Episode 7: Leverage Receivables Transformation to Enable Accelerated Growth and Expansion

Madhurima Gupta:
Welcome to the Mid-Market CFO Circle- an initiative by HighRadius, where we tap into the business and IT challenges that mid-market CFOs face at the office of the CFO. So, uh, today for our episode, we have with us, Sayantan Datta. Sayantan has over 17 years of business process transformation experience across functions, including 12 years of experience in transforming Customer-to- Cash operations for global organizations. While he started his career, uh, while transforming fulfillment assurance and billing operations for global telcos, um, he, later on, moved on to cross-industry finance transformation, where he has driven numerous, uh, transformation journeys for a lot of brands across these years. He has worked across multiple makes and versions of technology, geographies, and a wide spectrum of industries as well. And he has catered to, uh, you know, formulating the, uh, transformation journeys for organizations at various stages of growth. Welcome to the show Sayantan. How are you doing?
Sayantan Datta:
I’m good. Thank you. Thanks for the great introduction.
Madhurima Gupta:
You’re welcome. So Sayantan, you know, with your extensive knowledge and understanding of business process management and outsourcing with experience across sales and innovation life cycles, I wanted to understand, um, you know, with you, how companies, how mid-market CFO offices should leverage receivable transformation to enable accelerated growth and expansion. So during this discussion, I’d like to focus on how mid-market CFOs should plan their AR processes, their teams, the choice of ERPs that they should be implementing. How should they be managing data to cater business growth for let’s say a few next, uh, decades to come, right, or at least next five to 10 years to come. So in 2022, um, you know, Sayantan, what would you say are some of the mistakes that CFOs should be wary of while they’re planning their AR automation strategy?
Sayantan Datta:
Right. And that’s a great question, right? Um, but I know let’s sort of shorten the spectrum a little bit because nowadays we are very unsure of what happens in 10 years. But what we’ve seen in the last two, two and a half years in my personal experiences, through my interactions with finance leadership. There are three things that stand out, agnostic of, you know, size, industry, scale, which market you’re operating, uh, that kind of, we need to going forward if we are to, um, achieve the desired outcomes, right? The first one is taking a fragmented approach, right? Something in the overall value chain feels broken, something is taking more effort than it should let me go and fix that with digitization. That generally leads to a lot of plug-in-play technology in the medium, in the long run, as the organizations tend to grow, you will change ERPs, you will upgrade software and hardware and infrastructure and it’ll cause problems. I’ve seen this in many companies who are beyond mature stage of growth. I’ve seen this in companies who are just starting up and beginning to see explosive growth that they land into these challenges because of a fragmented approach. The second most important thing that we should not ignore is data, right. Data, quality, data, integrity, data sufficiency, and then overarching robustness of the data landscape and governance will directly impact the entitlement of any automation and digitization initiatives. Right? If I do not focus on say, my customer data, if I do not focus on making sure that the hierarchies are right, my entire accounts receivable process is going to suffer, doesn’t matter what technology I put in place for it. If my pricing isn’t right, I will end up getting disputes, doesn’t matter what technology I put, uh, to fix, you know, the efficiency of it, right? Because I’ll still be sitting on a lot of disputes.
And the last, uh, important thing, uh, is, is not to adopt a global template philosophy, right? Because business tends to, um, operate in different channels, to different customers. It’s, uh, growing in different directions. There are new products coming in nowadays more than ever, the new collaborations and new partnerships that we’re putting in place. If you take one global template and expect the business to standardize the one place, it always fails, is in accounts receivable. Right. Um, so we need to be able to design, um, a solution that caters to all the variations of business and sort of a corollary of all of this is our approach should not be technology-driven, right? I should not be picking one platform, one ERP, one solution, and then trying and force-fitting all my, uh, data, my processes into that sort of template. This is the age of composable solutions, right? The best answer may be in option B, option C. We can stitch together, given the advances we’ve made in integration technologies. Uh, but let’s focus on design, right? The design that needs to be driven by domain, the design that needs to be driven by my data visions, and the design that is led by process considerations. Those are the things that we really need to focus on, uh, and, and not to do wrong, uh, to be able to get the entitlement looking for.
