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The dynamics of Receivables Management are constantly changing due to the multiple innovations that are impacting finance. Electronic invoicing and payments, invoice portals and networks (such as SAP’s market leading Ariba) , dynamic discounting and sliding payment scales, and mobile technologies are all impacting the way the invoice cycle is managed.
Periodically SAP sponsors research studies with industry leading analyst companies in order to objectively ascertain the current pulse of the marketplace. Recently, such a study – Revenue Cycle Management: Increasing Control Over the Order-to-Cash Process – was commissioned with Paystream Advisors, a very highly regarded analyst firm which appropriately dubs themselves “The Finance Process Gurus”. So let’s review some of their findings next, and of course, I will provide a link to the entire report at the end of this article for those that want even more!
Firstly, the report recognizes that over the last few years Revenue Cycle Management Automation (RCM) has matured considerably and now encompasses the entire order to cash (O2C) continuum, with a broadening range of functionality within each process step. At the same time, RCM has penetrated further into the market and is increasingly accessible to smaller companies. As the solutions have become much more advanced, with straight-through-processing (STP) becoming the accepted norm in the O2C world, finance managers might struggle trying to fathom out where to get started.
There is a plethora of options to choose from today, ranging from online credit application processing, credit scoring and portfolio analysis, electronic invoicing, automated collections and dispute workflow right through to remittance detail capture and matching. PayStream’s research suggests that the explosion of options, together with a lack of clarity about solution choices, may be slowing the adoption rate. If you find yourself in that situation, this report will certainly provide an excellent place to start.
PayStream reports that without automation, the efficiency of many AR teams is compromised by having to resolve problems created during the fulfilment process that subsequently impedes the cash settlement process. As a result, they spend more time manually sorting out administrative issues related to the O2C process, than handling risk related matters. They note that in instances where discrepancies are addressed proactively, before they can become a settlement issue, there is no transactional friction delaying payment and consequently fewer items for collectors to address. Additionally, PayStream suggests that the latest Optical Character Recognition (OCR) tools may solve many residual issues in improving the accuracy of invoices.
Currently credit scoring and remittance processing have relatively higher levels of adoption than other automation tools, since they typically involve high volumes of transactions and are easier to cost justify. But as finance struggles to achieve more with less, and as Software-as-a-Service and Cloud computing now preclude the need for upfront investment, Paystream anticipates that AR automation will become more accessible to organizations of virtually any size.
So what’s the payoff? AR automation improves efficiency so that staff are freed from mundane tasks and can spend more on customer contact (see chart opposite), reduces costs, and provides better visibility and control. PayStream suggests that the benchmark benefits are reductions of 10-20% in DSO, 25% in past due receivables and 15-25% in bad debt reserves. Clearly these are well worth pursuing and the report provides some excellent guidance on how to get there by:
- Stepping through the O2C process in considerable detail.
- Highlighting recent innovations to look for, such as the trend towards risk-based customer management, the use of mobile technology (such as SAP Customer Financial Fact Sheet and SAP Receivables Manager), and the increasing prevalence of collaborative tools such as those embedded inSAP Dispute Management
- Explaining how SAP solutions cover the entire O2C process.
- Setting out various deployment options and what to look for from a vendor.
As I mentioned above, you can check out all that valuable detail yourself here – login required.