Why chief financial officers should surf the digital wave

Why chief financial officers should surf the digital wave

Evelyne Legaux, managing director of Finance OTC Consulting Ltd.

THE pandemic crisis highlighted how critical a proper Working Capital Management (WCM) strategy is for businesses to survive.

By elevating cash to a board-level topic, it also outlined the need for that strategy to be sustainable - a major change compared to the 2007 financial crisis that witnessed companies merely taking tactical measures whose impact on working capital (WC) vanished quickly thereafter.

Why did that happen? Because the complex cross-functional nature of WCM requires a comprehensive action plan that must include leveraging Artificial Intelligence and Intelligent Automation to identify the true drivers behind process inefficiencies and access real-time data analytics.

No matter the leg of WC, this is where digital technology comes in… and why it is here to stay.

A new world of opportunities in O2C, the pandemic crisis placed credit management at the heart of Enterprise Risk Management.

The war in Ukraine brings further geopolitical risks, trade disruptions, and macro-economic uncertainty, thus making process optimization critical for companies - the most fertile of grounds for emerging technology to flourish.

The truth is that going digital is not just for the most technical or trendy businesses. In 2022, the intention of it has gone mainstream instead because digitally mature companies are more resilient and better equipped to master rapid change and disruption.

In other words, those who aren’t taking action to evolve will be left behind by competitors.

For too long the O2C process has been overlooked due to its inherent complexity.

However, companies now view it as a ‘Golden Goose’ that ought to be cash-efficient, cost-effective, help maximize revenue and boost customer satisfaction - all at the same time.

But how can O2C deliver such benefits if it is supported by siloed systems, inefficient processes, broken workflows & multiple sources of data?

Here is the good news, the era of siloed thinking is now behind… for those who understand the power of digital and are willing to embrace a game-changer.

Digital brings limitless opportunities to evolve the end-to-end O2C process for the better.

Whether it is cash applications, credit approval workflows, or cash collections strategies, IA combined with AI and ML enables the automation of repetitive rule-based tasks to optimize process efficiency.

Likewise, digital enables higher precision & sophistication, compared to what can best be achieved without it.

This is particularly relevant for credit risk scoring models that need to deliver a holistic view of the customer across the entire portfolio, to support smart decision-making.

Playing a pivotal role within the organisation, O2C must build trust and gain support from sales and operations.

The purpose and importance of O2C must therefore be well understood by those business functions (e.g. clear credit terms or credit holds decision criteria), and O2C must operate transparently and align with them, towards achieving profitable growth.

Likewise, sales should involve credit at the outset of new customer vetting, to minimise resources spent on those unlikely to be approved.

Providing such transparency requires O2C to work with the right integrated technology that grants other functions involved visibility over the end-to-end process, access to real-time data & cross-functional correspondence capabilities.

Clearly, augmented efficiency in Receivables management helps free up cash trapped on the balance sheet, reduce DSO, and improve WC while creating capacity for more sales.

The more accurate and holistic a Credit risk assessment and decision-making process is, the more effective it also is, in supporting profitable growth while protecting Cash Flow generation.

With legacy systems, the customer is hardly at the centre of the O2C process.

Digital however goes a long way in enhancing customer satisfaction, through transparent dispute management for faster resolution of cases or automation of customer portal-related transactions.

By creating shared visibility, digital boosts cross-functional collaboration throughout the O2C value chain.

When sales, operations, and credit work together, they become a powerhouse that generates the right sales with the right customers.

As such, Digital comes across as a fantastic springboard for O2C to finally be seen for what it is - a profitable business support function as opposed to still too often being perceived as an obscure back-office that hinders sales - and shine its light… A new ‘Golden Goose’ is born.

Evelyne Legaux is consultant/managing director of Finance OTC Consulting Ltd.

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