CFOs have a strong focus on managing working capital, knowing well that their cash is tied up in Accounts Receivables and the Order-to-Cash process. Releasing cash from inefficient Order-to-Cash (O2C) procedures is a priority for them, so they can reduce debt, invest in product development, or support strategic initiatives.
Record-to-Report (R2R) is an equally crucial process in an organization’s financial value chain. In fact, R2R plays several critical roles in the success of the business—from demonstrating compliance to providing the executive leadership with the data and insights needed for making smarter business decisions.
For truly efficient, error-free and straight-through O2C and R2R processing, F&A teams need hyper-automated solutions that provide delightful front-end experiences to users and vendors, and completely “autonomous” middle and back ends that are integrated closely with other third-party systems in the ecosystem.
Evaluating the As-Is State of Legacy O2C and R2R Processes
While the pandemic emphasized the importance of cash management, CFOs had already faced similar challenges during both large-scale crises and smaller-scale issues. A recent survey revealed that 75% of CFOs plan to increase capital spending on their F&A teams with a focus on increased technology spend and use over the next few months.
Companies have been pursuing automation and integration of the O2C and R2R processes for a while now, aiming for increased efficiency and reduced errors, resulting in improved Days Sales Outstanding (DSO), Accounts Receivable (AR) turnover, and end-to-end financial data visibility. Progress has been made by automating specific tasks. However, the limitations of structural and ERP systems have hindered full O2C and R2R integration, and many automated processes still require a significant level of human intervention.
The O2C process involves various steps— such as order placement, credit management, order fulfillment, shipping, customer invoicing, payment collection, and reconciliation—in the sales cycle. Typically, it starts when a supplier receives an order for goods or services from a customer. This spans multiple departments and information sources, making it difficult for the F&A team to get a complete picture of the cogs and bottlenecks in the entire chain. Disparate systems like ERP, CRM, and BPM house O2C information, creating silos, and leading to delays and bad experiences .
Similarly, information silos in the legacy R2R processes cause latent issues that hinder the smooth working of the F&A value chain. Ideally, the R2R process needs to connect with all data-generating activities of the enterprise, such as transactions, end-of-period records, procurement, case resolution, forecasting, and so on.
But data gaps in the legacy processes allow errors and delays to creep in. Consequently, the Financial close process for every month, quarter, or fiscal year tends to be a painstaking experience for most Finance teams due to inaccessible data and over-reliance on manual effort. When key stakeholders like analysts, investors, lenders, auditors, and regulators use records coming from an inefficient R2R process, their decision-making is likely to get clouded.
More often than not, CFOs find themselves troubleshooting O2C and R2R processes and helping stakeholders collaborate across the chain to fetch relevant data – rather than investing their time and effort in value-generating strategic business decisions for the enterprise.
How do organizations overcome this challenge? Most organizations may turn to RPA automation bots for Finance & Accounting, but this provides only a temporary reprieve. Some may pump in more resources or invest in expensive point solutions—both unsustainable quick-fixes.
Research shows that 55% of CFOs are aiming for a touchless Financial closure process by 2025. For faster, sustainable transformation of the Finance & Accounting process, Autonomous Finance solutions based on no-code technology is a better enabler than RPA bots. Let us explore why.
Where RPA Automation Bots in O2C and R2R Financial Processes Fail
Robotic process automation (RPA) is the conventional approach to replacing manual tasks with a software tool that performs the task just like a human would. Problems arise because RPA bots are not blessed with cognitive capabilities as human accountants to understand the nuances in the processes—when exceptions happen in the process, they stall. And O2C and R2R processes can be complex and highly variable, leading to several exceptions.
For instance, an error in goods delivery can lead to order cancelation, which throws a spanner in the works of a typical O2C cycle. Further, a high number of outstanding receivables due to delayed payments can cause liquidity worries. When such situational challenges arise – and these occur quite frequently – the RPA automation bots will struggle to find the right rules to fit the context.
The CFO organization expects the technology to complete the task automatically, with minimal human involvement. But in less-than-ideal situations, the bots get stuck on hundreds of exceptions that a human F&A executive may have addressed in a day. Such situations have prompted several CFOs to roll back their automation efforts (and continue to rely on manual effort) while others implement a new set of bots or even reconfigure the existing ones to “react” and fix the issue.
The result could be a vast automation sprawl with its own maintenance challenges as well as the risk of exceptions arising from each deployment. For rapidly growing organizations with a sizeable R2R operational volume, this turns out to be untenable. Eventually, it will impact the organization’s business growth, customer experiences, and market reputation.
Finance Transformation: How AI-powered Autonomous Technology Makes a Difference
The answer to O2C and R2R challenges is not to respond to complicated process exceptions with an equally complicated RPA ecosystem.
Autonomous Finance solutions, powered by cognitive technologies such as Artificial Intelligence (AI) and Machine Learning (ML), and no-code technology enable the CFO’s Office to solve the issues of fragmentation of large volumes of data and processes, connecting end-to-end processes with information. They also provide real-time reporting and data visualizations to facilitate faster decision-making.
They eliminate manual processes in the O2C process by up to 90%, free up staff for higher value-adding tasks, reduce DSO, and improve cash flow, enabling businesses to improve revenue and profits.
The Generative AI component empowers F&A team members to adapt these solutions to changing business landscapes and tailor them to manage exceptions, learn from new situations, and even recommend process improvements as they automate the O2C and R2R processes end to end.
Unlike RPA bots, the team does not have to depend on IT to build these automations and maintain them. They provide efficiency and real-time unified visibility to the F&A team, helping them to improve cash flow for better working capital management, and enhance customer experience. As they come pre-integrated with key F&A systems, in ready-to-use SaaS packages, they can be quickly adopted without ripping apart the existing technology infrastructure. For example, here’s how JIFFY.ai’s hyper-automated applications for Finance, or ‘Finance HyperApps,’ streamline the O2C and R2R processes and enable end-to-end finance transformation:
- Simpler master data management: Automates customer onboarding, maintenance, and reporting
- Better credit handling: Reduces human effort in credit approval, credit limit requests, and refunds
- Faster month-end cycles: Automates journal voucher tasks by synchronizing with ERP
- More accurate reporting: Populates R2R systems with error-free data for better analysis
- Hassle-free compliance: Automatically creates monthly and quarterly reports with cleansed data
Today, 98% of CFOs say that they intend to protect digital investments even amid cost-cutting measures, and 66% plan to increase their spending. JIFFY.ai’s AI-powered No-code Finance HyperApps can transform critical processes like O2C and R2R from ‘automated’ to ‘autonomous’ and provide maximum ROI for your technology investments.