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Top 10 Topics in Order to Cash

Top 10 topics in order to cash

10 minute read

As a follow on to part one of this series—O2C in Times of Permanent Crisis & Relevance of Cash in a Volatile World—I’ve put together the “ultimate hitchhiker´s guide to the OTC galaxy.” Here’s a top 10 for the King of Cash and the Credit SME (and for the reader aspiring to be more).

The Things We Need to Do + Crisis = The Things We MUST Do!  Why would anybody write a Top 10 list when there are so many issues to resolve and so few resources available? No company can deal with yet another project—everybody is busy firefighting. Well … that’s exactly why. The total list is much longer than 10, so here’s the “our life depends on it” list.

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1) Cash Is King (Especially in Crisis Times)

Typically, in Finance and GBS organizations, most people focus more on efficiency and effectiveness, less on working capital. Some organizations have understood the relative impact cash—or the lack of it—can have. In times of crisis that becomes clear to those severely impacted by the crisis, typically 20-30% of companies. Cash becomes the only thing relevant and DSO the most popular metric. In our current turbulent times that makes us feel as if we are in a permanent crisis mode. Working capital has risen to the top of many rankings and charts, and rightly so: our survival depends on it.

The outside world also follows closely the cash position of an enterprise. If a company appears to have a cash shortage, the market reaction can be ruthless. Years of hard work can be destroyed in a moment of exaggeration.

We put cash at #1 of this list to be very clear: this is not just about cost savings (which can be significant), it is about survival. Transparency, clarity, insight, training, and tools are all relevant components needed to make everyone in the firm understand how important it is to understand liquidity and what impacts it.

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2) Technology & Automation Levels Are Still Too Low

Automation levels are not moving up as expected. This might have to do with unrealistic expectations (often the case when discussing technology), but in this case mostly not. In the times of shared services, 30+ years, companies have been focused on trying to increase automation levels. We can all agree there is plenty of technology available to do that, an ever-increasing number of tools and technologies.

Despite technology being available, progress is astonishingly slow. Average automation levels are +/- 50%. You can measure this in different ways, e.g., how many transactions are automated, what percent of the processes are automated, how many tasks are automated, how much did we save on automation, etc. In any case, companies often do not seem to get closer to the 100% target.

It’s fair to say that some companies are slower than others, but at large, many have put good work into the transformation and optimization approach. It seems that the environment moves at the same rate as we optimize. While a process is being standardized, optimized, and automated, someone (like government or markets) comes up with new requirements (like web portals for billing) that require new technology, tools, process designs, and projects and these eat up time and resources again. The race continues and the automation level is stuck. To win in this race, we simply need to be faster.

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3) Talent Management, SWP, Talent Scarcity & A Deteriorating Staffing Situation

Strategic workforce planning (SWP) has always been a trait of the few, who then reap huge benefits compared to the rest. Most companies don´t act but react when it comes to workforce changes. This was an acceptable approach in times of employer markets with significant unemployment, oversupply of talent, slower change cycles, and less permanent crisis.

In today's totally unpredictable environment, talent scarcity is starting to influence the actual ability to carry out work, not just resulting in lower performance. Production is halted, services paused, deliveries delayed, individuals fired. It is clear to everybody now the situation is deteriorating and the search for talent is a run for talent, sometimes a war for talent.

This market situation is made worse by the fact that the supply side thinks and acts differently than previous generations. Right or wrong, younger job hunters have a changed evaluation criteria list. Employers can like or dislike this, but they must consider it. In GBS, transactional work is not interesting for most, even beginners. The only way to attract young workers is to offer modern technology and convenient tools. People who have worked with an enjoyable set of tools will be unlikely to change to the competition (even if paid more) if they offer outdated work environments. So good tech supports the talent acquisition and retention.

Since everybody is looking for the same talent, the medium-term solution can only be in increasing the talent pool size. The one thing companies can do themselves is to upskill and re-skill. It is the cheapest and fastest way. For this to work, we must overcome the perception that a million bucks invested into a machine is somehow better than a million bucks invested into a person. Yes, people can leave the firm and the training is lost, but not investing in them is even more expensive. We need to accept a bit more risk.

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4) GBS Model Discussion

We’ve always had crises, but right now it feels overwhelming: pandemic, war in Ukraine, supply chain interruptions, rising inflation, talent wars, refugees, cybersecurity threats, greenhouse effect, growing hunger crisis. For many people the ability to watch another news report in the evening after 8-10 hours of hard work is limited. There is only so much we can digest.

Nevertheless, a permanent crisis environment produces insecurity, and we start to question things that were okay before. The Global Business Services (GBS) model comes under review: is it the right model for the future? The approach and target for this review is risk driven: how can we mitigate risks? Can we eliminate risks or at least be prepared to react when a crisis hits? At a minimum, we should be prepared (mentally and organizationally), agile to respond, and able to defend the operations to become resilient. Stakeholders expect stable operations, services, deliveries, and support.

The discussion touches several dimensions. The most critical and emotional is the location aspect: do we need other locations? Or do we need additional locations to spread the risk? How does this align with WFH, balance of life, automated processes? One clear answer in this context is that higher automation levels help reduce dependency and risk on FTEs and locations. At full automation, no location discussion is needed.

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5) End-to-End Optimization with the Help of Organizational Elements

As explained above, there is another push to increase standardization as a prerequisite for higher automation and productivity, despite diverging global developments. Companies understand that business needs to be efficient, so they seek compensating improvements. Technology is the key driver in this, along with re-thinking governance and organizational models.

