Driving to Order-to-Cash Optimisation and Accounts Receivable Transformation

The Challenge

Over the last year, the client faced significant aged receivables growth due to multiple acquisitions, specifically from one large acquisition that nearly doubled its customer and revenue base. Due to that acquisition, accounts receivables grew disproportionately throughout 2023 relative to sales growth. Immediately after the acquisition, the client’s collections and account management teams that aim to collect and help customers pay their overdue balances faced elevated integration issues, including:

• Case backlogs
• Increased billing issues, requiring significant research and investigation
• Increased unapplied cash levels
• Cashflow and profitability challenges

The significant growth in the accounts receivable balance doubled day sales outstanding (DSO) compared to pre-acquisition levels. The client sought Protiviti support to create a strategic plan to reduce DSO back to normal and help identify initiatives to reduce the AR balance to achieve the DSO target. Collections was not the only focus – the client aimed to implement best practices, transparent reporting and automation to ensure customers remain current. The client needed assistance in identifying process improvement areas throughout the order-to-cash process, improving the current collections processes and setting the client up for success for additional acquisitions expected in the future.

Program management expertise

Throughout the engagement, Protiviti provided project management office support. Protiviti has provided similar AR support for other business units at the parent company, and utilised lessons learned on previous engagements to help address common challenges. After initial discovery, we worked closely with the client to implement a program management cadence that allowed for cross-functional collaboration across collections, finance, account management, and sales teams to drive action against the company’s AR recovery initiatives. Direct support was provided to strategy and finance teams to prioritise addressing aged receivable balances and compiling reporting from all established initiatives, providing a full picture of progress against targets and performance to leadership. Oversight for any IT enhancements to legacy systems supporting AR recovery efforts was also provided, along with transition support to ensure the client is able to monitor and track initiatives addressing future AR challenges.

Accounts receivable recovery

Recovery had two primary focuses – chasing smaller numbers of customers with large past due balances, and the large quantity of customers with smaller past due balances. Since the client’s customer base had different behaviors, the team developed a targeted approach to reach out to the most customers as systematically and effectively as possible to collect on their past due balances. The AR recovery initiatives were measured against the monthly past due AR and DSO targets to ensure sufficient initiatives in flight were effective in achieving the client’s goals.

The AR recovery initiatives included:

• AR recovery “sprints” – Identified and prioritised accounts about 1,500 accounts with significant aged AR balances for collections and account management focus in targeted “sprints.” These accounts were subject to cross-functional collaboration and were analysed for potential write-off.
• Top account deep dive: A cross-functional review of the top 200 accounts with the highest AR balances by finance, collections, customer care, and sales. Our project management support ensured actions to collect on these accounts were followed through.
• Email bounce-back campaign: Review of 2,600 accounts with undeliverable responses to mass-emailing. Through this campaign, the team improved its process for updating customer contact information, ensuring the appropriate customer contact was receiving invoices. 

Through the AR recovery work completed, the client was able to reduce past due accounts receivables by $13M, or 27% from September 2023 to February 2024, and DSO by 15 days, beating expectations.

Looking to the future – improving legacy order-to- cash and collections processes

To support the client’s goal to reduce its accounts receivable balance, the project team concurrently identified and recommended process improvements throughout the order-to-cash process to support the growth of AR and ensure balances become and stay current. These process improvements addressed high-visibility pain points impacting the entire AR portfolio and assisted in recovering additional outstanding AR once implemented.

A key area of focus was the day-to-day collections process helping collectors be as effective as possible when making outreaches on past due accounts. Protiviti worked with the Director of Collections and VP of Finance to standardise how collectors should be approaching their portfolios, who and how to contact an account, and when to consider the account for write-off and third-party collections. This helped the client set achievable targets for collector outreach and how performance should be monitored.

Lessons learned from this engagement drove creation of an order-to-cash playbook that additional business units at the client could use. Best practices and related KPIs were aggregated to create a business-unit agnostic taxonomy to support all client subsidiaries, establishing sustainable and effective order-to-cash processes across the organisation.