Episode 29: What Does Collections Automation Look Like for Mid-Market Businesses?

Madhurima Gupta:
Hi, welcome to the midmarket CFO circle. I’m Madhurima, your host. And today I have with me Chris Argent. So today we are going to focus on talking about how collections automation should look like in mid-market organizations at admin, as mid-market CFOs offices plan for what they should be doing in 2023 at a time of rising demand and collection side and decreasing ability on the payment side, mid-market companies need to keep cash flowing and business running collections teams within organizations that are in dire need of innovation that could improve the overall process efficiency and health optimize working capital. So that’s something that we would wanna talk about a little today and transitioning from traditional methods of operations to a more data-driven futuristic, scalable digital solutions is what we think is the, way forward for midmarket CFOs office. But I’d like to hear from Chris Argent on what his opinions are on this subject and in order to get started with it, I’d like to welcome him to the show. Hi, Chris, how are you doing?
Christopher Argent:
Very well. And thanks for having me today, very much looking forward to talking to you in all of your mid-market CFOs, it’s very much an area I focus on. So looking forward to it.
Madhurima Gupta:
Absolutely. Thank you so much for your time now, before we get started. And though I would like to hear what your journey has been from yourself, but I’ll quickly give an introduction about you to our listeners. So Chris is the founder and managing director of generation CFO, a community for accounting and finance professionals. He’s created an environment where professionals could access continuous and collaborative learning and acquire real-life skills. He has experience in transformation programs with leading corporations like Amazon water phone and John Lewis. And prior to that, he was also working as CFO at a mid-market company. He’s currently strategic partner at ACCA, which is Association of chartered certified accountant. So on that note, I’d like to welcome you to show and, you know, just hear from you what your background has been, how your career has progressed. So would you like to share some information on that?
Christopher Argent:
Thanks very much. It’s quite nice to hear the highlights of my career in a couple of minutes. It sounds great. Yeah, my, journey’s been probably quite a traditional one. I started out as an accountant, worked my way up through the ranks and was very much part of core finance for a good 15-20 years. But the last role that I had within the sort of core finance team that I talk about, it was a divisional CFO in a mid-market. But there was a trigger point why I stopped doing that. And it was that I discovered a fraud within the company which I don’t have time to go into today, but the fraud basically led me to kind of question a lot of the systems, a lot of the processes, a lot of the tech that I had within the finance and accounting teams and it really planted a seed for me all those years back, which was, I feel part of a problem here rather than the big solution to, you know, processing transactional processing. So I went into finance transformation. I actually was like, look, I need to do something about this. And I worked, I was lucky enough to work in companies that were investing heavily in finance transformation. As you say, sort of John Lewis, which is a big UK retailer, Amazon is obviously everyone knows and Vodafone, which is a again and large telco and went through all the, sort of the processes within finance operations, but then started to specialize in BI and analytics and the sort of machine learning side of things. So I’ve really kind of seen the capability in action. And I realized that there’s so much for us to benefit in terms of new tech not just in terms of avoiding frauds, which was obviously the seed to all this. But just in terms of, you know, improving our roles, you know, stepping out of this grind of transactional processing and really probably doing the job that we first thought we, were training for rather than entering into a company as a very highly qualified admin assistant within an accounts team. So yeah, that’s, why I promote what I, do now via the community gen CFO which has grown, you know, to almost a hundred thousand followers now online where we’ve got lots of forward-focused discussions lots of, you know, we have these three A’s that we talk about analytics, automation, and agility, as well as the management of those three A’s. And yeah, that’s one of the key focuses for us at the moment automation.
Madhurima Gupta:
And, you know, before we actually dive into the topic that we wanna discuss today, I would really like to understand what that fraud was. And why did you feel that transformation could have helped you if, it was there in the first place to stop that fraud, I’m sure our listeners will be intrigued to know a little bit more about it. We can take a few minutes there.
