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  • Writer's pictureDoculabs Vision Team

Close Your Accounts Receivables Execution Gap With Process Mining

Updated: Mar 30, 2023

CFOs are struggling to gain visibility into their order to cash process to address inflationary fears spurred on by COVID. Thankfully help is available.

This is the second post in a five-post series. Click here to read the first, Is Process Mining the Answer to CFOs’ Inflation, supply chain, and labor shortage fears? This article will focus on how process mining can reveal the roadblocks to successful execution in your current processes:

  • Multiple, sometimes overlapping, workflows and multiple applications

  • Slow, inefficient, and/or manual processes

  • Customized ERP systems

Poorly designed or manual financial processes carry an opportunity cost.

Lack of visibility into your order to cash process issues, specifically the root causes of those issues such as data, people, and process, can also contribute to a poor customer experience.

The invoicing process is never as straightforward as it should be. Many things can and do go wrong. Errors in ordering, invoicing, terms, and manual activities are just a few.

To improve customer service and increase efficiency, companies have been investing in automating manual accounts receivable processes for over 30 years with a combination of workflow and document capture technology. Even so, systems continue to be misaligned and CFOs struggle to identify where roadblocks and process inefficiencies exist.

Process mining plays an essential role in providing a bridge that connects the data in these processes to identify exactly where execution is failing. By accessing the event log data of the business systems used in the order-to-cash activities, process mining can “X-ray” your processes, providing a real-time look at how your accounts receivable efforts are on track or deviating from the norm.

Getting insights based on system data, you won’t need to guess at how effective a process is or isn’t. Whatever the execution gap is, whether it’s late payments or inaccurate invoices, you can identify it and then target the root cause of the problem. For instance, in benchmarking the performance of two business regions, process mining reveals frequent payment delays and errors in one of them. Drilling down further, it is discovered that the underperforming region relies on manually created forms, which are often inaccurate. The data can then provide a business case for automating the invoice creation function.

How harmful to organizations can these execution gaps be? To put these disconnects and missed opportunities in context, Celonis commissioned a research report. The research revealed lost opportunities and costs to companies of not having insight into clean financial data across all systems. Here are the results for accounts receivable.

Closing the DSO gap between top performers (24.1 days) and benchmark company (53 days) would:

  • Free up $395,890,411 in working capital

  • Reduce risk by reducing bad debt to sales ratio

  • Cut cost per collection, often drastically – best-in-class is $8.71 per collection versus $42.73 for average companies

You can read more about this research here.

Better Than RPA, BI, and Spreadsheets

We’ve seen too many clients trying to make decisions about the future of their business with a hodgepodge “system” of business intelligence tools and spreadsheets for point-in-time data. And RPA isn't the silver bullet many in the C-suite seem to believe. RPA is a useful aid for digital transformation, but it is truly effective only when included within an overall process automation strategy.

Process mining can help you:

  1. Improve working capital

  2. Reduce risk from bad debt-to-sales ratio

  3. Cut collection costs

Here’s an example based on our experience with the Celonis execution management platform. For one client, we discovered that almost 40% of sales order items hadn’t shipped because none of them had a “create delivery” activity associated with them. That represented $20.2M out of $52.3M

Further, we discovered that root causes included a mismatch of sales order items in inventory and incorrect coding of the sales order items (with the possibility of additional causes). Based on our experience, we estimated that 5% of those orders could have shipped immediately, returning approximately millions in revenue.

This is just one example. Other opportunities to deliver ROI include:

  • Identify customers who are most likely to pay and prioritizing them for collections

  • Proactively identify intelligent credit limits to decrease the risk of non-payment

  • Reduce number of invoices that require rework; Celonis customer AkzoNobel saved $7M doing this

  • Fast alerts when gaps in credit/collection teams’ execution are identified

  • Understand in real time how processes run in reality

  • Identify the root causes of inefficiencies

  • Real-time numbers help you understand which execution gaps have the largest impact

Next Steps – Your Own X-ray and Report Card

The sooner you begin, the sooner you’ll close your O2C execution gaps. Doculabs can help you use process mining to delve into your data so you know where you need to improve now and where you can create value in the future.

We do this with a “CFO Report Card” approach. It’s an X-ray of your current data combined with Doculabs industry expertise combined with process mining from Celonis to:

  • Diagnose how well core processes, such as accounts receivable, are performing

  • Provide an executive summary report that will include process improvement recommendations in order to budget for 2022.

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