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The Declining State of Outsourcing Model Across Shared Services

Insights from the SSON Report: State of Order to Cash in Shared Services

Introduction

SSON released the State of Order to Cash (O2C) in Shared Services survey report in 2022, where they captured the responses of 70+ Global Business Services (GBS) and Shared Services Organization (SSO) leaders and identified a “Big Shift” taking place in the operational models across the O2C process in Shared Services. Preferred Operational Model in SSOs The report claims that 53% of GBS/SSO leaders are moving most of their outsourced processes to captive centers and implementing technology solutions to improve efficiency across all the critical O2C operations. The report also examined the varying trends across Shared Service Organizations (SSOs) like inefficient working capital optimization, Operating Expenses (OPEX) management, and poor customer experience that exposed some critical gaps across outsourcing of O2C processes.

This summary blog captures the insights from the SSON survey and highlights why GBS/SSO leaders are shifting their priorities from outsourcing O2C operations to an integrated captive model for scaling their GBS organization.

Why did GBS Leaders Make the “Big Shift”?

1. Inability to Optimize Working Capital

  • Increase in Day Sales Outstanding (DSO)
    GBS/SSO leaders observed a sharp decline in critical financial metrics like DSO, with only 24% of receivables converted within 60-120 days in 2021.
    SSON on DSO
  • Increase in Days Deductions Outstanding (DDO)
    The vast volume of deduction claims raised during the past two years left the A/R teams across GBS and SSOs overwhelmed with the identification of invalid claims and matching the claims with ERP-specific reason codes.
    SSON on DDO

2. Inability to Reduce Operating Expenses (OPEX)

  • Low E-Adoption Rates
    The survey showed that despite the widespread technology implementation across O2C and finance operations, nearly 30% of payments still come via traditional payment modes like checks and cards. Processing these payments was time-intensive and cost-ineffective.
    Customer’s Preferred Payment Channels
  • Manual Exception Handling in Cash Application
    Nearly half (47%) of the survey respondents stated that between 50%-69% of payments were received with missing – or no – remittance information.

    This implies that the A/R teams had to allocate significant bandwidth to aggregate information for missing remittances and process that remittance data to close the open invoices, which delayed the cash application process and impacted metrics like DSO and hit rates.
    Cash App Challenges

  • Overwhelmed Collections teams
    With tan added emphasis from the CFO to improve cash flow, GBS/SSO noticed that 45% of the collections teams felt they were overwhelmed since every collector had to follow up with 20 different customer accounts for payment reminders daily. This led to an increase in KPIs like DSO.

    Collector to Customer Ratio

  • Delayed Deductions/Dispute Resolution
    65% of GBS/SSO leaders stated that more than half (50%-90%) of their deductions/disputes require manual intervention in identifying invalid deductions and matching claims with the ERP-specific reason codes. This causes a delay in the resolution of the claims raised by the customer and impacts the DDO metrics.

3. Inability to Improve Customer Experience

  • Increase in Customer Onboarding Time
    46% of GBS/SSO leaders witnessed that onboarding a new customer takes 7-10 working days.

    Average Onboarding Time of Customers

    The multiple to-and-fros within the credit team and the customers due to missing credit application data or inaccurate information delay the bank and trade reference validation. This further slows down the process resulting in a poor customer experience.

  • Delayed Resolution of Blocked Orders
    47% of leaders confirm they require more than a few hours – and up to two days – to resolve a blocked order. The lack of access to the latest customer credit data and a complex resolution workflow add to the delay in resolving blocked orders. The longer an order is blocked, the more negative its impact is on customer experience.

    Average Time to Block Orders

Integrated O2C Process is The Future of GBS Operations

  1. O2C Technology Is Currently Operating in Silos
    As per the report, 60% of GBS/SSO leaders see a lot of value in establishing an integrated O2C function. They believe their processes are operating in silos, and their existing software applications don’t communicate with each other. These silos emerge from the lack of information flow and collaboration across internal teams like sales and credit and cause poor customer experience.
  2. Robotic Process Automation (RPA) has High Maintenance and is Short-term
    18% of leaders are working actively with RPA platforms and service providers to build RPA bots to automate repetitive, clerical work. While RPA might be a good starting point for automating processes, it is limited in its capabilities to drive scalable results. Deploying RPA for business operations is short-term and has a high maintenance cost as organizations need to upgrade the RPA bots based on changing business requirements.
  3. GBS Teams Are Not Leveraging Artificial intelligence (AI) Capabilities
    26% of leaders claim they lack the in-house skills to implement AI solutions. To leverage AI capability, it is imperative to ensure the IT team’s technical expertise and the finance team’s subject matter expertise are leveraged. This will help to build more robust AI and Machine Learning (ML) models that can learn from financial transaction data and analyze customer payment trends to share recommendations and predictions for improving decision-making quality.

Conclusion

GBS/SSO model is built on standardization, process integration, and end-to-end process management. The SSON survey report on the State of O2C in Shared Services denotes a significant decline in the O2C process performance levels across shared services and GBS organizations and the lack of technology adoption. GBS/SSO leaders must take charge to drive digital transformation across their operations with advanced technology capabilities like AI and RPA.

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HighRadius Autonomous Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Autonomous Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.