Well managed working capital and an efficiently run order-to-cash cycle reflects a company in good financial health. Historically, accounts receivable operations have lacked the automation and management tools necessary to exercise proper control and maintain timely cash flow, but there are software solutions available to resolve these problems. SunGard’s AvantGard Receivables, for example, focuses on improving credit and collection productivity by helping to optimise workflows and processes, leading to quantifiable results.
The order-to-cash challenge
For many companies, order-to-cash processes are manually intensive and/or compounded by the vagaries of different local practices and systems. This makes it more difficult for credit and collections staff to perform their duties such as monitoring credit risk, chasing non-payments and resolving invoice disputes. It can also impede managers’ ability to oversee the process as they struggle with reports inconsistent in format and containing incomplete data. This makes it difficult to track compliance, monitor performance and forecast cash flow. These problems can lead to expensive funding decisions and high volumes of Days Sales Outstanding (DSO), potentially threatening the financial stability and reputation of a company.
The challenge for companies is how to run their order-to-cash operations so as to achieve greater control of their cash flows, maximise the use of those funds and increase visibility across the group.
What makes an efficient order-to-cash cycle?
Tight risk control, close monitoring of customer payment behaviour and routine evaluation of exposure in order to mitigate corporate credit risk.
Automated processes and workflows to speed up cash flows and reduce DSO volumes.
Fully integrated systems and processes to improve productivity, reduce errors and decrease operating costs.
Fewer past due account receivables so that cash is received more quickly in order to reduce borrowing requirements and interest expense.
Automated dispute resolution processes and work queues to manage and quantify deductions, disputes, chargebacks and claims more effectively, and therefore reduce bad debt expense.
Comprehensive reporting of activity across the company, promoting more accurate decision-making and improved compliance oversight.
Online portal access to provide up-to-date information and enhance customer service.
AvantGard Receivables solutions
SunGard’s AvantGard Receivables is a range of fully integrated, web-based order-to-cash management solutions designed to support management decision-making, automate workflows and facilitate connectivity and collaboration between parties; with customers, between departments (sales and operations for example) and to third-party data feeds and systems. The Receivables range is part of SunGard’s AvantGard suite, which includes their treasury and payment processing solutions. SunGard adopts a holistic strategy, offering a technology platform that provides a combination of liquidity management solutions to meet the specific business needs of individual companies.
Key features of the system
SunGard AvantGard Receivables: main components diagram
Credit risk management.
Comprehensive internal data, such as open and closed disputes, and external data, such as bank references, is aggregated by the system and used with a variety of management tools to review, assess and control corporate credit risk. These include custom credit scoring by account and multiple score cards, risk grades that can be used to determine the most appropriate collection strategy for each account and custom online credit applications for customers.
Strategic collections.
Pre-defined collection strategies and strategy steps automatically execute as an invoice ages. For example, despatching reminders and past due notices to customers, notifying sales departments of delinquent accounts or placing telephone calls in a collector’s work queue. Companies can configure these strategies and the steps using categories such as risk grade, geographic location or balance due.
Dispute resolution.
Disputes are automatically identified and assigned to specific ‘owners’, then routed to these owners’ work queues. The progress of every dispute is tracked and escalated to the appropriate level, with all relevant documentation attached.
Cash application.
Remittance information can be accepted from multiple sources such as lockbox files, Electronic Data Interchange (EDI) or bulk payment advice uploaded from customer files or websites. This information is automatically matched with exceptions placed in an exception queue. Deductions and adjustments are detected and assigned ownership based on customer, business unit or deduction reason.
‘Rules’ driven engine.
This enables specific criteria to be set in order to trigger an account’s routing to a particular work queue eg to a credit review, dispute resolution or remittance deduction work queue.
On-line customer service/electronic invoice presentment and payment.
A web portal gives customers the ability to view their account details, download invoice copies, generate disputes and send payment information, including split invoices and partial payments. Referred to as a collaborative portal, real-time data can be seen by all parties including the customer, customer services, sales manager, credit analysts and collectors.
Management dashboards and reporting.
A centralised repository amalgamates data from multiple Enterprise Resource Planning (ERP) and account receivable systems, providing a single view and therefore greater visibility across an organisation, wherever subsidiaries are located. This includes performance monitoring, cash forecasting, root-cause analysis and corporate credit risk tracking.
The use of company-defined key performance indicators creates a comprehensive view for compliance oversight and allows management to certify processes, identify weaknesses and track the effectiveness of policies in accordance with their regulatory obligations.
Interview
AvantGard Receivables
CJ Wimley
Chief Operating Officer
Why did you develop AvantGard Receivables?
We wanted to develop a solution that would meet the changing demands of credit professionals. We consulted with a user group of our customers and discovered that their greatest need was to find a way to increase their turnover of account receivables and improve the efficiency of the various activities related to it. Working with them we developed AvantGard Receivables to provide a comprehensive and flexible trade management capability offering efficiencies and insight all the way along the order-to cash process. In 2005, we acquired The GETPAID Corporation, a provider of accounts receivables and collection software, which furthered our strategy to deliver a complete suite of solutions for improved liquidity management.
