Three ways blockchain is transforming order-to-cash

If you happen to work within the order-to-cash (O2C) function of an organization, you will be no stranger to the headaches that exceptions can cause within your processes.

The pain points that arise from the slew of data mismatch issues include master data inaccuracies, pricing mismatches, order errors, and incorrect emails, to name just a few. And the results are all too well known – customer frustration, accounting challenges, delayed payments, and an inefficient collections teams.

But imagine if you could drastically reduce exceptions in your O2C processes by implementing technology that gets all parties on the same page and dataset?

Going beyond the blockchain hype

Following a period of prolonged hype, organizations are starting to seriously explore blockchain technology – the same underlying technology used to create and distribute digital assets and virtual currency such as Bitcoin and Ethereum – to optimize their financial activities and back-office functions.

Within the O2C function, leveraging a private blockchain to harmonize data between parties on a single, shared ledger – giving real-time visibility to transaction processing can have a huge impact on results.

Unlike a decentralized, public blockchain, a private, restricted blockchain can be leveraged for a specific set of controlled activities, in which all parties have transparency over where a transaction sits in the process and all work off the same data set that minimizes exceptions. If a user tries to enter a different data point, i.e., price, quantity, or master data elements, all parties can see the attempted change in real time and are able to react.

The impact of blockchain on O2C

At Capgemini, we’ve also been exploring the impact of leveraging a private blockchain within the O2C function – completing a proof of concept (POC) with a large national retail client to support customer ordering, billing, receiving, and payment handling.

The results led to us identifying three major areas that can be positively impacted by blockchain:

• Proactive vs. reactive credit and collections- blockchain’s shared leger delivers a common view of key data elements such as purchase order (PO) attributes, payment receipt data and invoice and payment events. These include :
  • Notifying a customer if they have reached their credit limit at the time they place their order
  • Notifying a customer of the exact invoices that need to be resolved in the order for that order to be placed
  • Visibility into upcoming payments as soon as a customer authorizes it, which can be used to increase their credit balance proactively and ensure new orders are not unnecessarily put on-hold or rejected.
  • Creating a virtual credit balance by applying any pending payments that are visible on the blockchain against their credit limit
  • Visibility of when an invoice is received and accepted, which can be used to trigger events further upstream.
  • The confirmation of the acceptance of products and immediate notification if any item is missing or has arrived damaged.

This real-time view enables the O2C team to anticipate short payments, issues, and order releases, as well as proactively issue credits that enhance the overall customer experience.

• Identifying and eliminating exceptions with smart contracts – blockchain technology includes embedded business rules that can be triggered based on different scenarios. These smart contracts leverage the data set on the shared ledger to identify and eliminate exceptions. Smart contracts can be used for a number of different functions. For example, during customer invoice acceptance, a smart contract can alert parties that there is a pricing variance; and during the online order process, a smart contract can request the customer to update their account payables master data or sales tax certificate by providing real time notifications. This can all be accomplished prior to the order being processed, eliminating the need for corrections or rework required once the invoice has been issued, eliminating delays in the collections process. Any alert on the blockchain triggers an automated action to resolve the issue, driving touchless processing within the O2C process
• Piecing together the remittance trail for accurate payment reconciliation – blockchain gives organizations a real-time view of when a customer has released a payment and associated payment information, which can be used for more accurate reconciliation against invoices. This can be instrumental in assisting with collections, cash applications, as well as providing an accurate credit risk balance for the customer. Visibility on pending or processing payment data can be leveraged against credit balances enabling new orders to be automatically released due to in-transit payments. Leveraging shared ledger technology eliminates the need to wait for remittance advice to post cash, providing remittance instructions for all payments processed.

Our O2C POC has shown the potential for blockchain to reimagine the O2C function. This is only the tip of the iceberg. We’re excited about the journey to transform the future of O2C with blockchain.

Now, if only I could get more benefits out of my Bitcoin portfolio?

This article was written by Caroline Schneider (Credit-to-Cash Global Process Owner, Capgemini’s Business Services), Carlos Bartolome (Credit-to-Cash SME Americas, Capgemini’s Business Services), Preethy Dhanaraj (Domain and Blockchain SME, Capgemini’s Agile Delivery Center, Mumbai), and Sukesh Shetty (Blockchain SME, Capgemini’s Agile Delivery Center, Mumbai).

To learn more about how Capgemini can leverage blockchain to reimagine your O2C process and transform your business operations, contact: caroline.schneider@capgemini.com  

Learn more about how Capgemini’s Finance Powered by Intelligent Automation offering helps you navigate the myriad of products, tools and services, enabling your business to benefit from an intelligent solution that combines automation, digital platforms, know-how and insight.

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.

Caroline Schneider

I have over 18 years of experience in designing and leading digitally innovative F&A credit-to-cash solutions for clients across multiple industries and geographies.