Transforming collections and cash applications

Innovation-Nation-Special-Edition_quote_Carolina-RodriguesIt isn’t only small companies for whom cash flow concerns can be a challenge. While these issues may not be enough to become an existential threat to a large enterprise, they can still make a substantial impact on its ability to maneuver.

This was the scenario for which a client of ours sought help. The business is one of the world’s leading companies in industrial and medical gases, and its invoicing operations across Europe, Asia, South America, and Oceania were large, complex, and in need of attention.

The challenge – addressing people, processes, and technology issues

The organization was struggling with a large number of past-due invoices, a significant volume of unapplied cash, and high DSO levels. These were the result of underlying problems in three main areas.

First, a great deal of pressure was being placed on people, because they had insufficient tools and inappropriate skills. As a result, there was much emphasis on working overtime to get things done.

Second, credit-to-cash (C2C) processes were largely manual and therefore risky. Desktop procedures weren’t properly updated, and follow-ups and controls were managed via Excel spreadsheets, without any database or other supporting system: for instance, credit limits and credit notes had no consistent approval flow. Also, there was insufficient interaction between the finance and sales functions.

Third, tools and technologies were insufficient. There was no automated collection mechanism, nor any automation of cash applications; there was no workflow for service desk activities; and, overall, there was no technological consistency.

The solution – bringing out the best in teams, tools, and processes

Working closely with the client team, we undertook an analysis and overhaul of current processes. This included making credit note approval CFO-only, the introduction of a dedicated resource to handle backlogs, the elimination of forced cash applications, and the logging and tracking until closure of all cases of unapplied cash or unidentified cash. A further process improvement was the creation of a C2C service desk, making use of a workflow tool and CISCO Finesse, enabling a direct interface with the sales team and facilitating more productive and frictionless dispute management processes, as well as quality monitoring.

As a result of this assessment, three robotic routines were introduced to increase productivity in cash clearance. These comprised automated credit notes creation, automated reconciliation payments for the day, and an automated match of credits generated against open invoices. An automated ticketing system was also introduced.

Webcollect was used to automate communication workflows, reporting, account statements, and follow-up reminders, and to increase the number of automatic dunning letters. All of this helped to redefine the rules of collections by sales manager and type of business.

In addition, a skills matrix was established, ensuring the right people were engaged in the right place according to their competencies, and creating active backups for all activities.

Innovation at a glance - Transforming collections and cash applications

The outcomes – going frictionless

Many of the benefits that accrued from the changes that were introduced are measurable, and they are significant:

  • 40% reduction in accumulated past due
  • 20% reduction in days sales outstanding
  • 30% increase in cash flow
  • 72% reduction in unapplied cash.

Other benefits, while less measurable, are no less tangible. These include the stability and peace of mind that are the result of consistent, frictionless processes, and a more contented, more highly motivated team. Our client now has a much stronger base on which to build.

Carolina Rodrigues is an expert in R2R and C2C, and responsible for delivering operational excellence for her clients.

Murilo Bonfante Michetti is a service delivery manager responsible for delivering transformative F&A solutions and operation, delivery approaches, and operational excellence for his clients.

Carolina Rodrigues
Carolina Rodrigues (Credit to Cash Team Manager, Capgemini’s Business Services)

Murilo Bonfante Michetti
Murilo Bonfante Michetti (Service Delivery Manager, Capgemini’s Business Services)