, the purpose & importance of O2C must be well understood by those business functions (e.g. clear Credit terms or Credit holds decision criteria, etc…). O2C must therefore operate as transparently as possible & align with them, to help achieve profitable growth.

Likewise, the Sales function should involve Credit as early as possible in any new customer vetting process, so as to minimize the resources spent on those unlikely to be approved.

Clearly here again, the provision of such transparency requires O2C to operate with the right integrated technological solution that leverages IA & AI to grant all other functions involved visibility over the end-to-end O2C process & access to real-time insightful data/KPIs, supported by cross-functional correspondence capabilities.

 

Tremendous unlocked Value-add for the Business & its Customers

It is no secret indeed that increased process efficiency in Accounts Receivable management helps O2C free up Cash trapped on the balance sheet, thus reducing DSO & improving WC while creating capacity for further sales.

The more accurate & holistic a Credit risk assessment & decision process is, the more reliable & effective it also is in supporting profitable business growth while protecting Cash Flow generation.

With legacy systems, the customer is hardly at the centre of the end-to-end O2C process. Digital technology however goes a long way in enhancing customer satisfaction. Examples of it are: transparent customer Dispute management process that drives faster resolution of dispute cases, or the possible automation of those painful customer portal related transactions.

 

Last, but not least…

By creating shared visibility over real-time data, Digital technology boosts cross-functional collaboration throughout the O2C value chain. When Sales, Operations & Credit work together, they become a powerhouse that generate the right sales with the right customers.

As such, Digital comes across as a fantastic springboard for O2C to finally be seen for what it is: a profitable business support function, as opposed to being still too often perceived as an obscure back-office one that hinders sales…

The business organization thus becomes much more willing to accept this truth:

‘A Credit manager never says NO because they want to, but because they have to.’

 

The Future of Work in O2C

With the growing complexities of today’s business environment, the role that O2C plays in enabling business growth while protecting the main asset on the balance sheet, has become more demanding & critical than ever.

To deliver on what is expected from them, O2C & Credit professionals must now be supported by solutions that enable them to act efficiently & transparently. In other words, they must be freed from any manual process steps or mundane non-value add activities.

Such a change however doesn’t come without challenges…

While Digital enables people to access data & virtually work from anywhere, it also drives significant changes in how people work:

. the respective roles that people & technology play with regards to a given business process, need to be re-imagined,

. people need to develop a new skillset to be able to understand & integrate the technological capabilities of digital solutions with their own expertise & judgment,

. new creative ways of thinking need to emerge so that all opportunities to transform & optimize business processes are leveraged prior to automation itself,

. similarly, functional responsibilities across the organization need to be re-invented, with a view to placing the customer at the heart of the end-to-end O2C process & augmenting value-creation for the business.

A missed opportunity…

The other side of the coin is those changes can also create fear & anxiety where Digital adoption is viewed as a way of reducing headcount. Such a negative & narrow way of thinking is similar to a missed opportunity, therefore is wrong!

Instead, embracing Digital should be understood as a key enabler for business organizations to finally leveraging people’s under-utilized knowledge & abilities, thus improving employee motivation/retention. It should therefore be primarily viewed as a potential value driver.

Happy people will undoubtedly unlock opportunities to create strategic value-add for the business, which perfectly feeds into…

 

The ultimate Alignment with the evolving Role of the CFO

While the role of Finance as a function is in constant evolution, the momentum has been accelerating over the past two years, in terms of both depth & breadth. The many ongoing post-pandemic challenges & shifting priorities have lead Finance to help other C-suite leaders firefight to keep the business going, and to play a key role alongside the CEO in elaborating the corporate vision & long-term strategy.

As a result, today’s CFO is not only the guardian of past financial performance but is also expected to help drive long-term value creation for the business. The role of CFOs & other Finance leaders alike has therefore become much more forward-looking, which requires prompt responsiveness, agility & real-time intelligence to support strategic planning & smart business decision-making.

According to a recent EY Ireland survey, CFOs priorities in 2022 & beyond are focused on cost reduction & efficiency improvement (71%) along with talent development (28%), with many considering Digital technology as the solution to transform strategic areas of the business.

What is true of the CFO equally applies to their entire Finance organization. An Accountant today would expect to use real-time data analytics to support business decision-making as opposed to having to manually compile data.

Such a profound shift is particularly relevant to O2C, a function that is essentially customer-facing & plays a pivotal role within the business. When O2C professionals are freed up from mundane non-value add activities, they can focus on getting to know their strategic customers holistically, providing Sales & Operations with insightful real-time data analytics & sitting down with them to help drive the business towards reliable, creditworthy & margin-generating customers whose purchasing capacity is most likely under-utilized…

‘Moving from making sure things are done right… to making sure the right things are done…’

Undoubtedly, exciting times ahead for the world of O2C!

 

Should you wish to discuss this content further or indeed need help, do reach out on info@financeotcconsulting.com or through our Contact page.