Christopher Argent:
This, the short version is I found a fraud, which was, you know, well done, Chris, you found a fraud but it unraveled into a very sort of significant complex fraud perpetrated over four years going into the millions of pounds. And it was perpetrated by the CFO. So it was great. Well done, Chris. But then you have to clear it up. So the one year of my life was really difficult. I had to do my role as a divisional FC. I had to do the forensics to unpick everything. I then had to, you know, present the cases of the global actions against you know, the individual and tried to recover the funds. So it was very difficult year for me. And it was absolutely the catalyst to me thinking we’ve gotta get out of this. We’ve gotta get out of poor systems. We’ve gotta be in a higher, up on the list in terms of capital investment, because it’s not just about, you know, avoiding a million-pound fraud. It’s just about doing better and not feeling that you are, you are putting up with poor process. So you know, it was a huge professional and personal driver for me to start looking into finance transformation and what I do now with generation CFO. And a lot of people ask me, you know, you’ve moved out of the corporate world and you’re now doing this community thing. You know, why you could be on, you know, an amazing package, leading transformation programs. Well, this is the reason why, you know, I feel so personally about how the technology, the skillset, the people involved, the talent involved in this new world can benefit from it. And it all stems from really finding this transaction a long time ago, which ended up to be a bit of a nightmare.
Madhurima Gupta:
Thanks for sharing that story with us. You know, I’m glad that you were able to figure it out and though it was a little difficult, you did find your way through it and a commendable job there. Chris, now, you know, just to understand a little more about the topic that I wanted to discuss today, you know, today’s CFOs are already planning for, you know, managing risk around numerous issues that the world’s facing today, and while all of this, while they’re planning for parts towards growth. So what do you think will impede or assist with the growth of mid-market companies in the coming years.
Christopher Argent:
From a macro point of view, we’re living in a very complex world at the moment and complexity, you know, is gonna impede business growth. It’s gonna, impede, you know, forecasting, it’s gonna impede supply chains, people’s ability to pay. And it’s a very uncertain time for a lot of people. So I think trying to get any level of clarity, visibility insight from, you know, your working activities from your business is paramount. And I think visibility is something that’s kind of an agility is kind of part of the solution to that. And we don’t necessarily have it within accounting and finance. A lot of our transactional processing can be quite opaque. And if someone comes to you and starts asking you tough questions about when’s the cash coming in, or when can you close, or, you know, what sort of credit exposure we have, people don’t know and if you’re running a business in this environment, you really need to know.
Madhurima Gupta:
And what, according to you or in your experience has been the most critical challenge for growing CFOs offices that are looking to collect a large volume of invoice, let’s say manually.
Christopher Argent:
Well, there was so many examples in during the pandemic, you know, when it, there was this phrase going around and I’m sure people have heard it, that we accelerated five years in one because of the pandemic and the lockdown. And, what people mean by that is we, it’s really hard to make change. It’s really hard to transform things, transactional processing, whether it’s a volume of, you know, collections or it’s volume of invoices, whatever. And, you know, it changes hard because you’ve gotta try and force it to the top of the list somehow. And it’s, hard to create this sort of burning platform this priority around it because there’s always almost an assumption, you know, if things aren’t that bad, you know, if it’s good enough, then we don’t need to worry about, you know, investing in these areas. But we are massively underinvested, I’d say in accounting and finance and you know, I’m based in the UK, I think UK generally is massively underinvested as well compared to other regions. So, you know, we have to start sort of looking at this as a complex issue. And the pandemic showed us that we can actually accelerate. And I would say one of the biggest challenges, isn’t about the paper. It’s not about the technology, even, you know, it’s there, it’s about people’s attitudes towards it. And I think people get that they need to change right now. I think the messaging has been there long enough, you know, gen Z and above has been talking about this for 10 years. People get that they have to change, and there’s talk about, you know, future-focused work and analytics and the future, you know, CFO being the chief future officer, but we still need to see action, you know, and that comes with mindset and risk and budget, you know, coming through. And I think a lot of midmarket companies, you know, they’re, there’s just too busy and maybe not skilled enough in that area because this isn’t a natural sort of learning for people. And mid-market CFO may be responsible for the IT budget and IT, but they’re not formally trained in that. That’s not what they’re trained in. So there’s not a natural aversion to getting this stuff done. But I think that is changing.
Madhurima Gupta:
And, You know, you touched upon how much budgets are allocated towards financial departments in an organization, you know, that CFO is managing, but do you think that often more stress is given to the cost of implementing or transforming a function with regards to, you know, not giving the same amount of weightage to the value that the transformation brings in to the organization?