Madhurima Gupta:
So Sayantan, help me understand one thing, right? So even at HighRadius, we talk to a lot of CFOs and some of the reasons why they, uh, do not adopt a technology, for example, a software solution like HighRadius is because they have insufficient data available. Right. And because of this reason, they say that, Hey though, I do need a solution like yours, which could, which could be for managing their credit risk better, or for collecting, uh, increasing their collections efficiency, or it could even be to manage deductions better. Right. But at this point when they don’t have data, they kind of take a back step. Now for such cases, right, where they say, Hey, I need to fix my data first. And then only I can go to the next step. What would you say is the right approach? Is that okay to step back and not make that progress right now and wait for things to improve and then hop onto the next step? Is that an okay approach?
Sayantan Datta:
That’s an okay approach. But then, so there is an offshoot to that thinking, right? Yes. Today I’m not mature enough. And if I go with something like a HighRadius, which is an enterprise-grade solution and insufficiently implement it, it’ll go wrong. Right. But then taking a step back doesn’t mean I put a pause on things. It means that I increase my readiness, right. I start working on developing a data strategy. I start working on, um, making sure that I have a view of what my process looks like. Organizations are more interconnected than ever. Do I know how the data is flowing, if not, let me try and, um, understand that. And then with the advances that we are making and process mining today, that has become easier overall, right? So it’s always, it needs to be a journey to a maturity and readiness. Uh, and then if HighRadius is the answer, HighRadius is the answer, right? But for me to be able to deploy that and get the most out of it, I need to have a coherent strategy surrounding domain data and process. And that’s, that’s at the heart of this whole thing, whether it’s HighRadius or some other platform or basic optimization in, uh, in an ERP. If I don’t have a coherent and integrated strategy, I will fail.
Madhurima Gupta:
So let’s say now we’ve come to a stage where a company has figured out their data strategy and they have all the data that they need is sufficiently available right now. At this point, Uh, what would you say for mid-market CFOs that are eyeing automation should be the key AR processes that they should focus on to build a full proof plan?
Sayantan Datta:
There is no one right answer to this question, right? I mean, it’s, it’s a great question. It’s something that a lot of people struggle with and I’ve seen this struggle happen, not for, you know, platforms, but even when deciding on where should I put my robotic off process automation, even if I’m trying like three bots in the process, right? So, which is the right place to start so that, you know, I can grow and scale. Uh, it depends a lot. It depends on the culture of the organization. It depends on where the pain is, where the scale is. And most importantly, I’ve seen, um, instead of picking the hardest problem, first, it’s better to pick the most optimum problem where you’ll get some success and the probability of success is high, right? Whichever that is maybe it’s a transactional process like cash applications. Yeah, sure. Um, if there’s enough entitlement for an outcome and there is a high probability of success in terms of, I control the inputs and to the process, yes. I’ll pick cash applications. But if it’s not the case, right. I don’t have the integrations with my bank ready. It’s not at the right state of maturity. Let me look at something that I can control a little better, right? Let me go further upstream and control master data. Let me go and control credit risk management. Whichever makes the most sense from a point where I can get some good outcomes and initial success that then I can help use to feel, uh, you know, further scalability. So that’s, that’s sort of a factor in, you know, which, which process you choose. The other thing that is important to remember, especially midmarket companies in, you know, an accelerated growth phase, there are always like a hundred different priorities going on in the organization and all of them are interdependent. So my choice, um, should ensure that my transformation doesn’t stall because the whole organization suddenly pivots to focusing on something else or my choice should not stall growth, right? So it’s, it’s, that fine balance that you have to pick during the growth phases, because I don’t want to start putting a very complicated solution. And my organization suddenly takes a pivot. It acquires a fairly large organization, goes into a wholly new market, and I’m not ready to onboard the market or onboard the, uh, acquisition that I’ve just made that will make life more difficult. So again, it needs to be tied to at least the medium-term plan in terms of where the organizational growth is happening. And then I choose which process, which area, which market, which business, um, to, to make sure there’s that, that has the maximum chance of success. And it kind of to some extent becomes self-propelling by generating sufficient outcomes and savings from the implementation.
