Client: A global advertising and public relations company
- High working capital requirement
- Poor visibility on collections performance and risk of default/delays in realizing payments from customers
Genpact solution: Genpact reimagined the client’s accounts receivable (AR) process through the focused use of technology and Data-to-Action AnalyticsSM, applying a Lean DigitalSM approach to identify key metrics, eliminate bottlenecks, and introduce smart technology while reengineered processes improved the collections strategy
- £200 million accelerated cash flow from June 2015 to May 2016
- Aged debt past due for 180+ days reduced to 1.4% from 3.4% in one year, resulting in increased working capital and reduced risk of default and delays in realizing payments from customers
Delays in payments from customers lock up precious working capital and persistent follow ups add to costs while also potentially damaging hard earned customer relationships. A leading media company challenged with low cash flow due to aging debts addressed the challenges using a practical Lean DigitalSM approach to reimagine its accounts receivables and master data management to improve process efficiency and dispute resolution, to drive cash flows and high efficiencies.
A leading media company was struggling with significant delays in realizing payments from its customers. A high percentage of outstanding payments were past their due dates by as much as six months. Disparate data sources, legacy technology, and lack of an analytical approach caused the company to follow an unresponsive collections strategy across its varied customer base that failed to address differences in customer behavior, payment history, and credit and risk profiles of individual accounts. This resulted in inefficiencies and delays in retrieving aged debts in addition to hurting overall cash flow. Finally, lack of streamlined dispute resolution and escalation processes only made things worse, adding to customer dissatisfaction.
A Lean DigitalSM approach helped the company transform its collections operations by harnessing process-centric digital technologies, which helped reimagine the process with the help of design thinking and Lean principles. Genpact’s proprietary Smart Enterprise Processes (SEPSM) helped identify the key metrics to be improved to achieve target business outcomes such as reduced working capital, greater process efficiency, and higher customer satisfaction. The granular, data-driven assessment of the current processes helped identify the process and systems changes required for improving those metrics.
A sophisticated data analysis model was developed to forecast cash collection by integrating data from multiple sources and systems, such as customers’ payment patterns, payment terms, and accounts receivables. Additionally, it created a monthly forecast for cash collection which was tracked daily through metrics such as call volumes, cash collected, and collectible cash at risk per day.
The insights from the model helped optimize the collections strategy based on the payment patterns, credit, and risk profiles of individual customers, eliminating unnecessary follow ups and allowing collection agents to focus on higher-risk customers. The insights were used to advance the billing dates on invoices to align with customer payment patterns, allowing faster realization of cash, minimizing the need for follow ups, and boosting overall collections efficiency.
The dispute resolution process and escalation mechanism were put in place to focus on timely resolution of disputed invoices as well as reducing the frequency of disputes over time. The Prioritizer tool—part of Genpact’s proprietary Akritiv Systems of EngagementTM suite—was configured on top of existing enterprise systems to automate the workflow and provide insights on expected cash recovery each week. The tool also enabled members of the collections team to make invoice-level notes, mark promises to pay, and flag invoices as disputed in cases where the end customers refused to make a payment. The tool allowed the dispute helpdesk to triage the disputes according to complexity and risk, and assign them to appropriately skilled team members. Improved visibility ensured that accurate cash collection targets could be defined, the performance of team members measured and rewarded, and repetitive dispute categories isolated and resolved on priority. The escalation process with detailed SOPs and TATs was defined to focus on past-due invoices—especially invoices overdue by 60-180 days.
These insights, in addition to being harnessed for knowledge reinforcement on dispute category and best practice sharing, have been used to create a feedback system as well as a continuous learning environment for further improvements.
Redesigning the process, institutionalizing effective dispute resolution and an escalation matrix, and deploying smart technology helped achieve the following:
- Estimated accelerated cash flow impact of £200 million every year through advanced billing, faster dispute resolution, and improved collection efficiency
- Reduced aged debt due for 180+ days from 3.4% to 1.4% in one year, which resulted in increased cash flow, greater efficiency, and higher overall profitability