Accelerate transformation initiatives and deliver quarter-on-quarter value at the same time
Finance transformation. It’s a term applied to a wide range of business initiatives, but it isn’t a catch-all endeavor, and the drivers of finance transformation initiatives vary greatly. In some cases your initiatives will be driven by specific events, including system migrations, or a change in operating model such as outsourcing to shared services. In others, they will be inspired by a general realization that your organization needs to become leaner, more resilient, and more intelligent to remain competitive and financially robust in a changing landscape. And finance transformation initiatives often have different priorities or focus areas. Perhaps improving cash flow, reducing costs, or accelerating productivity?
But one thing nearly all finance transformation initiatives have in common is that they are slow and cumbersome. Inherently complex, and with almost endless boxes to tick, strategic finance transformation can take several years. Even then they don’t always achieve their goals. These long timeframes present a challenge when your business wants to achieve financial outcomes right away. Operational improvements are needed to remain competitive and manage challenging economic realities today. Not five years down the road. There’s a disconnect between the usual timeframe of transformation initiatives and the urgency of meeting financial outcomes.
Process mining is a technology that’s used to model, analyze, and optimize business processes. Think of it as an MRI that shows how your processes actually run — not how you think they run — and identifies value opportunities within those processes. Faster and far more accurate than subjective process mapping, process mining offers objective, fact-based insights to enable data-driven decisions. It layers on top of your existing systems, helping you to leverage existing technology investments without disrupting your business. Within the finance organization, opportunities to drive immediate value and accelerate transformation initiatives include optimizing working capital to improve cash flow, cutting costs in processes such as Purchase-to-Pay (P2P) or Order-to-Cash, or accelerating productivity across the Accounts Receivable (AR) or Accounts Payable (AP) teams.
Process mining allows you to determine the most impactful opportunities that will drive the greatest value, with the least effort. Prioritizing these ‘low-hanging fruit’ value opportunities, means you can expand from there and connect the dots between different processes. You can capture the value you need right now, and not wait years for your transformation initiatives to conclude. The opportunities you’ll pursue tend to prioritize one of three distinct goals, which are improving cash flow, reducing costs, and accelerating productivity.
There are value opportunities to be found across processes in AP and AR that will improve working capital, and ultimately free cash flow. In AP, this may mean purchasing with the most favorable terms to ensure optimal payment time, for instance by addressing short payment terms. It may also mean eliminating payment term mismatches that unnecessarily drive down Days Payable Outstanding (DPO). In AR, opportunities include optimizing payment terms and reducing late billing, as well as streamlining and intelligently prioritizing collections based on data-driven insights.
As part of its transformation journey, PepsiCo is digitalizing and strengthening its end-to-end processes — including AR and AP — with measurable impact tied to every step. In AR, PepsiCo discovered that focusing on Days Sales Outstanding (DSO) had the highest value potential for driving cash flow, and identified actions to quickly move the needle in this area — using Celonis’ out-of-the-box capabilities to unlock millions. PepsiCo also used Celonis’ intelligent automation capabilities, or Action Flows, to automate dunning note creation. In AP, PepsiCo used Celonis’ fuzzy matching capabilities to automatically identify invoices that were split to circumvent approval limits. As well as assisting compliance, this also saves an incredible amount of manual work so employee time can be used more productively.
The working capital impact that Celonis has had — in the range of millions — is quite astonishing.
Do you want to generate rapid cash impact within a single quarter? Check out Taking the work out of working capital, our optimization playbook for the CFO. Read it to discover which levers to pull for quick results, and how to identify value opportunities in your AP and AR processes.
Cutting costs is a common goal of strategic finance transformation initiatives, whether that’s by reducing the cost of goods sold (COGS) or minimizing selling, general and administrative expenses (SG&A). Improving contract usage is one example that encompasses multiple use cases, such as eliminating contract leakage or analyzing spend to create new contracts. Cash discount realization can also be improved by prioritizing invoices to drive on-time payments, and leveraging real-time reporting on open blocked invoices. In addition, duplicate payments can be eliminated by using real-time analysis to flag similarities in invoices or outgoing payments. And bad debt expense can be minimized by using real-time, data-driven risk assessment to inform credit limits.
