Digital Transformation

Digital transformation: Optimize your order-to-cash process

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What does "Digital Transformation" mean?

The term "Digital Transformation" or "digital change" refers to the ongoing journey from a society shaped by analog technologies to a digitized one. Gradually, digital technologies have taken hold, permanently changing key aspects of the economy and society.

For example, smartphones and social media have irreversibly changed the way we communicate, enabling digital services and applications to be used as a matter of course. Thinking one step further, big data and machine learning even offer entirely new perspectives on the organization of business and society.

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Digital Transformation in companies

The digital transformation of business models and companies in general involves various aspects:

Change in product development and company organization

More efficient ways of working based on digitalization ensure a reduction in costs as well as accelerated processes. By using robotic automation, for example, previously collected data can be used smartly.

Agile working, as can take place in teams or through smart manufacturing, leads not only to an increase in revenue, but also to better products or services. At the same time, the internal corporate culture must not be forgotten: Because traditionally hierarchical structures can have a negative impact on the skills and motivation of employees that it takes for a successful digital transformation. You should therefore examine the structure of teams, infrastructures, products and business models for optimization potential and act as a driver of the transformation.

Changing products, services and business models

Tapping into new markets that would be difficult to reach without digitization allows you to internationalize your business. This and also better customer centricity and innovation of products and services can consequently lead to an increase in revenue.

Changing the way you interact with your target group

It is important for successful digitization that you continue to invest in the trust of your customers. For example, while machine learning approaches through chat bots or similar can be applied for data analysis and automated communication, these should be implemented as pleasantly and almost imperceptibly as possible for the customer. In dunning and debt collection, this automation can be particularly useful. But marketing is also becoming increasingly automated, for example, with personalized advertising being played out to customers, leading to increased repeat purchases.

Example: Financial processes

Financial processes touch on all three aspects of digital transformation:

  • Streamlining internal financial processes
  • Enabling new business models, e.g., through adapted payment methods
  • Making payment processes and all associated customer communications more customer-friendly

What does digital transformation mean for the order-to-cash process?

Process costs

Process costs

Reduction of process costs

Manpower

Manpower

Reduction of necessary working hours

Error rate

Error rate

Increasing efficiency by minimizing errors

Liquidity

Liquidity

Improvement in cashflow

Time

Time

Acceleration of receivables management

Customer satisfaction

Customer satisfaction

Improve and increase customer satisfaction

The aim of the process is to increase the efficiency of the value chain.
Four factors are decisive here:

  • Service and quality from the customer's point of view
  • Control of costs
  • Control of customer requirements
  • Time, which affects the other three factors


The more steps along the supply chain are organized from a single source, the more smoothly efficiency can be increased. The use of innovative technology plays an important role in each step of the order-to-cash (OTC) process.

Invoices issued and receivables received during the order-to-cash process determine your company's incoming payments. However, delays can lead to complications in accounting, payroll, or planned purchases, as well as other liquidity issues. Since the order-to-cash process has an impact on the entire business, it is important to optimize it. A reliable order-to-cash process is an indicator of an excellently functioning company throughout all business areas. Digitizing these processes also gives you more time to focus on your core business.

Increasing the transparency and efficiency of these processes brings the following benefits, for example:

How does the order-to-cash process work in finance?

From a purchase order to receipt of payment, the order-to-cash process includes all order and payment management processes end-to-end. However, depending on business requirements, different steps may be necessary in the financial area:

  • Capture and storage of customer data in order management systems.
  • Authentication and risk assessment to offer the most suitable payment methods for the respective customer in the online order process
  • Payment processing including invoicing
  • Documentation of all business transactions for financial and balance sheet accounting, as well as accounts receivable accounting
  • Verification in case of suspected fraud & chargeback of payments
  • Returns management of returned goods
  • Receivables management with appropriate approach in the individually coordinated dunning process and customer-friendly debt collection.
  • Reporting of all developments

AUTOMATION

The use of robotic process automation (RPA) ensures that time-consuming, recurring processes in the company are automated. Artificial intelligence, on the other hand, now provides support in many places for invoice verification, payment processing and back-office activities. Alternatively, financial processes, from checkout to receipt of payment, can also be completely outsourced. With a flexible platform for financial processes, for example, the entire accounts receivable can be handled.

If accounting is to be completely outsourced to an external accounting system, the risk caused by errors and part of the liability are transferred to the service provider. Transparent reporting allows you to keep track of your individually defined key performance indicators (KPIs) at all times. For international expansion, it is also helpful to have a central contact person who is also familiar with country-specific legal and customs regulations. Our services cover the entire OTC process.

How do you measure digitization success in the OTC process?

In order to make informed decisions, it is important to keep an eye on your key performance indicators (KPIs):

  • Revenue share: Provides information on whether the revenue generated from the sale of products represents a sufficient share of the company's revenue. What percentage does the order-to-cash process account for of total revenue?
  • Employee productivity: If you compare the number of orders with the number of full-time employees, you get the individual productivity. This allows you to easily identify and optimize inefficient processes. At the same time, you find out whether the number of your employees matches the actual demand.
  • Average time to payment: Sure, some invoices are regularly paid late. But it helps to estimate the number of late incoming payments, e.g. to send payment reminders in time and thus avoid bad debt losses. To motivate on-time payment, rewards for direct payments can also be offered.
  • Level of automation: How much in the OTC process is handled manually and automated? How have error rates, order processing time, and time to payment evolved? To continuously improve, you should regularly review these factors.

 

Our solution Aqount helps you to keep an eye on precisely these key figures in a targeted manner. In the self-service reporting portal based on Power BI, all current data can be accessed at any time. In myAqount, the front end for the SAP instance, first-level support can even respond to customer inquiries in real time.

The future is automated

Are you also convinced of the possibilities of automating your processes? And are you already using digitized procedures in your OTC process?

Find out more about how we at Arvato Financial Solutions can help you transform on your way to the digital future.

Latest Articles

In this interview, our CEO Jan Altersten talks about disruptive technologies, the war for talent and other challenges facing the financial services industry in 2021.
Software is eating the world
Jan Altersten
26.01.2021
3 minutes
In this interview, our CEO Jan Altersten talks about disruptive technologies, the war for talent and other challenges facing the financial services industry in 2021.
Overall, we have experienced an unprecedented super peak season, also fueled by COVID-19. This is reason enough for merchants to prepare themselves and their shopping systems for the future – and this also goes for the payment methods they offer.
Collecting Service: How e-commerce benefits from consolidated incoming payments
Jan Florian Richard
13.01.2021
3 minutes
Overall, we have experienced an unprecedented super peak season, also fueled by COVID-19. This is reason enough for merchants to prepare themselves and their shopping systems for the future – and this also goes for the payment methods they offer.
The increasing digitalization of purchase behavior, the emergence of new product groups and business models, and of course the coronavirus crisis are leading to a veritable boom in new subscription models. Good time to check back-end processes for suitability.
Subscription Economy: The New Normal
Michael Rogge
04.01.2021
3 minutes
The increasing digitalization of purchase behavior, the emergence of new product groups and business models, and of course the coronavirus crisis are leading to a veritable boom in new subscription models. Good time to check back-end processes for suitability.