Overcoming the Seven Critical Challenges for A/R Shared Services to Thrive in a Turbulent Economy


Insights into how shared services leaders are coping with the turbulent economy and how they can prepare for the next stage

Contents

Chapter 01

INTRODUCTION

Chapter 02

Digital Transformation is the Way-Forward in 2021
Chapter 01

INTRODUCTION


Order-to-cash shared service leaders today are pushed to outperform with whatever resources they have. On the one hand, this has enabled them to become more adaptive and spontaneous but on the other, it has brought several pressure points under the spotlight, which influences how A/R business decisions are made.

This ebook highlights those seven-different areas vexing GPOs today and provides tips and strategies to enable shared services in becoming value-drivers, by adopting an agile and flexible approach for the next quarter.

1. Inability to meet customer expectations

A/R shared services are not only experiencing higher customer expectations but also a decrease in customer satisfaction. Most global businesses operating under a typical shared services model tend to prioritize cost reduction over customer satisfaction.

According to a Gartner study, 29% of the shared services professionals stated that there was a significant decline in the A/R team’s ability to meet customer expectations due to COVID-19. This could result in decreasing the customer retention rate and ultimately impact the cash flow of the business negatively.

The optimal way to avoid that from happening would be to drive a more customer-centric approach. But the factors that inhibit GPO’s from achieving customer satisfaction within order-to-cash are two-fold:

1.1. Lack of any organizational incentive for A/R teams to be focusing on customer satisfaction

There is a general notion that maintaining customer relationships is the sales team’s job. Hence, A/R teams deprioritize it, as it doesn’t directly fall under their KPI.

1.2. Lack of integrated systems causing limited visibility across A/R teams

A/R teams working in silos with disintegrated systems, often across geographies, are unable to interact and work together in real-time, resulting in poor customer experience in the long run.

2. Failure to deliver on SLAs

Another major pressure point that emerged as an underlying impact of the pandemic was that shared services were unable to deliver on the Service Level Agreement(SLA). As per SSON, almost 43% of the shared services professionals claimed inadequate infrastructure and limited hardware as their reason for failure to deliver during this crisis.

As a result of this, some GPOs were forced to rethink their SLAs since it affected their receivables and overall productivity. Few of them even started moving to third-party service-providers and investing in digital transformation initiatives to comply with the needs of the customers and support their crumbling working capital and cash flow.

3. Increasing competition in the market

Enterprise organizations today have a vision for global expansion – they’re venturing into new territories and even new industries and new business lines.

And with every expansion, order-to-cash GPOs are faced with great opportunities and even greater challenges. The price of expansion is that you have to deal with the competition in the market. This then backfires as another area of stress for finance professionals. Some leaders believe that staying local might help them avoid competition, which is not true. This is because SSCs are continuously tasked with the need to level-up in order to be on par with their peers.

It is significantly more challenging if you’re operating on a legacy platform when these competitors have employed new, more innovative models that might involve technology investment and automation.

4. Inability to implement disruptive A/R operational models

For every shared service center to thrive, it is imperative that leaders keep coming up with innovative models of operation for their A/R processes that set them apart from their peers.

But often it is challenging for leaders to implement new, disruptive models for their order-to-cash operations. One of the primary reasons being that most of the finance executives are skeptical about the success of said operational model. It is harder for GPOs to create an effective business case and get the executive’s buy-in considering the cost, benefit and execution pre-requisites of digital transformation projects.

5. Lack of operational agility

Operational agility is the rate at which the workforce adapts to change- the faster the workforce adapts, the smoother the business flows. This results in improved workforce productivity and optimized working capital.

But managing this rate is significantly difficult if there is a resentment for change in your team. The factor that might lead to this aversion is that the order-to-cash teams are not that well versed with the functional aspect of the technology and automation and they look at it as a replacement for them instead of an enabler or value-driver.

6. Increasing employee attrition rates

A major area of concern for shared services leaders is the number of employees who are leaving their positions in search of something more “secure” in this turbulent time. This leads to an increase in employee attrition rates, which affects the overall team productivity.

27% of A/R shared services leaders made changes to increase employee motivation, while 19% modified financial incentives citing employee motivation as a major reason.


Source: McKinsey Quarterly Survey

But some GPOs face a significant challenge to provide incentives with fractured cash flow and working capital. It is even difficult for them to keep their order-to-cash teams engaged and motivated, due to all the manual work they put in. This is also one of the reasons why employees decide to be in a team that already leverages technology in the workplace.

