In this episode, AVP at Sidetrade Bill North discusses an overlooked KPI called Time-to-Invoice. For many industries, Time-to-Invoice can represent a significant value and the hidden secret to reducing DSO. If more companies were to start the clock earlier in the order-to-cash cycle, DSO would actually be all encompassing, from the time that the product or service is sold through both invoice creation and invoice delivery.
In this episode, AVP at Sidetrade Bill North discusses an overlooked KPI called Time-to-Invoice. For many industries, Time-to-Invoice can represent a significant value and the hidden secret to reducing DSO. If more companies were to start the clock earlier in the order-to-cash cycle, DSO would actually be all encompassing, from the time that the product or service is sold through both invoice creation and invoice delivery.
Welcome to Finance to Futurist, a Sidetrade podcast series on how innovation data and AI are disrupting order-to- cash.
Natalie Silverman:Hi, this is Natalie Silverman for Sidetrade. Welcome to Finance to Futurist. On today's episode, we're discussing an overlooked KPI called Time-to-Invoice. For many industries, time to invoice can represent a significant value, and the hidden secret to unlocking DSO. Please welcome AVP of Sidetrade Bill North. Good morning, Bill and thanks for sitting down for Finance to Futurist.
Bill North:Thanks, Natalie. Glad to be here.
Natalie Silverman:All right. Well, I always start off with a very easy question, then we'll get progressively harder today. You know, we'd love to hear more about yourself and your background and how you got to Sidetrade.
Bill North:Sure. Well, my background is in corporate finance technology. So spent many years in the treasury management system space, spent a lot of time in the payments, cross border and domestic space. And I've spent about, say about five years in the accounts payable and accounts receivable space, working with Fortune 500 multinational globals and evaluating and implementing technology.
Natalie Silverman:So this is not your first rodeo in terms of AP and AR.
Bill North:That's it's definitely not I don't know how many rodeos I have been to, but I guess you could call me a
Natalie Silverman:I love that. All right, so today's topic, cowboy. it's a little bit different than maybe some of the other topics that we've tackled here on the podcast. So I'm gonna give a little bit of background, and then we'll get to my first question. You know, suppliers have invoiced their buyers the same way I feel like for a very long time, and you know, my background, I actually worked in order to cash maybe five, six years ago, and I feel like it hasn't changed much where people are still doing very manual, sometimes slow prone to error processes. And, you know, sometimes it's just easier to stick with the status quo. Obviously, global market drivers inflation, all these, you know, macro events that are happening, it's causing this complexity, I think, to be even more accentuated. One thing that I'd like to talk to about is a secret weapon that's out there that I feel like can help a lot of finance professionals. And it's finding that hidden value within the order to cash process. So that secret weapon we're going to introduce today is called Time to Invoice and I wanted you to talk to me just about how you think this concept of time to invoice has a direct correlation with DSO?
Bill North:Absolutely, I think there's multiple factors that have influenced kind of the overlooking of what we call time to invoice. And I'll start with the concept of control. Oftentimes, leaders in looking at where technology and automation can help see the low hanging fruit in the areas that they can more easily control. So you look at like you mentioned, the proliferation of AP technology, that's an area that you can control, right, that's, that's a lot of these platforms out there on the AP side are talking about, you need to control your spending. And so in accounts receivable, you look at the first area of control primarily, that's collections, right? Because you can control how your collectors act and behave and how efficient they are. And technology can definitely help you there. But the area of time, the invoice right is so dependent, the challenges are created by customer requirements, if companies only had to produce an invoice in one format on one day of the month, and the same thing could be used by every customer, then we wouldn't have this problem. But it's a balance, right? It's a balance of meeting customer requirements of putting the invoice in a certain format, including certain data, making sure it gets into an AP portal on the customer side in a certain format and having certain data. And so organizations lose a lot of that control. And oftentimes, they'll go after that collections efficiency, or maybe caching application or other things right. Again, you can more control it. And we'll leave that invoice or time to invoice idea, maybe to the end. And in my perspective is it's just as valuable to attack the time to invoice.
Natalie Silverman:Now. That's a great point. And I guess my follow up question would be talk to me about how most organizations calculate DSO today. And again, controversial statement. But how do we get them to maybe think a little bit differently? If you think personally that maybe it should start earlier in the cycle.
