Bryan DeGraw of the Hackett Group recently presented “World Class Digital O2C: Transforming AR for the New Normal.” The digital transformation in order-to-cash (O2C) processes of ConvaTec, a $2 billion global medical devices company, has achieved Hackett’s world-class performance designation in O2C, with intelligent AI-powered technology from Emagia.
To understand digital solutions in the market, Hackett evaluates systems from a perspective of demonstrated features and functionality. Hackett Associate Principal of Finance Advisory Services Bryan DeGraw says, “We look at how the tools really enable world-class performance. So how are the tools affecting and moving the needle in terms of efficiency and effectiveness? That’s how Hackett measures world-class performance.”
At the presentation’s start, DeGraw introduces Christopher Arnold, Vice President of IT and technical support chief of ConvaTec’s finance transformation, and Srinivas Dusi, ConvaTec Order-to-Cash Global Process Owner, along with Veena Gundavelli, founder and CEO of Emagia.
This article relates ConvaTec’s achievements in applying Emagia’s AI-powered O2C tools, and platform—the features and functionality—as ConvaTec built and staffed a new global finance business services center during the worldwide COVID-19 pandemic.
The Case for Digital Order to Cash Transformation
Converting accounts receivables to cash is a complex process. Multiple discrete and intricate phases present a challenge to the concept of a single, frictionless order-to-cash (O2C) process. The complexity is compounded when an organization operates globally with multiple languages, currencies, time zones and ERP systems, as with ConvaTec.
Companies commonly evolve a patchwork of teams, tools, and applications and often operate different ERP systems in separate regions. ConvaTec’s receivables involved a mix of outsourcing, in-sourcing and local sourcing. Processes were largely manual and exclusive. Now ConvaTec is unifying the disparate elements into an integrated global, digital O2C process. The results of that effort, which is nearly 4/5ths complete, have been deemed “world-class” by The Hackett Group.
Setting Up a New Gen Global Business Services Center
ConvaTec had determined it would establish a new global finance center in Lisbon, Portugal. It decided to insource the operations from their then global outsourcing partner. Knowledge transfer to brand new team, process harmonization across global operations and setting up digital platform for process automation – all three were planned to be established parallel in three separate tracks. It sought one digital platform that could completely manage accounts receivable. It found Emagia and conducted a pilot program. O2C Global Process Owner Dusi says, “We saw that Emagia was able to provide the level of automation and the AI-based tools to achieve our goals.” The company set up a five-phase implementation, covering about 50 countries world-wide.
Emagia offers an artificial-intelligence-driven solution to provide an end-to-end, integrated global digital O2C process automation including credit, collections, deductions and cash application. Its cloud-based platform and applications combine automation, analytics, and artificial intelligence to drive a unified AR system and processes that overcome fragmentation, remove friction, and improve performance through the O2C cycle. Critically for global businesses, Emagia also handles the additional complexity of multiple languages, currencies, and time zones.
Empowered with the Digital Trifecta
Order-to-cash involves a tremendous amount of data from disparate sources and systems, including customer documents and data, ERP systems, and various third parties. The first order of business is to bring all that requisite data together into a single data hub. Emagia has mastered integration with myriad data sources for exchange, extraction, and conversion through its applied intelligent applications. It brings data from ERPs, CRMs, credit bureaus, banks, government sites, vendor portals, customer forms and documents into a unified data hub, the cloud-based Emagia Data Exchange. Complete data gathering and aggregation capabilities are critical to the program. Gundavelli says, “That’s where we have invested quite a bit and can drive efficiencies.”
Automation, analytics, and AI come together in Emagia’s “AI engine” to create an 85 – 90 percent touchless O2C process. Gundavelli explains how O2C can leverage automation, analytics, and AI—the “three A’s,” as she calls them. Robotic process automation (RPA) employing numerous Bots gather such data as business licenses, resale certificates, contractor licenses, liens and bonds, bank statements, and EDI/MT940/BAI2 feeds.
Six primary process automation modules operate out of the single Emagia O2C platform: credit, receivables, collections, deductions, cash application, an EIPP portal. These automated modules interact with the underlying Emagia Unified data hub in real-time, providing everyone from credit to dispute resolution and sales unprecedented, coordinated access to customer and transaction information as needed, along with dashboards and reporting.
Analytics based on artificial intelligence (AI) and machine learning (ML) animate the processes. Intelligent analysis generates predictive, descriptive, and prescriptive analytics to guide actions. For example, analytics identify what information to send to the customer and how to send it. Then the system executes on that knowledge. This kind of analytics infrastructure, with automation based on analytics, has become fundamental to current systems. The dashboards and reporting for each phase of O2C give management a new level of visibility and understanding of receivables and cash flow.
Supporting all this is an AI digital assistant, which provides the equivalent of “Alexa” or “Siri” for O2C. “Gia” is Emagia’s digital assistant, trained in more than 100 O2C skills, with an ability to understand credit, collections, cash application and deduction activities. Gia is embedded in each module of the system. It supports internal staff, answering queries from executives, sales, customer service, credit, or collections staff. It can read documents, extract information and perform simple to complex O2C process related tasks assisting the staff and helping them to improve productivity. Gia augments the GBS workforce as the new generation AI assistant.
