Reducing technology friction across the Source-to-Pay and Order-to-Cash continuum

Do you ever get the feeling that technology is getting in the way?

How many of us have sat patiently waiting for Windows to apply countless updates, or fiddling around to get audio or video to work on a Teams call?

And these are just end-user pains. Imagine the electronic stand-offs between internal systems when one doesn’t provide an output that the other is expecting to process?

We can all roll our eyes and tut at these familiar electronic inefficiencies, but what happens when friction points impact the cash conversion cycle? Since cash flow is the lifeblood of business and the cadence of the CCC is the heartbeat, any obstruction to cash in or cash out has serious ramifications. Time is money; both source-to-pay (S2P) and order-to-cash (O2C) continuums should flow seamlessly, or cash flow becomes disrupted.

We live in a world of increased automation and digitalization of business processes. But when things go wrong, it can feel like the original manual workload has simply been replaced by another, electronic, workload. Take the example of electronic invoicing, promising savings in the order of €6.60 for every invoice sent and €11.20 for every invoice received and processed (according to this Billentis report from 2017). But how many businesses foresaw the many required hours of having to manually key invoices into some accounts payable (AP) systems to realise these savings?

Harmonising processes to improve cash flow visibility and control

Component parts across the S2P and O2C continuum need to communicate seamlessly, but many businesses rely on import/export processes at various points along the way. In the best case, these are automated via API connections. But, the more connected systems in the process, the more potential there is for sources of friction to impede this flow.

The S2P and O2C continuum includes some of the most complex general and administrative (G&A) processes within any business. Optimising and managing procurement activities and supply chain, through to integration of e-commerce with inventory and delivery management, then back into purchase order matching with invoice payments presents a hugely complex workflow, with every step presenting a potential friction point. Consequently, these processes present significant potential for optimisation.

In the context of source-to-pay, it is commonly reckoned (read McKinsey’s thoughts on the topic here) that somewhere in the region of 4% of external spend is wasted due lack of automation and optimisation. So, for every £200m spent, there could be around £8m wasted; that’s a lot of money!

Another McKinsey study highlights a typical 6:1 return on investment derived from improved visibility into order-to-cash processes. The same study cites the example of a B2B industrial manufacturer that discovered value leakage within O2C processes of between 3-5% of EDITDA — leakage that could be addressed through improved visibility and control. These are considerable returns for process improvements.

Diagnosing and optimizing previously obscured elements of S2P and O2C independently may well yield significant performance improvement and associated returns, but achieving a holistic view of cash flow across the full S2P and O2C continuum provides better insight for decision making and forecasting.

In a recent study conducted by Forrester Consulting on behalf of Corcentric, it was shown that 37% of those interviewed either already had accounts receivable (AR) automation in place or had plans to deploy it within the next 12 months. Similarly, 36% of the same audience either had AP automation in place or plans to deploy it within the next 12 months.

Streamlining for stability and efficiency

The fewer components to integrate across the technology stack, the more streamlined processes become. A single platform utilizes a single database, providing a single source of truth for more accurate financial insight and control.

As businesses strive to achieve that real-time insight and control, it makes growing sense to streamline the S2P and O2C continuum to require as few component platforms as possible.

What’s more, within and between each platform artificial intelligence (AI) and machine learning (ML) can increasingly be leveraged to reduce what used to be a human effort to connect elements (e.g., invoices matched with contracts, POs, and rebates). We tend to talk about these component parts within a platform as intelligent apps – giving credit to their intelligent autonomy within a cohesive whole.

This paradigm shift from a diverse application stack of point products to a platform-based solution with apps as components, brings value through the centralization of data, improved stability and efficiency, and real-time access to insights from across the platform.

But how do businesses achieve this digital transformation effectively and efficiently?

Most technology friction is internal

How many IT projects finish ahead of schedule, or even just on-time (and/or on-budget)? Maybe you’re lucky, but IT headaches and protracted deployment schedules are not uncommon.

If you’re in any doubt, take a look at this 2021 Forbes article for some sobering stats. Highlights might be the suggestion that 90% of IT projects fail to deliver any ROI, or that only 30% of digital transformation projects yield improved performance.

Even the most impressive and complete SaaS solutions take time to implement, configure and optimize, and then they need to be monitored and updated. What may sound like an almost perfect solution can often mushroom into another one of those lengthy IT projects. Far from the frictionless hopes at the outset of the project.

This is no disrespect to internal IT teams, but the talent needed to deliver a successful digital transformation project (especially in our topic areas of AR and AP, or holistic source-to-cash) is hard to find, and then hard to retain.

If you’re business is about technology systems for the S2P and O2C continuum, you’ll probably do a good job in delivering these. But most businesses don’t have this experience in-house, so they must grapple with deployment challenges when all they really want to do is get to the end result of having more efficient, effective and robust platforms to do their job.

It’s hardly any surprise, then, that a study conducted by Forrester Consulting on behalf of Corcentric, mentioned earlier, found that 85% of companies are engaging or plan to engage a managed service partner to fill existing talent gaps and leverage best practices in their AR and AP automation and optimisation projects.

Removing technology friction and shortening time-to-value

It’s a fair argument to say that high-tech should be high-touch, meaning that the greater the complexity of the technology, the greater need for expert assistance.

In order to achieve an optimal deployment tailored to your specific needs as a business, and deliver a return on investment as fast as possible, you need expert insight into how to get the most out of your technology solution, as well as finding the least demanding way to integrate it with your ERP and related systems.

Working with a managed service provider, such as Corcentric, can accelerate the project lifecycle, streamlining workflow and even handling typical friction points such as data integration and customer onboarding.

But even when everything is launched, nothing stands still. Links with connected supplier and customer systems need to be maintained and updated, handling of data formats and delivery protocols may change, and then there are those exceptions to expected process that need a human touch to validate, escalate, and resolve. A managed service provider can handle development iterations and update deployments within the scope of your contract to meet service level agreements (SLAs).

It’s true that AI is making massive changes to how much human involvement is needed and where, but for now at least AI is best considered to be an extremely capable assistant – learning fast and making short work of previously time-consuming tasks. AI is not yet ready to think creatively enough to design and implement complex solutions. Nor does AI yet have the finesse to liaise with suppliers and buyers to resolve anomalies and changes to existing processes with complete success. So, we believe high-tech should be high-touch to ensure sufficient human expertise in streamlining every aspect of solution configuration, deployment, management and optimisation.

From implementation to refinement and ongoing smooth-running, managed service providers bring experience and assurance that is missing when a business takes a DIY approach to integrating various SaaS solutions. Managed service providers can help shorten time to value and deliver on business objectives, without contributing to overheads.

Furthermore, a managed service provider can adapt to capitalise on advancements in new technology to create competitive advantage and enhance customer experience through meeting evolving customer needs. Working with a managed service provider in this capacity enables a business to explore use cases for emerging technologies, such as blockchain or the internet of things (IoT), without exposure to the risk and inefficiency (and delays) associated with early adoption of new technology.

Managed service relationships can be steered to focus on bottom-line improvements, such as enhanced profitability and value for project stakeholders, through well-structured SLAs.

Find out how a managed services approach can provide holistic visibility and control, as well as reduce friction, across the S2P and O2C continuum in this webinar – A view from above, the role of the modern CFO. Or read about how CFO.com suggests improved alignment for AR and AP departments, through a managed service approach, in their white paper on Three Ways CFOs Can Better Align AP and AR.