“Who Owns What” – The Shift in Order-to-Cash Outsourcing
The turf and politics of “who owns what” is shifting in today’s OTC scope discussions as service providers are anxious to deliver end-to-end solutions to capitalize on their increasing investment in and development of end-to-end OTC tools and processes.
Traditionally, in what was known as “invoice-to-cash” (ITC) offering, most order-to-cash (OTC) outsourcing has been focused on outsourcing two or three functions, such as invoicing, cash applications, and collections.
However, in recent times, the development of service providers’ capabilities to provide end-to-end OTC outsourcing solutions has become the new fad in the OTC arena. It will likely continue as companies (buyers) are moving toward outsourcing their entire OTC process instead of just outsourcing selected functions to register a better return on their investment in OTC.
The Shift From Function-Based To Process-Based Outsourcing
One of the most significant challenges in outsourcing OTC is working cross-functionally with the multiple departments involved with the various OTC functions.
This is particularly true when addressing customer order, shipping, billing, collection, and dispute-resolution problems that occur across the OTC process. Not surprisingly, undefined boundaries can cause process disconnects, errors, and friction within a company, along with a lack of transparency in problem-solving. Consequently, once a problem is known, it cannot be solved in a vacuum and thus takes the teamwork of various organizations to piece together the solution. From an outsourcing perspective, the more integrated the OTC process, the more efficient the solution.
Readily available quantitative and qualitative information is a requirement for successful processing and issue resolution in OTC. This comes with highly integrated processes that are typically supported with integrated ERP platforms.
Today, most companies are in various stages of implementing ERP solutions, and most continue to rely upon internal legacy applications to some extent. Many companies have sought to use overlay tools that give visibility into different data across differing systems.
Service providers in the OTC space bring these tools to the table, enabling companies to integrate their OTC functions.
Automating and tracking the cycle of cash flow from order management through to cash application is becoming increasingly attractive as a transformational opportunity with companies. Transformation and the ability for the service provider to bring full process redesign and technology solutions have become critical drivers of the OTC process approach. Functional OTC solutions tend to result in piecemeal and less integrated solutions.
The focus on cash flow, coupled with the realization by buyers that OTC outsourcing can provide more than just cost-reduction benefits, has also supported the shift to a process-based versus functional approach.
Service providers can offer significant value by improving the company’s financial position through increased cash and working capital levels, which in turn provide benefits of raised funds for investment and decreased debt levels to the company. Reduced receivable DSO (“day’s sales outstanding”) is best achieved through managing the end-to-end OTC process, where processing errors and snags are minimized.
The turf and politics of “who owns what” is shifting in today’s OTC scope discussions. And service providers are anxious to deliver these end-to-end solutions to capitalize on their increasing investment in and development of end-to-end OTC tools and processes.
Future Scope of Order to Cash
Big Data and AI
The predictive capabilities of artificial intelligence combined with Big Data, tends to give valuable information that turns out to be a boon for multiple investors and debtors. Using natural language processing and self-learning algorithms, one can quickly improve their own data analysis. It also helps them forecast payments and provides methods to improve upon existing business ideas.
Internet of Things
IoT is a new age process that aims to provide connectivity to various physical objects so that there is an exchange of information among them. The data collected from the source is transmitted in real-time, preventing any bottlenecks along the way. In the Order to Cash cycle, IoT can play a crucial role when it comes to placing orders, delivery, and issuing invoices for the same. This significantly reduces the amount of work that is imparted upon, such as order processing and invoicing.
With the Robotic Process Automation (RPA) already making waves in the current Accounts Receivables landscape, implementing bots for complete automation of the Order to Cash process would ease up a lot of tasks involved. Moreover, tasks that were handled by human resources could be automated using bots assigned for that specific purpose, reducing unnecessary delays in processing and provisions for errors.
The Order to Cash process is the financial backbone of any organization. A company’s economic growth directly correlates to how efficient their order to cash process is. With businesses more conscious than ever about the bottom line and customer satisfaction and a constant change in technology, there has been a multitude of changes that have significantly decreased the amount of workload that used to be present when done manually. However, it is upon the company to leverage the benefits of such technologies and adapt to the modern methodologies to streamline this cycle and optimize the process to gain financially.