Why do companies want account receivables solutions?
Essentially it’s the ability to do more with less – so lower costs, more operational efficiency, reduced DSO and improved turnover in A/R. Effectively managing A/R is important given that it is the single largest cash flow within an organisation. Improvement in this area means better liquidity management and proper use of the working capital cycle. It reduces reliance on other cash sources such as borrowing and the increased interest expense that brings. It also leads to a reduction in bad debt expense, effectively lowering what hits the bottom line.
What about Sarbanes-Oxley – has that had an impact?
Yes. The need for regulatory compliance and the tools to help with that is certainly a factor now. Our customers tell us they can breeze through the related compliance requirements for A/R with our AvantGard Receivables solutions. It is easy to show that sufficient controls are in place and to provide the right reporting. This is definitely a key benefit.
What is the main challenge a company faces within the order-to-cash process?
I think the main challenge is that there can be a lot of manual processes and many interfaces with multiple systems, or even within one ERP system. Our AvantGard Receivables solutions eliminate this problem by combining everything into one single view. You can still have different treatments and regulatory requirements according to country, as well as flexibility around account and customer segments, but the number of people involved in the processing is significantly reduced.
“The need for regulatory compliance and the tools to help with that is certainly a factor now. Our customers tell us they can breeze through the related compliance requirements for A/R with our AvantGard Receivables solutions. It is easy to show that sufficient controls are in place and to provide the right reporting. Th is is definitely a key benefit.”
What differentiates AvantGard Receivables from competitor products?
The breadth, depth and integration of AvantGard’s offering through the entire cycle, from customer order to cash management. We can provide one collaborative vehicle. We also have proven results. Our customer base consists of large and well-known company names that have seen significant returns on their investment. It is one thing to sell an IT product, but it is another to show a customer their return on the investment they have made.
“Our customer base consists of large and well known company names that have seen significant returns on their investment. It is one thing to sell an IT product, but it is another to show a customer their return on the investment they have made.”
What are SunGard’s development plans for AvantGard?
We have a holistic approach to liquidity management and so we will continue to invest in treasury, accounts receivable and payment processing. Our aim is to offer a hub from which our customers can get all the information they need. Where we are not a direct provider, we can be a gateway in collaboration with third parties such as banks, credit agencies and scoring platforms, offering a better picture with greater global visibility. Essentially, we want to help our customers reap financial and operating benefits from improving their processes within the financial supply chain. We will continue to work with each of our customers to develop a combination of solutions that is right for them.
Customers
SunGard’s AvantGard Receivables solutions serve a customer base of more than 350 companies, with over 20,000 users in 40 countries. The solutions are used by businesses across diverse industry sectors including chemical and pharmaceutical, consumer goods, industrial manufacturing, and media and entertainment. Many of these customers are large, multi-national corporations with global shared service centres.
Independent study
In 2006, Forrester Consulting researched the potential return on investment that could be realised by deploying SunGard’s order-to-cash management solution for trade receivables. Forrester concluded that “the primary quantifiable benefit” to the company interviewed for the study “resulted from the improvement in credit-related financial measures such as DSOs and bad debt expense, increasing profitability for the company by over $2m in the first year.” This was in addition to other improvements, such as in the productivity of employees resolving credit and collections issues, employee satisfaction, and the ability to comply with Sarbanes-Oxley requirements.
Customer feedback
Customer feedback suggests the same.
Pertti Metsälä, who is responsible for Shared Services IT/IS at Alfa Laval, says “AvantGard connected to our decentralised in-house ERP systems and helped us gain visibility and control into our receivables across Europe. As a result, we were able to reduce our past due accounts receivable by 42%.”
Bill Uhrich, Director of Corporate Credit for Dresser Inc., says “After we implemented AvantGard, we lowered our DSO, decreased past due A/R and reduced our bad debt reserve by 20%. With the increase in cash flow, Dresser increased working capital which not only helped the company to completely fund its ongoing operations, but contributed substantially to pay $115m in optional debt prepayments.”
SunGard AvantGard
AvantGard is a leading financial management software solution suite that helps corporations and financial institutions efficiently and effectively manage their treasury, cash management, accounts receivable, and payment processing.
AvantGard’s sophisticated and integrated solutions provide the functionality required to optimise the visibility and processing of cash flows to enable corporations and financial institutions to effect sustainable improvements in liquidity management. Through Collaborative Financial Management (CFM), AvantGard delivers enterprise wide visibility to cash in-flows and out-flows, operational controls, risk management, and connectivity for managing partner relationships. By connecting corporations, banks, customers, partners and suppliers via a secure data connection, AvantGard presents aggregated financial data for improved control and visibility. As a result a customer has the ability to oversee the entire financial supply chain across all subsidiaries and geographic regions in real-time, allowing for increased operational efficiencies and the ability to optimise how cash is deployed and invested.