Christopher Argent:
Yes and no. I think most people who get transformation, you know, if I’m a CFO and I’m looking to change something, I get that there’s a value case, as well as there’s a cost. You know, I think most people would be aware of, you know, the value equation. You know, it’s not just about license costs coming down. It’s not just about head cut headcount coming down. It’s about the quality of data that we have. It’s about the quality of processing. It’s about the ability to automate, you know, it’s the shifting of the headcount to, you know, forecasting and management of what we do rather than, you know, just getting rid of a head count. So I think most people understand that, but again, what we don’t have is necessarily, you know, the skills to create this intangible business case, this intangible asset business case, you know, what is the value of data? What is the value of an automation? You know, what is the value of doing a one bit of transformation, you know, which then enables some, another bit of transformation and we need to start thinking more inevitably about this. It’s not just about cost versus value. It’s also about the next step in an innovation journey. If I automate, you know, O2C order to cash or treasury or record to report, if I automate that part, does it mean that I have data that I can use for another automation or another transformation project? So I think there’s, you know, there’s a sort of innovation mindset that we need as well as just looking at the value.
Madhurima Gupta:
Absolutely. And you know, let’s say if you know, we could grant CFOs a wish to have you know, let’s say order to cash automated for them from scratch without any glitches that might exist today. So first that CFOs who are looking to do that, what would be your go-to recipe.
Christopher Argent:
In short, it would be leaning on the best technology. Right. And you haven’t paid me to say that yeah, let’s be clear. Yeah. I, you know, people are the blocker to a lot of transformation. Yeah. So if I have one dream, you know, action on this, it’s for people to start investing and engaging with technology because there’s so much value to be had from it. And, you know, as part of gen CFO and my work with the ACCNand AT you know, we’re even arguing that accounting and finance or part of accounting and finance should even be a stem subject right now. So in science technology subject, because there’s so much, you know, so much advanced work we could be doing in terms of automation and machine learning, all the rest of it. Now that’s not saying that there isn’t an accounting profession, there is, but there’s this sort of supplementary side to what we do. And we’ve seen it happening in the marketing space, right. You know, we don’t just push bits of paper through doors. Now we have a whole digital marketing world, and I think the same thing can apply here. So we really need to take its seriously as leaders to empower these sort of finance digital finance functions, which is what we call it which is a new set of skills, new set of thoughts, you know, new set of processes. That would be my real, my dream.
Madhurima Gupta:
Good to know that. All right. So the other thing that I wanted to, you know, kind of stress upon, or, you know, get your opinion on is how let’s say we can leverage artificial intelligent power tools for, you know, maybe effective collections and how important are those AI driven analytics for a mid-market business, in your opinion.
Christopher Argent:
They’re, massively important. So, you know, mid-market a classic mid-market problem in O2C may be say reconciliations, right? So, you know, you’ve got all of these payments coming in. You’ve got all of these invoices that need to be sort of reconciled. If you have any level of volume there, it’s a manual task. Normally, you know, your allocations are done. Credit controllers are looking at it. You know, treasury teams are trying to understand cash flows. It’s just a complex world. But you know, it’s been proved that machine learning and AI is brilliant at that task, you know, absolutely nails reconciliation. And it’s just one of many applications in the O2C side, whether it’s, you know, managing sort of discounts and deductions or whether there’s sort of, I don’t know, disputes that need to be managed. What you’re, doing is you’re trying to sort of make sure that the humans are focused on the stuff that really needs to be worked on. And the say the reconciliations and more of the transactional processing is being worked on through automation. And that, like I said, that’s leaning heavily on the technology. But the technology’s there. And before we even get to, you know, O2C there’s obviously account reconciliations or financial close, that also benefits, and then, you know, helps us understand financial position, the treasury guys in mid-market, you know, if there is a treasury person we’ll be asking, you know, where’s the cash, you know, if we’re working in foreign currency, you know, how much money am I have I got to hedge, or how many, how much money do I need to hedge against? Now, if you have this very opaque kind of world in O2C, it’s very difficult for you to forecast and to hedge properly. So there’s so much that can be done. But you need to lean on the automation to free up the human to, you know, we talk about working on value but also to create the transparency, which is coming full circle, right? One of the biggest problems at the moment is that we don’t really see what’s happening in the business, and we need to create that transparency.
Madhurima Gupta:
And Chris, in your opinion, how can an effective collections strategy help you to forecast your cash better? And are CFOs already kind of looking at both the things together, or do you think that the two processes right now are disparately, you know, placed in organization?
