Eliminating friction drives O2C transformation

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The best way to start your transformation to a frictionless finance department is by understanding where and how frictions are created.

Over the last year, we have seen a renewed focus on removing roadblocks slowing down business functions, frustrating customers, or negatively impacting sales and costs. Finance departments often play a crucial role in contributing to, leading, and designing these initiatives to improve business outcomes.

The global health crisis has accelerated transformation plans, focusing on speedier cash collections or increased working capital. This shift pushes back-office teams into a more strategic position, especially when delivering significant outcomes within order-to-cash (O2C) functions. However, many finance teams struggle when it comes to identifying how to start the journey.

Understanding how frictions happen

Before starting a transformation journey, you need to understand how friction happens. Think about how many people in your finance department touch a single invoice or order. The process may include the pricing team, the order fulfillment team, collections, or dispute teams, along with sales or finance teams. By the time all is said and done, more than 25 people could have interacted with a single order or invoice. With each issue, each validation, query, and approval needed, business slows down and runs the risk of being incomplete or full of errors that require rework. This results in customer frustration, order delays, lower sales, and higher costs.

Unfortunately, one thing that is often overlooked is how much frictions cost in the long run. Frictions, work around exceptions, and process issues are accepted because this is how it has worked for years. With every point of friction in your O2C operating model, your organization loses money; every exception is a wasted effort and pushes your customer closer to your competition. You may have designed processes and teams around friction without devising a plan to eliminate friction for teams, customers, and partners.

Identifying where to start your transformation journey

However, by asking a few key questions and comparing your key metrics with industry benchmarks, you can identify where to begin your transformation process. Are you achieving 95% or greater cash automatch rate? Are you at 100% invoice accuracy? Is your billing 100% automated? Are your accounts receivable less than 10% past due? Is your day’s sales outstanding (DSO) within a few days of your average terms? If you answer no to more than one of these questions, the more critical it is you review where you may have process friction. Process friction is anything that restricts process flow. The best place to start is to figure out where process friction negatively impacts results or customer experience.

When creating a successful O2C transformation initiative, you will start to see a faster flow of information with fewer exceptions while enabling your teams to focus on higher-value tasks instead of repetitive tasks. Within O2C, the speed you can collect cash changes dramatically if your level of process friction is high. The best initiatives start with a clear vision and understanding that less friction means better flow, higher sales, and faster cash conversion. Stay tuned for more on how to achieve frictionless O2C!

To learn more about how Capgemini’s Finance Powered by Intelligent Automation can help you start your frictionless finance journey towards enhanced O2C processes and improved customer satisfaction, contact: caroline.schneider@capgemini.com

Caroline Schneider has been delivering and designing O2C solutions for clients for over 18 years. She is passionate about delivering solutions to clients to maximize their working capital through technology, automation, and industrialized process design.

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