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Accounts Receivable, You Have a Problem โ€“ And We Can Fix It

Celonis
by Celonis
September 13, 2021
4 min read

โ€œA thousand songs in your pocket.โ€

Those words sounded pretty impressive when Apple launched the iPod back in 2001. But time and technology march on. Apple stopped making standalone music players four years ago, and today we can stuff more than 70 million songs into our pockets thanks to mobile streaming services such as Spotify.

But itโ€™s possible that in one area of your life (or work), youโ€™re still โ€“ metaphorically speaking โ€“ carrying just a thousand songs in your pocket. Weโ€™re talking about your Accounts Receivable (A/R) infrastructure.

Does this sound familiar? Is your A/R department living in a bygone era in technology terms?

Donโ€™t worry, youโ€™re not alone.

A story of old technology and data all over the place

In our State of Business Execution Benchmarks Report 2021 we surveyed more than 200 A/R leaders on how their departments are running and what could be holding them back. 42% said they were hindered by rigid systems and technology. The figure rises to a remarkable 66.7% for companies with fewer than 10,000 employees โ€” the kind of company youโ€™d expect would be more agile by virtue of being smaller.

โ€œIf you look at a lot of the systems that A/R departments are using, it's often very old technology,โ€ says Gwyn Roberts, Global Business Development Manager at Celonis and resident A/R guru. โ€œIn the last 10 years, businesses have moved on a lot, but their systems havenโ€™t. Theyโ€™re not flexible and itโ€™s hard to reconfigure them without spending millions and millions of dollars.โ€

AR Blog - $390B

And thereโ€™s more: over 40% of our respondents said they were also stymied by a fragmented data landscape. As Roberts points out, most companies have grown by acquisition over the last decade, meaning theyโ€™ve ended up with multiple ERPs. Trying to consolidate them is both difficult and expensive.

โ€œAnd it's not just ERPs,โ€ he adds. โ€œPeople will hold data on desktops in Excel spreadsheets, and thereโ€™ll be other places where data is stored, depending on the industry that you're in, whether it's a billing system or a specialist system.โ€

In other words, thereโ€™s lots of data all over the place.

Your processes are broken and you donโ€™t even know it

The net result of all this inflexible, outdated technology and data fragmentation? 40% of respondents talked of broken or inefficient processes.

โ€œSome companies donโ€™t even realize how broken or inefficient their process is,โ€ says Roberts. โ€œAnd a lot of those who do know, donโ€™t know how to fix it.โ€

This stuff matters now more than ever. For many companies, the COVID-19 pandemic brought a fresh focus on cashflow and the importance of getting paid on time. As we head towards an uncertain future, that focus isnโ€™t going to go away.

Celonis-Blog-Two - AR Some Companies Are better Than Others

And thereโ€™s certainly room for improvement. We discovered thereโ€™s a big difference between the companies executing processes at full capacity and the rest. For example, average companies have a Collection Effectiveness Index of 56.6%, whereas the top companies reach 83.6%. Itโ€™s a similar story with other KPIs, such as Average Days Delinquent, A/R Turnover Ratio and Days Sales Outstanding. The companies who excel are ahead by a long way.

Where are the pain points? Hereโ€™s one: our survey told us that more than a quarter of invoices are disputed. That could explain the haunted look on the faces of your collections specialists. And most of the problem comes back to those inefficient processes. For example, we found that less than half of invoices are right the first time.

There are plenty of other issues driving your A/R team crazy, too: late payments, underpayments, out-of-date payment termsโ€ฆ But getting to the root cause of these issues isnโ€™t easy.

If youโ€™re an A/R leader and your CFO wants to know whatโ€™s going wrong and why, say, DSO is looking so bad, what will you say? You probably donโ€™t know the answer. And that means you canโ€™t put things right despite having the best of intentions.

Weโ€™ve got the answer

How do you join the ranks of the companies that are executing so much better than the rest?

The answer starts with process mining. We have a solution thatโ€™s built specifically for A/R, that gives you a living, breathing, moving picture of your collection processes in real time โ€“ so you can see where the inefficiencies lie, and take action to automatically to fix them. Itโ€™s easily integrated with your existing systems and can be up and running in 40 days.

Sounds too good to be true? It could be the difference between average and best in class.

Download our 'Cash is King' eBook to find out how process mining could help you optimize your Accounts Receivable processes.

Celonis
Celonis
Author

Celonis believes that every company can unlock its full execution capacity. Powered by its market-leading process mining core, the Celonis Execution Management System provides a set of instruments and applications, the Celonis Studio as well as platform capabilities for business executives and users. The Celonis EMS offerings help companies manage every facet of execution management from analytics to strategy and planning, management, actions and automation.

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