7. Managing non-performing business units

More than 50% of A/R shared services leaders are concerned about continued global business delivery operations, as per SSON. To cut down on additional operational costs of running shared services and ensure an optimized working capital, GPOs are tasked with the dilemma of making these critical decisions for their business-

  • Should they continue operating with all the business units or are there some of them which would not be able to cope up with the impact of this pandemic and would thus need to be eliminated?
  • For the business units that they choose to terminate, what do they do with their operations- should they be brought back in after things return to normal, or should they look to outsource them to a third party at lower costs?
  • In the event that they choose to continue with all the business units, should they let them operate as-is, or instead invest in digital transformation initiatives to improve the long term productivity of the A/R teams operating within them?
Chapter 02

Digital Transformation is the Way-Forward in 2021


One of the most optimal solutions to tackle these pressures that GPOs are dealing with is implementing digital transformation in the workplace. By investing in digital transformation initiatives in order-to-cash, shared services leaders could elevate themselves to a more strategic role in the office of a CFO.

52% of the shared services leaders believe that the SSCs would be highly digitized in the aftermath of this COVID-19 crisis.

More than 37% of GPOs are planning on accelerating their digital transformation initiatives.


Source: SSON Survey

According to Forbes, 84% of digital transformation projects end up as a failure- primarily because of a one-directional approach to drive this transformation, and not focusing on all the 3 levers of digital transformation at once. Order-to-cash GPOs exploring digital transformation initiatives right now cannot afford to make a wrong decision. You can go through this webinar to hear experts from HighRadius talk about how you can leverage this Gartner cost decision framework to enable better decisions for your digital transformation strategy.

The Three-Legged Stool Analogy

The three levers of digital transformation- People, Process, and Technology are similar to the legs of a three-legged stool. They’re codependent on each other and even if one breaks down, the stool would fall.

Here are three ways as to how automation in A/R could impact the three main drivers of every business in the future:

1. People management

The challenge for GPOs in this area is to get the A/R teams to embrace automation to perform tactical tasks, allowing them to shift their focus on to more high-impact tasks like performing credit reviews and making well-informed, data-backed decisions.

For that to happen, shared services leaders would need to ensure that the teams are able to accept and co-exist in the same ecosystem as technology.

1.1 Explain the team about automation-

  • Help them understand how automation trims down the paper and labor-intensive A/R operations.
  • Explain to them that with automation in place, they would be able to take up other strategic tasks and apply their context-sensitive intelligence to machine recommendations.
  • Assure them that automation doesn’t act as a replacement but instead as an enabler and value-driver.

1.2 Prepare them to ease their way through the change-

  • Conduct workshops and train your team to ensure that they completely understand and adapt to how the A/R processes around them would transform.
  • The shift from legacy to a new system and adjusting to it could be a long-drawn process and hence, give the team the space to get accustomed to the changes in the workplace.

1.3 Boost your team’s morale-

  • Just making your team familiar with the change, isn’t enough- you need to keep them engaged and motivated.
  • One way this could be achieved is by conducting interactive sessions with a No-Shop Talk agenda once in a while and coming up with creative ways to appreciate the efforts put in and the work done by the team.

2. Process management

The roadblock that GPOs face here is to identify process gaps in the A/R operations and look for a scope of improvement in them.

An ideal way to clear these blocks would be to devote time in executing process improvement strategies.

2.1 Perform Fit-Gap analysis-

Focus on the leaks and pain-points in the A/R process to think through how your expectations from a digital transformation initiative would look like.

2.2 Apply lean six sigma and kaizen-

Implement agile methodologies to strategize on how to achieve desired outcomes from automation and evaluate how the new system is delivering in comparison to the legacy one.

3. Technology investment

Technology investment is the most crucial aspect of any business, hence GPOs need to ensure that they invest in the right piece of technology and get the stakeholder buy-in to achieve the finance executives’ goals.

In order to do that, it is necessary to stay updated with the evolving market trends. Here are a few trends that global shared services are working towards:

3.1 Shifting to a cloud-based automation system-

Acts as a single source of truth keeping together all the customer master data consolidated in one place.
Enables real-time visibility over the receivables and allows inter-team collaboration.
Helps in streamlining workflows and reduces the time spent on getting approvals from different stakeholders.

3.2 Installing self-service portals to digitally enable the customers-

  • According to a study by Apex Analytix, 43% of the shared services leaders believe that self-service portals would see a rise in SSCs in the post-pandemic landscape.
  • It would act as a gateway that allows both the customers as well as the employees to view invoices, make payments, view outstanding disputes, etc.
  • It would also reduce the number of touchpoints a user would have to go through earlier to resolve an issue.

3.3 Investing in AI-enabled digital assistants for A/R-

  • Artificial intelligence-powered assistants help improve user experience by organizing an A/R analyst’s worklist and arranging action items based on priority levels while also suggesting where to start the day.
  • It transcribes live customer calls, highlighting the important points. It then saves them in the call log allowing the analyst to quickly track all the essential details from the call and act accordingly.
  • It is also capable of suggesting intelligent action items based on the call with the customer and allows the analyst to make quick, strategic decisions.
You can learn more about AI-powered digital assistants and how they can help in creating value for your A/R in this 3-minute read blog.
Chapter 01

INTRODUCTION


Order-to-cash shared service leaders today are pushed to outperform with whatever resources they have. On the one hand, this has enabled them to become more adaptive and spontaneous but on the other, it has brought several pressure points under the spotlight, which influences how A/R business decisions are made.

