Process Transformation Generates Millions in Cash and Working Capital Improvement

This global energy company had brought together two entities in 2021 and several years later, was still experiencing challenges in several areas of its business performance, most notably order-to-cash (O2C) and source-to-pay (S2P) processes. These issues had an extensive impact on the company’s bottom line.  The company was looking for a trusted partner to help identify and prioritize improvement opportunities and then design and implement actions to standardize and improve key processes by:

• Removing inefficiencies
• Reducing cycle times
• Driving consistent process performance
• Maintaining established internal controls and
• Improving working capital where applicable.

The client wanted its employees to focus on value added activities, improving on-time payments and reducing the effort needed for troubleshooting and exception management.

Finding the root cause

The client’s O2C process was plagued with manual processes with minimal visibility, leading to lengthy cycle times and increasing AR balances. Similarly, the S2P cycle suffered from manual workarounds and lack of standardization, causing procurement inefficiencies and delayed vendor payments.

We began our partnership by completing comprehensive reviews of the client’s existing O2C and S2P processes, where the Protiviti team conducting stakeholder interviews and process/technology walk throughs, performed leading practices gap analysis and peer benchmarking, analyzed transactional data, and facilitated design thinking sessions. We identified key bottlenecks in the O2C cycle, such as manual and inconsistent invoicing and payment collection, along with inconsistencies in the S2P process such as limited spend visibility, inefficient invoice processing, complex delegation of authority, and inconsistent supplier management practices.

Pinpointing solutions

Following this evaluation phase, we recommended two major solutions: automation and standardization across both processes.

The O2C process involved a three-phased plan to streamline operations through technology-driven solutions like automated invoicing systems that would enhance accuracy while reducing cycle times. We introduced several ‘quick wins’ that included:

• Piloting an accounts receivable collections transformation for US customers
• Developing a tool to monitor purchase order balances
• Outlining requirements for O2C KPI reports
• Conducting and documenting key O2C processes

To optimize current state invoicing processes and define long-term invoicing improvement opportunities, we also analyzed detailed invoicing data, designed standardized processes and workflows and developed tools to optimize the client’s invoicing process. Throughout, we also held working sessions to generate feedback on how well the new processes were working.

For S2P, a roadmap transforming the supply chain organization to be strategic and efficient was created to increase value across the enterprise. The focus was on:

• Improving on-time vendor payments
• Establishing contract lifecycle management guidelines and processes
• Implementing supplier lifecycle management (SLM) and category management, including a strategic sourcing framework
• Developing master file enhancement and ongoing governance processes
• Establishing a part number and catalog cleanup process
• Implementing a leading P2P tool to streamline processes and increase visibility

The outcome of implementing these recommendations was transformative for the client. Standardizing the O2C process led to faster invoice processing times and more accurate forecasting, significantly improving cash flow. Standardizing the S2P process optimized procurement efficiency by reducing variations in sourcing decisions.

Fostering an environment of continuous improvement

We understood that long-term success would happen, not just by solving existing issues, but also by fostering an environment open to continuous improvement within enterprise operations. To that end, Protiviti worked closely with the client's leadership team to create an enterprise continuous improvement function under the Director of Business Process Improvement (BPI) to cultivate an organizational culture and supporting tools and methodology centered around continuous improvement principles. Working with the director of BPI, Protiviti led the establishment of an enterprise continuous improvement function, which included the development of a governance framework, process documentation, tools, templates, dashboards and training approaches to bring the client’s vision of a culture dedicated to continuous improvement to life.

The project entailed regularly assessing performance metrics associated with both O2C and S2P cycles for potential areas of enhancement -- thereby ensuring ongoing optimization rather than stagnation after initial improvements were achieved.

The power of robust processes

The results spoke volumes as the client witnessed improved financial performance due to optimized cash flow from streamlined O2C processes and cost savings via efficient procurement practices from standardized S2P processes.

For O2C, the client reduced its overall accounts receivable balance by $6.3 million for its North America region while also reducing its year-to-date day sales outstanding (DSO) by 6 percent, which translates to an approximate $24 million improvement to working capital.

For S2P, the team focused on revamping the delegation of authority to be right fitting for the organization, developed a process library linking all policies and procedures, developed measures for each subprocess of the S2P taxonomy, and focused on clearing out existing outstand payments by troubleshooting and creating guides & trainings for common invoicing clearing procedures reducing DPO backlog by over 50%.

This client’s journey under Protiviti's guidance illustrates the power of robust processes paired with a culture committed to continuous refinement – a testament to what it takes for enterprises to thrive amidst today's rapidly evolving business landscape.