Eliminating Silos From Order To Cash in Four Simple Steps: Insights From Leading Management Consulting Firms

Every siloed business activity has the potential to have a rippling impact on the broader finance function, resulting in cash flow delay. Let us dive deep into some financial misconceptions that arise from silos:

1. Impact on Profits:

Profit is an integral metric of success for a business; most businesses include expenses like packing and shipping when calculating profit margins. However, certain complex expenses are left out of the calculation of integral profit margins, such as:

• Deductions write-offs
• Late payments
• Compliance fee
• FTE productivity lost

These expenses mount up over time, reducing your company's profit margin. We can draw the following conclusions from the same - Teams specializing in manual A/R operations, such as deduction coding, must focus on more value-adding work with the adoption of technology, freeing up their bandwidth to make informed business decisions powered by artificial intelligence (AI), enabling finance teams to improve the overall business liquidity.

2. Impact on Customer relationships:

The customer experience(CX) is majorly impacted by ineffective internal communication between A/R and other finance teams. Due to the lack of real-time data, there is a lag between aggregating the same and coming up with intelligent business inferences. For instance- a customer might have already made the payment, and the cash application team closed the open invoice, but since the system was not updated in real-time, a collector might still follow up with the customer. This impacts the customer experience. Customer engagement gives us vital data for product improvement and drives the employees across business functions to meet the tangible demands laid down by SLAs (Service Level Agreements). Forbes highlights in their blog that to improve CX, executives must focus on creating agile cross-functional teams designed to address specific business challenges and equipping them with easily accessible real-time performance data.

3. Impacts on KPIs:

KPIs(Key performance indicators) are critical for performance analysis across finance functions. They are typically tied to financial performance like revenue and profit margins, which are essential, as discussed already, for a business to regulate. It has been observed that the productivity rate of a business is directly tied to the performance of its employees and the conversion of its aging receivables. We can drive a business to make a real dollar value impact by monitoring KPIs in-depth with the correct measuring tools. But like most business functions, because of the preexisting silos, across the verticals and horizontals of the organization structure, disconnected operations result in a lack of visibility of information across business departments which has a detrimental effect on KPIs.

Keeping the aforementioned difficulties in mind, we have developed the Four-fold approach that will help you in overcoming the issues that are faced due to a siloed mentality across the organization.

1. Establishing a unified vision:

Creating a unified vision for the entire organization would lead to the reduction of organizational silos and the promotion of a team mindset.

2. Leveraging Technology:

• Installation of an agile, easy to maintain technology infrastructure that is intelligent enough to point out the challenges and mitigate any impending risk exposure to the business.
• A/R teams, when equipped with robust technology, also show increased productivity because of the low downtimes that come with the same.

3. Encouraging cross-departmental collaboration:

• Inter-team collaborations encourage sharing resources, information, and expertise throughout the organization globally.
• It also allows employees to understand better the responsibilities of others in the business, which they may utilize to enhance future initiatives or procedures.
• Further, establishing 360-degree visibility across all global operations would aid in the transfer of ideas and data seamlessly between the various business functions.
• One example of how inter-team collaboration helps with revenue growth is credit and sales. Through credit research tools, credit leaders can share insights about customer behavior and their profitability through credit research tools and help them expand selling opportunities to customers. This turns the credit department into an invaluable partner for sales facilitation and expansion.

4. Providing Incentives:

• Employees must be encouraged to pursue the bottom-line goals of the organization as employees with a siloed mindset may be more concerned with meeting their immediate demands than with the organization’s long-term objectives.
• Leaders must employ rewards and other motivating measures for their employees to boost their dedication in order to see the change in the bigger picture.

Breaking down silos is a complex undertaking for every business, yet, avoiding these challenges would be more detrimental to the company’s overall financial health. By using the four-fold approach, the strategies may assist A/R teams in removing knowledge gaps across global operations and help in establishing a harmonious and agile business environment.

Greg Ottalagano of Church & Dwight believes that an interconnected order to cash can improve customer experience with better visibility and streamlined operations.