This ebook highlights those seven-different areas vexing GPOs today and provides tips and strategies to enable shared services in becoming value-drivers, by adopting an agile and flexible approach for the next quarter.

1. Inability to meet customer expectations

A/R shared services are not only experiencing higher customer expectations but also a decrease in customer satisfaction. Most global businesses operating under a typical shared services model tend to prioritize cost reduction over customer satisfaction.

According to a Gartner study, 29% of the shared services professionals stated that there was a significant decline in the A/R team’s ability to meet customer expectations due to COVID-19. This could result in decreasing the customer retention rate and ultimately impact the cash flow of the business negatively.

The optimal way to avoid that from happening would be to drive a more customer-centric approach. But the factors that inhibit GPO’s from achieving customer satisfaction within order-to-cash are two-fold:

1.1. Lack of any organizational incentive for A/R teams to be focusing on customer satisfaction

There is a general notion that maintaining customer relationships is the sales team’s job. Hence, A/R teams deprioritize it, as it doesn’t directly fall under their KPI.

1.2. Lack of integrated systems causing limited visibility across A/R teams

A/R teams working in silos with disintegrated systems, often across geographies, are unable to interact and work together in real-time, resulting in poor customer experience in the long run.

2. Failure to deliver on SLAs

Another major pressure point that emerged as an underlying impact of the pandemic was that shared services were unable to deliver on the Service Level Agreement(SLA). As per SSON, almost 43% of the shared services professionals claimed inadequate infrastructure and limited hardware as their reason for failure to deliver during this crisis.

As a result of this, some GPOs were forced to rethink their SLAs since it affected their receivables and overall productivity. Few of them even started moving to third-party service-providers and investing in digital transformation initiatives to comply with the needs of the customers and support their crumbling working capital and cash flow.

3. Increasing competition in the market

Enterprise organizations today have a vision for global expansion – they’re venturing into new territories and even new industries and new business lines.

And with every expansion, order-to-cash GPOs are faced with great opportunities and even greater challenges. The price of expansion is that you have to deal with the competition in the market. This then backfires as another area of stress for finance professionals. Some leaders believe that staying local might help them avoid competition, which is not true. This is because SSCs are continuously tasked with the need to level-up in order to be on par with their peers.

It is significantly more challenging if you’re operating on a legacy platform when these competitors have employed new, more innovative models that might involve technology investment and automation.

4. Inability to implement disruptive A/R operational models

For every shared service center to thrive, it is imperative that leaders keep coming up with innovative models of operation for their A/R processes that set them apart from their peers.

But often it is challenging for leaders to implement new, disruptive models for their order-to-cash operations. One of the primary reasons being that most of the finance executives are skeptical about the success of said operational model. It is harder for GPOs to create an effective business case and get the executive’s buy-in considering the cost, benefit and execution pre-requisites of digital transformation projects.

5. Lack of operational agility

Operational agility is the rate at which the workforce adapts to change- the faster the workforce adapts, the smoother the business flows. This results in improved workforce productivity and optimized working capital.

But managing this rate is significantly difficult if there is a resentment for change in your team. The factor that might lead to this aversion is that the order-to-cash teams are not that well versed with the functional aspect of the technology and automation and they look at it as a replacement for them instead of an enabler or value-driver.

6. Increasing employee attrition rates

A major area of concern for shared services leaders is the number of employees who are leaving their positions in search of something more “secure” in this turbulent time. This leads to an increase in employee attrition rates, which affects the overall team productivity.

27% of A/R shared services leaders made changes to increase employee motivation, while 19% modified financial incentives citing employee motivation as a major reason.


Source: McKinsey Quarterly Survey

But some GPOs face a significant challenge to provide incentives with fractured cash flow and working capital. It is even difficult for them to keep their order-to-cash teams engaged and motivated, due to all the manual work they put in. This is also one of the reasons why employees decide to be in a team that already leverages technology in the workplace.

7. Managing non-performing business units

More than 50% of A/R shared services leaders are concerned about continued global business delivery operations, as per SSON. To cut down on additional operational costs of running shared services and ensure an optimized working capital, GPOs are tasked with the dilemma of making these critical decisions for their business-

  • Should they continue operating with all the business units or are there some of them which would not be able to cope up with the impact of this pandemic and would thus need to be eliminated?
  • For the business units that they choose to terminate, what do they do with their operations- should they be brought back in after things return to normal, or should they look to outsource them to a third party at lower costs?
  • In the event that they choose to continue with all the business units, should they let them operate as-is, or instead invest in digital transformation initiatives to improve the long term productivity of the A/R teams operating within them?

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HighRadius Integrated 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. Integrated 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.