The Accounts Receivable Problem and What to Do About It

For over 20 years, enterprise companies have been managing isolated parts of Order to Cash in shared services. This article looks at how two companies, AstraZeneca and Tesco, are looking into bringing their entire O2C process into shared services.

O2C in Shared Services:

1. Most commonly, companies have looked at the O2C process as having two distinct halves – Order to Bill and Bill to Cash. The latter half has been the piece that most shared services organizations have folded into scope. Nick Redman, GPO Contract to Cash and Banking at AstraZeneca, estimates that only 40% of shared services include the first half, Order to Bill, in scope.
2. Nick’s view is that Bill to Cash is a straightforward section of the process to drop into shared services, but the sticking point for the first half of the whole process is that it is deeply connected to Commercial. “Commercial likes to hold on to the Order to Bill process, because it touches the customer. To include Order to Bill in scope, you need a different engagement with the business, as this will present a real change for some departments. You have to be really sensitive to things like period-end, and you have to know how to elegantly manage multiple stakeholders. As end-to-end goes, O2C is less mature than R2R or P2P.”
3. Nick adds that, when bringing in Order to Bill, process owners and shared services leads will feel more pressure from the business, as the Order to Bill part presents higher exposure and risk. “You had better make sure you are allocating cash correctly and processing orders quickly enough.”
4. End-to-end works well in shared services. Huw Jones, Global Transformation Programme Manager at Tesco, says that bringing in the whole of Order to Cash into shared services is advantageous. One reason is that the Master Data team usually sits in shared services, and the O2C process is greatly assisted by a stronger connection with Master Data.
5. AstraZenca includes Order to Bill in its shared services scope, and, where appropriate based on the business model, Tesco does too.

Benefits of O2C in Shared Services:

1. The cost benefits for bringing the Bill to Cash part into shared services are compelling. Both Nick and Huw reference 50% cost savings once the more standard Accounts Receivable is migrated. When the Order to Bill part is added to this, the savings climb well north of 50%.
2. Huw points to the benefits of having “a common way of working, one view, one system, and one process in place,” and how this significantly improves process efficiency. “The business case of 50% savings means you’ll have funds to invest in technology and automation. Process improvement and automation will mean you’ll see fewer disputes and fewer credit notes, and the flow of cash in will be quicker. Looking at compliancy, you’ll be getting better information at source, so your data will be more accurate.”
3. Nick adds that further benefits include a reduction in fraud and an improved credit risk – and, in AstraZeneca’s case, “overdue debt reduced from 8% of AR to 0.8% of AR and collection-to-terms is in the low 90%s.”

Success Factors When Migrating O2C:

1. Huw stressed that top level sponsorship is key when moving to shared services, as is having “commitment at all levels.” He adds that the business needs to be “sold the benefits.”
2. Nick is very clear on approaches that should be avoided – like the ‘lift and shift’ approach. When shared services takes on O2C, process re-engineering needs to be part of the plan: “If this is just about cost reduction, without the process improvement, you’ll have a painful few years ahead. Be really clear, well before you start the transition, what you want to improve.”
3. When O2C comes into a shared services, it is rarely standardized, and it will be challenging to offer a quality service and standardize the process at the same time. For this reason, Nick suggests letting the business units know that there might be a dip in service. Awareness is key here.
4. As far as scope and approach is concerned, Huw believes it’s better to avoid trying to boil the ocean. “Small steps are better. It’s good to be realistic, as you won’t cleanly move from one state to the other. The bigger the organization, the more challenging it will be.”
5. High Radius, RPA and AI leader in Accounts Receivable and Order to Cash, say there is a 4 Step Maturity Framework that can be applied in O2C, so optimize this end to end process. To find out more about this Framework join our webinar on the 18th July.

O2C Process to Service: 

Order to Cash is a perfect example of a finance process that reaches across the business, and beyond the walls of finance. Both Tesco and AstraZeneca are focusing on a more Service-led model where finance is business-focused, rather than just finance. To meet this end, it helps to have the entire O2C process in scope for shared services.