The most popular governance element is the use of process ownership concepts. What a global process owner (GPO) does and how this role is made to work is a topic for a book of its own. Suffice it to say, giving people 10% more work and a 4th title is not going to do the trick. To produce measurable change, a real investment into the process-oriented thinking is required. Typically, a GPO concept requires 2-3 layers of individuals, not one super(wo)man. 

Another organizational trend seems to be the alignment of internal structures with employee capabilities. This makes sense: have people do what they do best! In OTC, this could be structuring teams around skills focusing on collections, dunning, etc. versus an end-to-end approach with one team. This, obviously, still needs to fit with the overall process level end-to-end transparency. When people do what they like, proficiency and motivation increase, results improve, and customer satisfaction is achieved through employee satisfaction. Add pre-designed escalation paths and continuous trainings to the mix, and you’ve created a recipe for success.

The icing on the cake is the incorporation of experience from seasoned coaches and mentors. New employees have little time to become SMEs and high performers. It would be careless to miss the experience and advice available in the market.

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6) Cybersecurity

According to Cybersecurity Ventures, the global ransomware damage costs in 2021 were $21 billion. That is more than 100 times the amount from 10 years earlier. The prediction for 2031 is $265 billion, more than 10 times today´s number.

Most companies have already been hacked—they just don’t like to talk about it or publicly admit it, which is why the risk is perceived to be smaller. Those that haven’t been hacked probably will be in the 2-3 years. Surprisingly, many companies still think they are prepared and safe. They hope IT has done something to avoid this happening. This amount of self-confidence borders on arrogance. The fall will be hard for many. The only sensible recommendation to be given is to take it seriously and invest time, money, and resources now. A complete production stop, a GBS center not running, irreplaceable loss of data, technology destroyed by attack—all of these outcomes are very expensive and can be life-threatening to an organization.

OTC professionals can help by better securing their process and through training staff. GBS can help by running the cybersecurity office for itself and potentially for the enterprise as a whole. Management can help by prioritizing this as relevant threats and investing in security.

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 7) Measure for Value 

You can only manage what you measure, but also—you get what you measure.

Too many organizations in OTC are stuck in the traditional reporting structures. Everyone follows DSO and similar metrics, but is this really helpful? Potentially we can keep the cash flowing, but what about overall long-term business targets? What should we measure to achieve them? Are our “OTC targets” or “finance targets” the right targets, or are they conflicting with the business´s goals? In terms of metrics, “zero bad debt” for example sounds great, but how many sales are you losing? Or is this good if you are a dominant player in a marketspace with above average profit margins?

The point is: measurement should be constantly reviewed. But more importantly, a well-balanced scorecard should focus on leading measures and metrics versus the current heavy weight of lagging indicators.

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8) Digital Transformation Journey

How can we list the famous transformation journey only in 8th place?

For a decade or so, this has been the underlying change enabler to guarantee continuity in business success. And it still is! But it is, as said, an underlying holistic trend and approach. In the current crisis mode, there are so many pressing issues that require short- and medium- terms responses, that 8th rank seems correct. It will stay an evergreen.

A lot of work has gone into the transformation of societies, organizations, processes, and individuals. What seems a bit underrepresented is the best practice design solution for OTC. Do we know how OTC should look in the optimal world? Is there one view or is that still in discussion, or are there several differing approaches and outcomes?

For anyone interested in OTC and cash (so all of you reading this), revisit the past transformation journey and let´s reconsider how far we have gotten and where we need to go. Benchmark and design the transformation journey for OTC again, because many organizations are spending all their time on reporting on past success, not mapping and following the future path.

A big help in this quest is a program management office (PMO). If you don’t have one, get one. This aligns with the other organizational model changes discussed under #5. It can be a helpful lever to design the future and focus on the critical path. The benefit in the critical path approach is that you might actually reach the target one day.

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9) Sourcing Model Risk

Some recent research claims that OTC should be done completely in a captive environment, and that outsourcing OTC does not work. I would argue that you can find the same number of reports proving the opposite.

This imprecise outcome is exactly the reason for the never-ending debate about captive versus outsourcing, i.e., the sourcing model.

In OTC/cash, there has been slightly more debate about how well outsourcing or GBS works. Some prefer more decentralized approaches again. This is likely a result of the current crisis environment and the risk-based thinking approaches (more than the past performance in past setups). Risk does not need to be higher in any single sourcing approach though. It depends on the setup, partners, technology used, people employed, etc. What is clear, and true, is that risk powers more of the sourcing discussion, in our case, into position 9.

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10) Advanced Analytics

We should always start by checking what needs to be in place so that analytics tools can produce beneficial insights in general, e.g., master data in structured fashion. What insights do we want to produce, and for whom? How do we align analytics approaches with other teams and functions (e.g., sales, other finance) to provide insights (e.g., forecast) in the best possible way?

And when discussing analytics, we always end up discussing artificial intelligence (AI). What difference is AI making and what difference can it make in the future? Is this the question everyone should be asking when talking about AI and automation?

Digital disappointment has occurred for many because the automation they bought hasn’t changed anything—they have simply digitalized the process so it has the same pain points and challenges, although they might have gotten there quicker with less manual effort.

Likewise, everyone is calling everything AI, so it’s important to distinguish the many options out there. What is the difference between robotic process automation (RPA) and machine learning (ML) and what do we use them for, correctly? Find out and see the difference AI can and will make for your team or company. At the same time, stop believing all the (equally existent) marketing myths around AI.


Watch this on demand webinar as our expert panel, including the author of this article Tom Bangemann, discusses the future of order-to-cash processes in a changing world, and hear first-hand what companies are doing about it.

Tom Bangemann is a senior ex-hackett leader, board member, advisor, thought leader, and O2C and GBS subject matter expert.