Madhurima Gupta:
Sayantan, another question on the same lines, right? So what I wanted to also understand, and this is again, based on some of the conversations that I’ve heard at HighRadius, from different CFOs that we have spoken to. So, you know, when they’ve, uh, you know, set up a roadmap on how they should be approaching transformation of their AR function, they, they generally end up giving, um, importance or prioritize a particular area where the team is making more noise. Right? So there’s a possibility that, um, there is an AR team of, let’s say, 20 people, now out of these 20 people, there are 10 collections people, because of course you need to have more collectors to collect your due amount. Right. And in cases like these, a lot of CFOs, because that’s, what’s making the maximum noise, they focus on collections. Whereas there is a possibility that there actually, you know, they need improved for cash application or they need to onboard their clients quickly and they need to mitigate risk better. So how should, uh, CFOs break out of these stereotypes, right. And make sure that they, they, if they have any preconception preconceptions, they’re able to overcome it. So how should, uh, mid-market CFO look at it?
Sayantan Datta:
Um, and that’s a great question. And it goes back to what I talked about when I started off saying a design is tricky and design just doesn’t mean, um, I’m, I’m sitting in a room somewhere on a whiteboard and upgrade design. No, right. These are things, if I assess my collections process accurately, there are multiple reasons there could be collections noise, right? Collections noise could be because there’s a dependency on sales to go out and set right expectations, which they’re not doing because you know, it’s grow at all costs, right. Uh, noise and collections could be because of each genuine cash at the tail end of the supply chain, right? At your, your lowest level of customers, they are facing a cash flow issue, which has happened a lot in the last two years, right. The noise is not necessarily a people noise. The noise is a situational noise. The market’s reality is creating that noise. The noise could be in some industries, this is very true. The noise could be because you just don’t have a clean view of the ledger, right? Because like you correctly said, you’re not doing your cash applications, right? So therefore a collector doesn’t know what should be collected. And there that leads to a lot of noise. So for me to be able to figure that out and for me to be able to design this solution, to address the problem end to end in the value chain that starting collections noise could originate in master data and credit and disputes and cash applications in the upstream sales and marketing process in the order management process could originating in supply chain could be just, you know, bad business environment. I need to look at all of that.
And then I need to come up with a design, uh, that fits into that context. Right. But it’s agile and scalable enough so that when the context changes that the design can change accordingly. Because, so I’ll give you one very, very interesting example. I was reading sometime back that if you look at the trend of how, you know, working capital metrics are evolving, right. Uh, as we are coming out of COVID, you’ll see that, you know, DSOs are going up and the payable outstanding are going up. So, uh, some of the mid-market companies you’re gonna face pressure at both ends. You’re gonna face pressure in terms of getting paid, and you’re gonna face pressure in terms of making payments, right. And all the, uh, good stuff that the governments are, uh, sort of giving out through programs to support businesses, that’s gradually coming to an end, right?And you’re, you’re moving into an economy. That’s gonna be very different, um, not totally different, but significantly different with all the hyperpersonalization. Uh, the consumerization of B2B that’s happening. Credit risk management becomes very important. Now credit risk management forever has been a control function, right? It’s about, okay, an order is gone on hold. Let’s take a look and see if I can extend some credit, let me push it forward. But that is no longer gonna be sufficient because uncertainty is nowadays almost always around the corner, either a variant or a political conflict or a geographical conflict. So I need to be able to continuously assess credit risk in terms of expected loss and in terms of probability of loss and how that will lead to specific leakage. And then can I then try and factor that leakage or that possible loss back into my pricing. So that’s how important credit risk management has become. Now. I need to pay that attention to it rather than, you know, continuing in the same, uh, spirit of credit being a control function as we go forward. So I, I hope that sort of gives you a good idea of how I think about design being very important in the context in which I am, um, thinking about transformation.
Madhurima Gupta:
So, you know, that gets me to my next question, right? So when people are putting together this design, or, you know, an AR transformation plan, what weightage should CFOs give to the expected growth that they expect, uh, in their business and why?
