We say it all the time, but in light of the current economic climate, it bears repeating: Cash is king.
by Bob Cecil
How to get more? One answer has been in front of us for some time. Companies looking to improve their cash flow should consider moving their Order to Cash (O2C) processes into a shared services or outsourcing environment. What’s been known for some time is that these strategies can reduce operating costs. The not-so-dirty little secret is that they can also improve cash flow, an increasingly important objective of companies looking for sources of funds in today’s credit-constrained marketplace.

So why have organizations been slow to migrate full O2C activities to shared services, with even fewer incorporating O2C into their outsourcing model? One of the primary challenges is that because many of the activities in O2C are managed outside of finance—order taking, invoicing, credit management, dispute management, etc.—many people need to get on board in order to take O2C to the next level of efficiency.

The most notable economic benefit of outsourcing or migrating your O2C activities to a shared services environment include improved working capital, typically in the range of 0.25 percent to 1.5 percent of impactable revenue. This includes improvements in past-due receivables, reduced unauthorized and preventable deductions and allowances and reduced bad debt. It’s important to note that while the working capital benefits are significant, they often are also front-end loaded—enabling your company, for example, to fund other improvements.

Internal Selling
How to get people aboard? Lead with a carrot: Talk early and often about benefits. In large organizations you can expect to reduce operating costs 20 percent to 30 percent by transitioning finance and accounting operations to a shared services model and a full 30 percent to 50 percent with business process outsourcing (BPO). In O2C the direct savings can be similar—but that is just the beginning.  

Other benefits include increased customer satisfaction, improvement in on-time account reconciliation, a reduction in processing time, and reduced errors throughout the entire O2C process—all while complying more easily with Sarbanes-Oxley and other global regulations.

It’s not just the CFO, CIO, or the head of procurement that needs to board this train. Depending on who owns what part of the process, decision makers can also be the heads of Sales, Logistics, Customer Service etc. To complicate matters, when undertaking a multi-business unit or multi-country project, key stakeholders can be multiplied many times, particularly when distribution channels and/or business models differ. You have to go into battle knowing true change management will involve communicating effectively to many different functions—and you’ll have to do it while battling misconceptions, like the idea that good customer service cannot co-exist with cost control.
Pick your first skirmish carefully. One of the keys to success is starting with an effective test of the concept, design and implementation. Too small a test proves nothing, and one that is too large or complex increases risk of failure. Avoid an across-the-board, multi-country, multi-business simultaneous rollout.

Consider a pilot based on a complete business segment or country, standard policies and procedures, thorough cross-functional training and the use of self-service tools to deal with simple queries regarding, for example, invoices. Also consider using proven collections tools such as eCredit, GetPaid, I-Many or a series of service provider proprietary tools. If some people in the organization are nervous about customer reaction, consider a customer-facing/noncustomer-facing split of activities for process scope. Starting small, even with no customer-facing activities, will give you a much better chance of success and of gradually expanding scope to some of the customer-facing activities such as email notifications.

Key Lessons
The most common reason for the failure of shared services/BPO is inadequate executive sponsorship. The second is a failure to align with stakeholders. The key is to develop a compelling business case. Disarm potential resistors by providing a clear idea of what a shared services and/or outsourcing operation will do for them. You’ll also need to consider investing in training and recruitment, since responsibilities will change.
There are risks inherent in not moving forward. The standardization, re-engineering, consolidation, and outsourcing of noncore company functions are never easy. But with the proper level of sponsorship, good advice, stakeholder alignment, and above all reasoned change management, it can be done. Failure to bring more efficiency into your O2C processes puts your company at a competitive disadvantage, wasting resources that could be used to build a stronger, more profitable organization.