Bill North:So when we engage with prospective customers and existing customers, the measurement of DSO is at top of mind, right? Because that is the kind of industry accepted financial ratio that quote unquote, measures your ability to collect products that you've sold or services. And at a high level, you can calculate DSO just from financial statements, but it's very interesting to me that DSO is very inconsistently talked about when you talk to financial leaders within global organizations and how do they measure their teams internally, sometimes they call it DSOs sometimes They call it other things, maybe percentage of overdue payments. But even when you use DSO internally, potentially, we've talked to many financial leaders that start that DSO clock at different points in the process. Let me review a few data points recently that that I've been privy to. So interesting enough, I was attending and presenting at a CFO conference that was run by one of the large global analyst firms. In their session, they talked about DSO as being all encompassing from the time that the product is sold, and all the way to when cash gets applied, and it gets collected and then applied. And those first two steps they called invoice creation and invoice delivery, two distinct steps, we are referring that now it's I take to what we call time to invoice for that whole process. And they absolutely put a stake in the ground saying this should be included in your DSL calculation and how you measure your grouping internally. In my session after show I actually did a quick rough survey in the crowd, there was probably around 50 folks in the crowd. And interestingly enough, about half included what we call time to invoice in their internal reporting, and half of them did it. So just goes to show how inconsistently DSO gets applied and measured within organizations. And again, I'll repeat what I just said a couple of minutes ago is that delays and invoicing have just as much financial impact as collections due in the value of DSO and bringing back working capital of the company. So oftentimes, it's inconsistently measured. And it's a probably a harder challenge to solve because of the customer requirements. And that combination of those two drivers result in either folks not wanting to measure it, maybe to expose some inefficiencies, or just, you know, leaving it to a later challenge to solve. Let me get my collections Correct. Let me get cash application correct in billing or invoicing will kind of be the last one to solve. And we absolutely think that that's probably not the way to go.
Natalie Silverman:One thing that also I listened to during your session and the other session that you mentioned, you know, a lot of these industries, right, like oil and gas, transportation, logistics, it seems like they're dealing with things like field ticketing, right, or internal routing, and even internal approvals processes. And some of those seem to be the root causes for why it's taking longer and why that it leads to delays before an invoice is even generated, right and sent to a customer. So I don't know, do you have any advice or best practices on maybe how to avoid some of those root causes? And you know, a lot of times it seems like it might be driven by those manual processes, or, you know, the lack of integration maybe between systems internally and externally. But any advice you think for somebody that's maybe bringing this new concept of, oh, hey, we need to start calculating our DSO a little bit earlier in the cycle? And how can we do that and bypass some of these root causes?
Bill North:I think in addition to what you just said, Natalie, about the root cause of of what we will call pre invoice workflow or process, I would add one more big driver with this, and that is the getting the invoices to the AP portals in the right format, and then getting visibility. So let me let me talk about that in a minute. But I think the first thing that you evaluate, I would recommend is basic automation in this pre invoice workflow, right, which means if you're like you said, oil and gas, the concept of field tickets, which essentially is just a confirmation by someone in your organization, that the product that you ordered was delivered in good standing and in good shape right at the right place. So similar. Other industries have good receipts or proof of deliveries, same type of concept, right? And those things, you're not going to have a choice, you have to do it. So a lot of companies are putting an automation around that process a field ticketing system, or you know, some sort of integration between let's say, FedEx or UPS you can integrate into their systems to get proof of deliveries, right? And that solves that one automation problem or challenge. Now the key is when you look at attacking the invoicing problem, integration is key. You want your eInvoicing platform to be able to very easily integrate with the systems field ticketing systems, VOD goods, receipts, and then also things like timesheets, right for for a lot of the services based industries, you have the concept of timesheets, and maybe even timesheet approval, which oftentimes we'll see that it happens in one system completely independent of your invoicing system. And then there's a manual effort oftentimes to then reconcile that before you send the invoice because we've even come across some industries where if you get any data point wrong in your initial invoice, you have to reissue the invoice and you can't do it for 30 days. So that's 30 days of DSO that you're adding to the process because you got potentially one data point walk. So you know, I think putting basic automation in pre invoice, integrating that and then having your invoicing platform, do data validation. Even after that automation is done. Doing a final check in the eInvoicing platform could potentially be that step where you validate that everything is correct and the invoice is the right format. And then to finish this off, is you've got the invoice created. The date is all correct. We know it is we've done Over accuracy checks, but now you have to get it to say a third party AP portal, like an Ariba, or a Coupa. Or target. Right? That's a whole different challenge, because now you have to get that data in there format includes certain bits of information. Some of these portals have proprietary information that has to put in their network IDs is not going to live in your system. But it has to be in this invoice when you upload it, you can see that it's in when you go to scale, it's potentially a huge problem. And oftentimes, we see organizations just throw people the problem, because that's probably it's not the most efficient, but it's the easiest thing to do is to throw people at this and absolutely, this is an area that technology is the enabler, not people.