Christopher Argent:
I’d say they’re definitely siloed. At the moment, I think most people would see, you know, forecasting as part of an FP&A function. You know, you might have your financial modelers within your FP&A function, your financial planning and analysis function, or management accountants team depending on the size of your company, you might have a treasury person who’s also just focused on cash forecasting, but that’s a really complex model. One of the major inputs into that is obviously gonna be your money in from, you know, O2C. So I think one of the key things with when you shift towards this sort of more automation environment is that you look at everything end to end stop looking at it as a silo, but looking at it as, you know, a process all the way from start to finish from order to cash to forecast, and then you just, you are using the same data throughout, rather than it being, you know, passing the cash data into a forecast model, and then someone else starts to forecast against it, try and see it as a sort of linear process, which is not the linear process. And everyone’s just benefiting from the overall automation but try to move away from that siloed approach. But that’s, you know, that is difficult because we have such a structure within finance, which everyone gets and kind of likes in FP&A doing their FP&A bit actually, why not move your cash forecasting into O2C? You know, they might be able to do a much better job if you put a modeler in with O2C. Just as we’ve said, put a finance business person in the business, because that will help you know, business plan and forecast, enabling business, you know, you could put the model of within O2C to create the forecast. So, but it, you know, it’s all very doable. I think you just need to have a bit of an open mind and it, and obviously match your requirements as an organization.
Madhurima Gupta:
And you know, the other thing that I wanted to touch upon when it comes to making collections as an operation more efficient is being able to accept different mode of payments. So when it comes to UK, what do you feel, or what have you seen being one of the most accepted methods of payments and where should CFOs office be heading in, let’s say 2023 for that?
Christopher Argent:
Well, we’re seeing, you know, everything’s moving electronically, right? There’s, absolutely this, you know, we’re not moving away against a cashless economy, but obviously in terms of payments, everything is coming through online now. I think that kind of goes without saying, but you could be within a retail environment where you are considering to move away from cash. So I do think there is another opportunity or benefit here where you could start saying, look, even as a retailer, you know, we are moving away from cash. So what does that do in terms of collections? Well, it means that you have everything there immediately for your processing, your reconciliation, the data that you need for forecasting, it sort of enables everything that we are talking about. It also reduces the manual load on the cash collections. You know, in very practical terms, you are not counting it up. You’re not taking it to the bank. You’re not wasting time. You’re not having to pay for security or whatever to collect things. So in terms of sort of payments at the very other end of the scale, you know, there’s a lot of talk about cryptocurrency starting to come in and, you know, I am aware of accountants who are now being asked to sort of reconcile cryptocurrency now speaking as Chris argent, you know, I think the jury’s massively out on that. I still don’t you know, fully, I, understand blockchain and I understand what a Bitcoin is or that the currency is, but I still have a massive question mark over whether that is actually the future of, you know, collections or, or a part of O2C. Simply because there seems to be more of a liability to it than an asset, as a currency at the moment. But people are looking, you know, at the very other end of the spectrum at that sort of thing.
Madhurima Gupta:
So, you know, that being said the other area that I wanted to touch upon is when you know, mid-market companies are growing geographically, right? They’re expanding. How should, what, according to youth, the most effective approach or efficient approach to collections in such scenarios.
Christopher Argent:
Yes. Well, you need a sort of seamless system in place, you know, there’s the, you are, you know, there’s an adage with growth and automation that, you know, you’ve gotta fix the wheel before you get it to spin faster. Yeah. You’ve gotta fix the wheel before you put three or four on, or start going from a car to a lorry, you know, you have to go back, so you are, you absolutely need to bring in, you know, best practice and a decent system that fits your future growth. Yeah. If you are currently sort of thinking, yeah, we’ve got an O2C process and system and team that has worked for three, four years, and we are set for expansion or set for new currencies coming through, then you’ve, you’ve gotta go revisit that because it’s gonna be very different, you know, even in three years, the whole product market’s changed in three years, people’s appetites, as I said, for Bitcoin or cash has changed. So you need to go back and have a look and make sure that you’ve got, you know, seamless process that’s working on you know, a great system with the right talent who are ready to respond. Yeah. Because they’re gonna have to be much more agile in their approach in growth versus probably how they have been working for the last two, three years, you know, in maybe a sort of more or level market. And as you start to move, you know, globally, I don’t think there’s any question now about cloud and the, and cloud approach. I rarely talk about cloud now, but it is actually to still need to be talked about because some people do want on-prem systems, but I think as you start to sort of move globally or, outside your region you know, there’s a lot to look at in that area, but I would say, you know, obviously a cloud solution is the way to go as well.
Madhurima Gupta:
Great. So thank you so much for sharing your opinion on CFO circle today. And I hope this was an interesting conversation for you, Chris. I really thoroughly enjoyed it. So thank you so much for taking your time for this conversation. So all our listeners out there, I hope this was an interesting conversation for you, and we will be back with more conversations every Thursday. So please stay tune.