Gia, deployed on the customer care portal and in customer communications, can interact with customers 24 hours a day/seven days a week. Gia moves conversations forward, for example, asking, “Is there a problem with this invoice?” or “What kind of issue do you have with the invoice?” Gia guides the customer to identify and resolve the problem, presents payment options, or acquires a promise to pay.
The Emagia package combines automation, analytics, and AI to solve companies’ need for a scalable, digital O2C process.
ConvaTec’s Transformation Program and Results
Medical device manufacturer and distributor ConvaTec operates in 100 countries around the world. It receives 100,000 payments per month to more than 18 bank accounts. Its prior finance “system” was a patchwork that included outsourced services, in-house local and centralized operations with manual processes and some small O2C systems in a few areas. Two years ago, the company began to transform its financial operations to centralize, standardize, simplify, and automate globally.
ConvaTec established a new global finance center in Lisbon where it is deploying multiple new systems. For O2C, the company chose Emagia. It ran a pilot program in June 2020, starting with Italy, Spain, and Portugal. In the pilot, O2C global process owner Dusi says, “We saw Emagia was able to provide the level of automation and the AI-based tools to achieve our goals. Emagia provides one platform to manage the complete AR solutions.”
Arnold notes that the company faced two major risks. The first was the reengineering of its organizational structure while creating the new center in Lisbon. The people that started the process, selecting the solution and starting to build it, were not the same people that would operate the solution. The company had not even hired the latter group yet.
The second risk was moving forward during the COVID-19 pandemic. ConvaTec decided to continue building the center in Lisbon and implement the new systems. Arnold points out that because ConvaTec is an international company, its people are accustomed to working across distances and remotely, which proved a real advantage. The company decided to proceed and, Arnold says, “It worked out. We’ve opened the center in Lisbon. People have not met face-to-face yet, but we’ve managed well.”
Working through the pandemic, they are now in the fourth of five phases. Arnold says, “We’re still implementing, but a large portion is done,” including America, most of Europe and the Asia pack. “We’re really on course to where we planned to be.” Each phase has run 12 weeks as teams worked remotely from home.
Gaining the AI Advantage for World-Class Digital Performance
Through Emagia, ConvaTec has transformed AR into a global, digital O2C system on one integrated platform for global receivables management. ConvaTec aims to achieve world-class global operations performance, including 90 percent touchless cash application with same-day posting, 85 percent and better current AR, dispute resolution in less than a week, and a 40 percent reduction in the cost of AR operations.
The first step was the creation of the customer master set to integrate with SAP. Dusi calls that a significant achievement. “It took time, but it works quite well,” he says.
Straight-through Cash Application with AI
Dusi presents performance metrics before and after Emagia implementation. The company’s cash application auto-apply rates varied by region. In the U.S., it was 59 percent, but in the Europe-Middle East-Africa region, it was just 3 percent. Canada was at 1 percent, while the Latin America and Asia-Pacific regions had zero percent auto-applied cash.
Emagia’s cash application module involves multi-lingual and machine learning capabilities to move “unidentified” payments to unmatched payments to matched payments. From October 2020 to April 2021, average auto-matched payments have increased from 30 percent to above 70 percent. Partial auto-matching has decreased from 30 percent to 16 percent, and manual matching from 19 to 11 percent. These trends will continue through the cash application modules intelligent learning to reach the goal of 90 percent.
Touchless Collections with AI
On-time payment has improved across several markets. Before implementation, less than 60 percent of payments were on time (average across regions). Since implementation across several regions, 78 – 92 percent of payments are on time, with a 25 percent improvement in current AR. ConvaTec accomplished this with a 45 percent reduction in collections FTE. The intelligent assistant Gia has proven very useful for collectors to get information quickly.
Frictionless Disputes with AI
Before the transformation, the lack of visibility of the global receivables portfolio hampered dispute resolution. Disputes were not recorded in a single place. A disjointed process involved recording disputes in Zenshare, approving them via emails, and manually performing credits and debits in SAP. The turnaround was “extremely long,” delaying collections. Lack of coordination among teams further delayed resolution, and auditing and reporting were problematic.
The digitization in one global platform now provides complete visibility of ConvaTec’s global receivables portfolio. The dispute process is seamless—recorded and approved in Emagia and smoothly integrated into SAP, which automatically creates credits/debits.
Gia expedites approvals, and the collections team has complete visibility of disputes while collection strategies exclude disputes in progress. Various units can collaborate via the Emagia platform, which maintains an audit trail. Approval time is now less than one week.
Strategic AR Contributions Strengthening the Balance Sheet
As the transformation proceeded through 2020 into 2021, ConvaTec has seen balance sheet strengthening, decreased DSO, an increase in cash on hand, cost reduction and improved control and compliance in operations.
The ConvaTec team managed this digital transformation of AR in multiple countries throughout the world during a global pandemic—a remarkable achievement in execution. And through the Emagia platform and system, ConvaTec is realizing AR goals even as it is just entering the final phase of implementation, reaching world-class (top quartile) performance.
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To watch the recorded webinar, click here