Natalie Silverman:I feel like this is a bit of deja vu because I mentioned to you I did used to work in order to cash and I feel like even five, six years ago, this was the same challenge that I used to hear over and over it's AP complexity, but now it just seems like tenfold, right? Because there's probably 50 to 100 more AP systems out there now, right? Yeah, it just it's funny, because I feel like I'm in the twilight zone listening to some of these same challenges. And one of them too, that I'd like to ask you about is I think I asked us five years ago, why is AR so far behind AP? And why is that still the case? It seems like you know, receivables tends to still be an afterthought?
Bill North:That's a great question. And I would completely agree with you a couple of factors, I think lead into that. And that is number one. Again, this concept of spend control has really been kind of pushed out there by the AP technology companies. And there is clear ROI in that area. Right? It's easy to see that you've got this much spend, you put this workflow around it, you put it you centralize it on one platform. And there's a good ROI there. And again, it's much easier to control the spend internally, and I think AR for you know, for the ability and the prospect of bringing back working capital in the business, I gotta tell you, I think it's just been a challenge, it's been probably a little bit harder to solve because of the customer influence into it. And and maybe it's just that that technology hasn't yet gotten to the point or is maybe a little bit behind in AP. You know, the good news is it's here now things like collaborative intelligence, and, you know, AI and big data in on the AR side, where some technology platforms enable you to see how people are buying products and how they're paying invoices, then they'll help you. So I think it's getting there. But I would completely agree that it's, you know, the AP technology market is quite large right now.
Natalie Silverman:Alright, Bill, last question for you. We were at another conference actually a couple of weeks ago. And we talked to some of our clients and some prospects around the topic of employee retention, which I thought was interesting, because we spend a lot of time talking about AI and technology. But we don't spend as much time thinking about how, like you just said, technology can enable finance teams, and a lot of times AI I mean, what is it therefore it's not there to remove people from doing their jobs, right. It's actually there to give employees the tools that they need to do their jobs more effectively, more strategically. So just wanted to get your thoughts on that. Because I don't think we focus as much on that concept of employee retention and finance.
Bill North:Natalie, it's a very timely question in that conference I attended that was there were multiple sessions on how to attract and retain talent and finance. Right. And there's obviously compensation work from home. And there's so many aspects that technology doesn't touch. But absolutely, I think everyone was in agreement that technology can be a differentiator, right? If you think about one area of of AR, that's probably has the most headcount, that's collections collections is typically a very high turnover area, very competitive for talent, probably the most challenging area to attract and retain talent in AR. And so you know, what, what I found is collectors want the ability to be efficient and productive. They don't want to waste effort in collecting, you know, just as much as the organization doesn't want them to waste it. But oftentimes, the tools that they're left with, which could be Excel, it could be manual, it could be email doesn't give them the ability to do that much more effective. I think it'll probably take, I would say, six to 18 months to get some more data on this and really understand the impact of it after this great resignation and post COVID. But absolutely, finance leaders felt technology across the board was going to be a key differentiator in attracting and retaining talent.
Natalie Silverman:Thanks, Bill, for your insights into the future of finance. For Sidetrade, this is Natalie Silverman.
Conclusion:This has been another episode of Finance to Futurist, a Sidetrade podcast series. Make sure you catch every episode by subscribing to our podcast on Sidetrade.com or through your podcast platform of choice. Thanks so much for tuning in. This podcast is brought to you by Sidetrade, and is for general information purposes only. All rights reserved.