Deutsche Telekom Services Europe (DTSE), has a Purchase-to-Pay process that handles over 2 million order items, and almost 9 million invoices a year. While the end-to-end value chain was highly digitalized, there were some execution gaps for which DTSE struggled to find the root cause. This included blocked payments which prevented the company from maximizing cash discounts. Using the Celonis platform for real-time reporting on open blocked invoices — as well as automatic invoice prioritization — saves DTSE €40 million per year by enabling on-time payments and an impressive cash discount rate of 96%. In addition, increasing automation and improving the no-touch rate on purchase orders has freed up capacity for tactical sourcing and resulted in savings of €12M, while data-driven duplicate payment analysis has saved €3M and also blocked future duplicate payments.
Employees who were doing low-value transactional tasks in the past, now have the time to select suppliers or negotiate better payment terms. This helps our teams achieve millions in savings throughout the year.
There are multiple ways you can boost productivity and drive immediate value to accelerate finance transformation initiatives. Simplifying procurement is one use case, which could include reducing discrepancies between purchase requisition (PR) and purchase order (PO) documents by matching against the organization’s master data. You can also minimize AP throughput time by streamlining common actions such as goods receipt (GR) follow up that may otherwise delay invoice processing. And you can accelerate dispute discovery and shorten dispute cycle times in AR through data-driven identification of likely issues.
Healthcare innovator IQVIA’s Shared Service Center is on a mission to go from a cost center to a profit center. Achieving this goal involves insourcing, and upskilling the workforce to be more automation-focused, including building a Celonis Center of Excellence within shared services. The result? A 40% reduction in the cost of shared services over the last two years. IQVIA uses Celonis in Order-to-Cash and Purchase-to-Pay processes in a variety of ways. This includes fixing payment term misclassifications, which led to DPO increasing by 32 days on average, instantly freeing up almost $600,000 of working capital. DSO is also being addressed by getting bills out to customers and accepted faster. This is game-changing given that a single day of DSO equates to around $40M of free cash flow.
We’ve already generated, on a working capital basis, hundreds of thousands of dollars per day that’s resulted from increasing our days payable outstanding, while decreasing our day sales outstanding. And the overall cumulative result has been multiple millions of dollars of savings.
Are you ready to increase productivity in AP? Take a look at our 20-minute webinar Celonis for Finance: Optimizing DPO, to achieve quick cash flow wins in AP without deprioritizing your long-term transformation goals.
Your finance transformation initiatives rarely just involve one team. And they rarely stay with the finance organization itself, but are often impacted by other departments across the business. That means they involve a complex web of interconnected processes. Without full visibility into these processes, finance transformation initiatives are almost guaranteed to fail. To understand where the real value opportunities are — and implement the data-driven apps and automations that will allow you to act on them — you need end-to-end visibility.
Conventional process mining helps you understand how your processes truly run and discover value opportunities. But there’s now an even more powerful iteration of process mining that goes even deeper and gives you this end-to-end view. Object-centric process mining, also known as OCPM, is the newest innovation in process mining technology and it allows organizations to better visualize and analyze how processes are interconnected across business operations. While classic process mining looks at single objects such as sales orders, purchase orders, or invoices, to determine how they flow through a particular process, OCPM reveals the interplay between these various objects within your processes as they move through their connected lifecycle.
View all business activities from any perspective using a single source of truth.
Move from 2D process views to a dynamic, 3D view of the entire business.
Discover valuable opportunities at the intersection of processes and departments.
When organizations are looking to improve high-level financial results — whether that’s by reducing costs, improving cash flow, or increasing productivity — the focus is rarely on individual business processes. Business leaders are unlikely to think small changes to individual operational processes can achieve the type of impact they want to make on high-level KPIs. But these hidden value opportunities can have an enormous impact, and that case will inevitably have to be made when your organization is considering process mining.
Learn how to explain process mining to business leaders with our eBook, Making the Business Case for Process Mining in Finance. It outlines how process mining unlocks unprecedented value across your finance processes, explains the technology, functionalities, and drivers for adoption, gives tangible use cases, and shows you how to build a business case.
Celonis enables customers to optimize their business processes. Powered by its leading process mining technology, Celonis provides a unique set of capabilities for business executives and users to continuously find improvement opportunities within and across processes, and execute targeted actions to rapidly enhance process performance. This optimization yields immediate cash impact, radically improves customer experience, and reduces carbon emissions. Celonis has thousands of implementations with global customers including many of the world’s leading companies, and is headquartered in Munich, Germany and New York City, USA with more than 20 offices worldwide.
Are you ready to accelerate your long-term finance transformation initiatives, while also driving immediate value and hitting your quarter-on-quarter goals?
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