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Digitize Order to Cash Processing in SAP Systems

23-04-2021 7 min read

The current economic crisis has hit organizations hard and fast and finance teams are playing a vital role in stabilizing cash flow and liquidity. In this environment, digital infrastructure and automation have become drivers to survive the crisis: visibility into cash, liquidity and payments can only be sufficiently achieved when digital processes are implemented.

In a recent UKISUG event, James Sanderson of Philips and I discussed how digitization has enabled companies running SAP systems to transition relatively seamlessly to remote work. Companies that did not invest in digitization before the crisis will have to catch up quickly – or risk falling further behind.

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If we look into the market today, we can see that there is a sense of unrest and urgency among organizations as they move towards a more digitized approach to their daily work. Before the crisis, most companies expected to have years to prepare for the digital transformation that is happening right now. This is particularly true for organizations running SAP systems that planned a complete digital transformation as part of their move to SAP S/4HANA. Moving to the HANA platform would enable these companies to take advantage of the in-memory systems’ lightning-fast ability to process data and built-in intelligent automation capabilities. However, the crisis made digitization an immediate priority and put HANA migrations on hold, as companies had to quickly adapt processes to work during a world-wide pandemic. Those that had hoped to take a ‘wait and see’ approach or address the problems of manual processes once everyone was back in the office, realized they could not wait. And as the crisis continues to persist in pockets around the globe, companies are scrambling to address issues such as lack of speed, transparency and visibility across the organization.

Interestingly, some finance professionals see this crisis as an opportunity to strengthen the finance function. Whereas before teams had plans or roadmaps to digitize finance functions during the transition to S/4HANA, now they have a clear, strong and robust argument to digitize immediately. As we adjust to the ‘new normal’ of remote working, all finance departments must adapt and seek out the best technologies and the most efficient ways to automate processes and bolster security, so employees to focus on the most important tasks now and be ready to move to S/4HANA in the future.

How to Ensure Liquidity in the Short Run

At the moment, liquidity is everything and controlling your cash burn is paramount. With this in mind, the short-term challenge for organizations is to move past today’s uncertainties with liquidity and look at how they can use technology to become more stable tomorrow. A recent report by Accenture states that the adoption of technology is no longer an option but a necessary requirement. The aim should be to rebuild and recover, and the faster this can be done the better prepared you will be to tackle whatever the future may hold. As access to fast, accurate data becomes more important, companies must look for ways to take full advantage of this valuable asset. To coin a phrase, cash may still be king, but your data is the kingdom’s gold.

Therefore, when you identify your overall cash position, start by looking at your ERP systems, which are a reliable source of cash flow data. Some things you can do to ensure liquidity in the short run include:

  • Quantify your cash available and any additional incremental capital. Identify cash that can be secured and take immediate action to safeguard it. Then, forecast cash collected in the context of your latest sales projections.
  • Collect payments from defaulting customers as soon as possible. Renegotiate your customers’ payment terms and cash discounts, and optimize pending payments/payment runs and time payments to your advantage.
  • Assess working capital and monitor default risks for AR. Establish a reporting matrix for tracking financial status and available liquidity, and then continually track liquidity, credit line and covenants,

Consider how adopting new technology can help you in the future by asking yourself the following questions: 

  • What tasks can we automate that are currently being done manually? Focus on repetitive, rule-based activities such as cash allocation, payment flows, credit reviews, or cash pooling proposals. For companies running SAP systems, look for automation solutions that will work with SAP ECC and SAP S/4HANA.
  • Where are your immediate pain points and how can they be addressed with embedded technologies? How quickly can they be ‘live’ in your system? An SAP certified solution will ensure seamless integration with your existing system,  
  • Can you centralize your cash and payment management? By centralizing in- and outbound payments you can create deeper visibility into cash-in and cash-out and use that information to accelerate or decelerate processes to your advantage.

Focus on Accurate Credit Risk Control

Any field of finance today should aim to address three priorities when digitizing processes: transparency, visibility and control. In the area of order-to-cash (O2C), these priorities can be addressed by automating and integrating your credit, cash, collections, and dispute processes. Begin by using technology to keep your customers’ credit information up to date and review it regularly. A strong credit solution can help you automate worklists and create automated credit limit proposals based on: new credit information, such as delays in payments, credit agency reporting, or payment methods. This allows for a greater control for credit managers because all of the customer’s credit data is held in one place – creating a single source of truth.

Drive your Collection Efforts

From a collections and disputes perspective, use digitized solutions to automate your worklist, so you only contact the customers when you needed. Automation will help you move away from complex reporting processes. For example, instead of running a report in SAP, exporting it to Excel, sorting it per your business needs and then disseminating it to the collections team, you can use an automated solution to create a centralized file that keeps all customer data in one place. This will enhance the customer service side of collection activities and will avoid the need to search through historic emails to understand the situation. Let the system put your data to work for you: If the customer is not paying despite several promises over the last weeks/months, an automated solution can flag this behavior and suggest the ‘right’ action to take. Sales doesn’t have to intervene with the customer and everything is documented, visible and transparent. Having the real-time collections data at your fingertips puts the control firmly in the hands of the collectors. It also ensures that if a payment is received that the process can be stopped, ensuring that customers are only contacted if absolutely necessary.

Aim for Hyper-Connected Payment Management

Similarly for payments, you can use digitization to ensure greater transparency, visibility and control. Harmonize and integrate your payment processes to enable centralized control of company-wide payments and, if possible, create a global payment factory. Facilitate straight-through processing using robotic process automation (RPA) to create, approve and release payments. Use technology to ensure payments are secure and monitored for fraud and compliance. Chose solutions that enable easy connectivity with any bank, for example via SWIFT, EBICS, API, and even PSPs such as PayPal, plus the capacity to handle all formats. Finally, use these solutions to automatically collect payment files from all of your different sources, such as SAP, TMS, HR etc. so you can perform activities such as fraud detection, approvals and monitoring centrally.

With the above taken into consideration, you can quickly and easily increase the efficiency of your O2C and payment processes, so employees can remain effective even if they are working remotely. Using technology to create a centralized view of cash flows, will provide you with greater visibility and control over your inbound and outbound payments and will help you build an organization that will be resilient for the future.

To find out more about current trends in credit, collections and payments watch my discussion with James Sanderson, Global Cash Applications and Cash & Bank Oversight Lead at Philips on how digital and remote working is shaping the future of finance.


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