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The State of Business Execution: Four Key Opportunities for 2021

Celonis
by Celonis
March 04, 2021
6 min read

Digitizationโ€™s promises of increased productivity, operational transformation, and boundless innovation have led countless companies to invest millions in new technologies over the last few years.

But hereโ€™s the bad news: somethingโ€™s not quite adding up. Despite continued investment, our 2021 State of Business Execution Benchmarks Report discovered that productivity and output are still running far below expectations across many lines of business. They are simply not executing at their maximum capacity.

The reason? There are a lot of factors at play, which are all explored in our full report. But, one of the clearest contributors is that rigid systems and broken processes are hampering business execution.

Our research uncovered significant execution gaps across four key departments, where current platforms and processes arenโ€™t living up to expectations: Accounts Payable, Accounts Receivable, Procurement and Order Management. But itโ€™s not all doom and gloom. Now that we know where these gaps are, we can start filling them.

Here are some exciting opportunities to improve execution in four diverse departments, as identified in our 2021 State of Business Execution Benchmarks Report.

Rethink systems and processes to boost efficiency in Accounts Payable

The pandemic has put a lot of pressure on Accounts Payable teams โ€” pushing them to keep a close eye on working capital, while maintaining strong supplier relationships.

A/P teams have employed a lot of unique tactics to help them keep cash levels healthy during these tough times. But according to our findings, there may have been some major opportunities to improve their performance and processes staring right at them all along.

According to our survey, more than 41% of A/P say that rigid systems and technologies are negatively impacting their performance. But with just 20% of A/P leaders reporting they use process mining to identify the root cause of issues across the department, few are unlikely to be able to see exactly where and how current tools are holding them back.

By picking up process mining, A/P teams can look inwards and spot clear opportunities to improve internal performance โ€” instead of putting the squeeze on struggling suppliers.

This may make the difference between paying on time only 50% of the time, as the average company does, versus 77% of the time for top performers.

Smarter invoice prioritization holds limitless potential for Accounts Receivable

With the true economic impact and uncertainty of the pandemic still being felt worldwide, working capital is going to be very important for A/R teams in 2021. For teams seeking new ways of improving working capital this year, weโ€™ve got good news and bad news.

The bad news is that thereโ€™s a major gap between the Days Sales Outstanding (DSO) figures achieved by average companies and top performers. According to data from JPMorgan, average teams achieve an average DSO of 53 days, whereas top performers have got that figure down to just 24.1 days.

But the good news is that because this gap is so significant, there should be some very straightforward ways for most teams to start closing it.

Doing so will require a smarter approach to invoicing โ€” more specifically for most, better invoice prioritization. Currently, more than 71% of A/R departments prioritize invoices by age and value, rather than likelihood to pay. With even the most reliable clients struggling to stay afloat, this can be a risky strategy, leading collection teams to waste time going after invoices that they should be writing off.

By refocusing on the outstanding receivables most likely to be paid, teams can avoid wasting time chasing cash thatโ€™s unrecoverable. This means looking beyond basic KPIs and instead taking a data-driven, proactive approach to collections.

Executive sponsorship is key to Procurement innovation

Procurement is a department in flux. Forward-thinking Procurement leaders know how much value their team can deliver to the wider organization โ€” supporting innovation, identifying powerful supply chain and channel opportunities, and leading efforts to improve sustainability and product quality.

Yet procurement teams still spend an overwhelming amount of their time focused on maintaining the โ€˜five rights of procurementโ€™ โ€” delivering the right goods and services, at the right time, to the right places, at the right price.

Those โ€˜rightsโ€™ arenโ€™t going to get any less important for the department any time soon. So if procurement teams want more time to focus on delivering strategic value in new ways, theyโ€™ll need to find ways of creating that time.

Thatโ€™s where data-driven Procurement comes in. By making better use of data and applying automation, procurement teams can gain the time they need to focus on the tasks that theyโ€™re best suited to complete. But, a major barrier remains.

Our report found that more than 41% of organizations lack the executive sponsorship needed to enable a more data-driven approach to Procurement โ€” stifling innovation, and preventing the department from achieving its maximum capacity.

We see the effect of this across KPIs like on-time delivery and cost per purchase order, to name two. Only 54% of the time do supplier deliveries arrive on time for the average company, compared to 83% for the best-in-class performers.

Maximizing capacity can revolutionize Order Management

The average Order Management team delivers just 42.8% of its shipments on time โ€” and when you dig into their processes, itโ€™s easy to see why.

Today, the average order currently goes through 25 different touches โ€” each taking over an hour โ€” before it reaches its destination. Of course, this varies by industry, but the truth is that every one of those touches is another opportunity for the order to get held up, lost, or sent to the wrong location.

By moving towards touchless ordering and improving the visibility of Order Management processes, our research found that an average company can expect to save more than $64 million through cost per order improvements alone.

With the right processes in place โ€” automated in a way that makes sense for your organization โ€” Order Managementโ€™s execution capacity can be maximized to the tune of millions.

Every execution gap is an untapped opportunity

While our research found significant execution gaps across every department we surveyed, this isnโ€™t all bad news โ€” far from it in fact.

Each one of these execution gaps represents a clear and achievable opportunity to improve execution capacity โ€” many of which can yield tens of millions of dollars in savings.

To get the complete picture on the state of business execution and explore key insights from our survey of over 2,000 business leaders, read our report.

And if youโ€™d like to learn more about your own ability to maximize your execution capacity, get in touch with one of our experts today.

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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