The Process Execution Gap – Celonis Research Reveals Potential for $100M+ Cost Savings and Working Capital Availability

August_Celonis Research_Feature imageDo you know what’s preventing breakthroughs in your company’s performance? Inefficient and ineffective business processes prevent many companies from maximizing revenue and cost savings. 

At Doculabs, we believe process mining is the key that will unlock those benefits for companies. Over the last months, we’ve written often about process mining – what it is, what the benefits are, and how to get started. Today we’re going to focus on ROI potential revealed by a Celonis survey. 

The 2021 State of Business Execution Benchmarks Report from Celonis illustrates the process execution gap in procure-to-pay and order-to-cash processes and points to a solution.  

The Process Execution Problem 

Here’s the core problem:  

“Every company has a set execution capacity. It’s the maximum level of performance that an organization can achieve with its available time and resources. If you want to increase your execution capacity, you have a choice: either increase available time by adding new resources, or find new ways of accomplishing more with the resources you already have.” 

Companies have invested billions of dollars and thousands of hours to automate manual business processes. Workflow and process automation tools and digitization of paper documents are two crucial technology elements that enable automation.  

Yet despite all of the money and time invested, companies still have an execution gap. Most companies know this, but are unable to identify where their roadblocks are. That’s where process mining can play a critical role. 

From the research, “Celonis continues to see productivity and output levels that fall far below expected execution capacity in nearly all of our engagements.” 

Accounts Payable Performance 

The survey data shows how average and top-performing accounts payable departments perform across five important KPIs: 

  1. Touchless Invoice rate 
  2. Paid on time rate 
  3. Cost per invoice 
  4. Days payable outstanding 
  5. Duplicate payments 

August_Celonis Execution_AP KPIs

The survey responses showed that there are three key obstacles to accounts payable execution: 

  • Rigid systems and technologies – 41.1% 
  • Broken or inefficient processes – 38.9% 
  • Organizational silos – 37.2% 

Additionally, 65% of AP teams focus on moving invoices based on due dates and first in, first out rather than how an invoice impacts KPIs. The technology exists to overcome these obstacles (RPA, workflow, and intelligent process automation technology), but you have to begin with an understanding of the root causes of the issues. Only 20.5% of AP departments use process mining to identify their process execution root causes. 

Accounts Receivable Performance 

The average company also performs poorly in AR processes. Two of the same obstacles prevent companies from better AR performance: 

  • Rigid systems and technologies – 42% (66.7% for companies with fewer than 10,000 employees) 
  • Fragmented data landscape – 40.4%
  • Broken or inefficient processes – 40% 

The image below shows the four KPIs the majority of AR departments focus on and the gap between average and top performers. 

August_Celonis Execution Accounts receivable_image 2

One execution gap is caused by focusing on the wrong KPI – “71.3% of collectors still prioritize invoices by age and value instead of likelihood to pay.” Prioritizing based on receivables that are most likely to be paid prevents wasting time chasing unrecoverable cash. 

The Cost of Being Average 

Companies pay a hefty price for average execution. To show the financial impact, the study assumes an average company: 

  • Revenue: $5B 
  • Average order price: $1,500 
  • Sales orders: 3,333,333 
  • Purchase orders: 3,000,000 
  • Total supplier spend: $2.4B 

On average, these average companies are not capitalizing on $567M in working capital and $105M in cost savings.  

Closing the execution gap in any one of the four processes in the survey would be worthwhile: 

  • Accounts Payable: Eliminating the execution gap between DPO in benchmark companies (48.4 days) and top performing companies (74.5 days) would free up $171,616,438 in working capital.
  • Accounts Receivable: Closing the DSO gap between top performers (24.1 days) and benchmark company (53 days) would free up $395,890,411 in working capital. 
  • Procurement: Reducing the cost of PO processing from $15 to $1.35 per PO would save $40,950,000. 
  • Order Management: Lowering cost per sales order from $29.31 to $9.94 would save $64,566,677. 

What Should You Do? 

Closing these execution gaps is low-hanging fruit. Pluck it. Process mining can reveal the problem areas in your procure-to-pay and order-to-cash business processes. While not covered in this study, intelligent automation tools from companies like ABBYY, Hyland, Kofax, Ephesoft, and many others are mature, robust solutions that can automate manual invoice and accounts payable workflows.  

You can download your copy of 2021 State of Business Execution Benchmarks Report here

You can also contact us. Doculabs, a certified Celonis partner, can work with you to identify your process execution gaps. Get in touch with us at (312) 433-7793 or you can tell us how we can help here 

Check out the video below to see our Process Optimization Calculator for an idea of how much you can save via automation. You can also see our Process Migration Solution in action in the second video below.  

 

 

Photo by Brett Jordan on Unsplash

Rich Medina
Doculabs Vision Team
Our blogs are a group effort, from writing to editing to brainstorming topics. We collaborate to provide you with our best thinking that will help you use technology to improve how your organization operates. The Doculabs blogging team is Richard Medina, James Watson, Marty Pavlik, and Tom Roberts.