Sayantan Datta:
There’s no right answer, right? I mean, it depends on which stage of growth you are in, in the business life cycle. If you’re at the, you know, sheet down state, there’s a different thing. You gotta think if you’re in a maturity stage, there’s a different thing. When you’re, you know, going for a life cycle extension, there’s a different, um, but if you make a list of 10 things, um, it should not be lower than number three. Right? Um, and, and that’s because you know, your transformation, as I mentioned somewhat before, right? Your transformation is going to either stall because of other initiatives going on in the organization, right? You suddenly, uh the organization might get acquired or decide to acquire a whole, you know, different business into the whole different market. And there is a possibility that will stall my transformation. The other thing that can happen is because I’m doing this transformation. So for example, let’s assume that I’m implementing a platform and my business is largely focused on, you know, North America, Western Europe, as a business, we decide to now expand into APAC, right. And, you know, Southeast Asian countries, uh, uh, they have their whole regulatory and language complex. You know, if I haven’t factored that into my design, I will never be able to onboard that market into whatever solution I, I have, uh, in place in terms of technology, in terms of process, in terms of templates, right? So factoring in that growth plan will enure that my choice of solution, and remember, I’m saying my choice of solution, not technology is agile enough. It’s scalable enough. There is enough speed to market to be able to onboard. Uh, it has adaptability the moment I add the new language, how soon can I onboard that market? How, um, well, can I adjust to the nuances of that language, whether it’s, uh, written left to right top to bottom. It, it makes a lot of difference in transactional processes, which depend on language-based input. In the middle east when you’re getting bank statements, which are not in English if or remittance advices that are not in English, will my cash applications process stall, or do I have translation engines enough to be able to extract data? Correct. Right. So that’s, that’s why the growth, uh, you know, the growth plan or the growth strategy is very, very important and should never be lower than at least, you know, number three, I’d put it at number two.
Madhurima Gupta:
So, um, can you describe some of the dependencies which are growth averse that the CFOs office have built-in that they should move away from?
Sayantan Datta:
So organizational dependencies generally tend to be the most problematic, right? Uh, let me give you a very simple example, to be able to do my, um, my invoice offset, right? I am dependent on the supply chain to send me my, um, my proof of delivery or send me my returns information on time, right. To be able to collect from a customer. My, uh, contract data is just sitting with customer service needs to be available to me. Otherwise I’m dependent on them. So data dependency is driven by organizational boundaries is a massive, uh, growth of us. And it’s not really a CFO responsibility. It’s how finance gets set up over time. Um, especially in, you know, high growth phases, finance becomes an enterprise support function instead of a partner. And therefore you end up in this place where finance is basically responsible to do all the accounting and the rest of the organization is focused on growth. Now it doesn’t take very long for concerns of compliance, for concerns of working capital to catch up because selling no matter what eventually ends up in a, in a significant amount of mess, that retroactively is very difficult to solve.So that’s one very big dependency that needs to take care of the other pieces, a dependency on trivial knowledge. Um, I have a team of 10 people, uh, for, a relatively small customer base in the space. Uh, my collector really knows my customer, right. And, and the way they want their things to happen, the frequency at which they want their account statements, uh, being sent to them when they want their reminders. When you lose that person, you lose the relationship with that customer. And that customer could account for 5% of your revenue, which means that you are opening yourself up to potential, you know, past due working capital risk. At worse, you’re leading up to revenue risk, right? Because at the end of the day, the customer is dissatisfied and you have to end up writing it all, that’s a direct hit to your or PNL, right? So it’s important to be able to remove dependencies on individual people. It’s always a people, uh, business, right? So it’s not that you get rid of people, but you should not lose knowledge because loss of knowledge, poses a greater risk as loss of revenue or, you know, your defaulting customers. So those are, you know, sort of two things that in my experience we need to focus on, um, in terms of what dependencies should I attack when I need to sort of design for the next, uh, phase and transformation next phase in digitization.
Madhurima Gupta:
Absolutely. And Sayantan, in the very beginning, we talked about dependency on technology as well, right? Where we spoke about how, when companies are very comfortable with one kind of software, they kind of, you know, stop to move forward to the next. Right. And, uh, maybe let’s say if to a problem, HighRadius is a solution, for many numerous other reasons they think, all right, let’s put that on a pause and be happy with what we have at the moment. So for cases like these,um is that something that you feel works out because, uh, it is in a way hindering the ability of the CFO office to scale as the company grows.
Sayantan Datta:
Yeah. As long as there’s a plan, right? I mean, yes, we should not get comfortable on our laurels, which is, you know, age-old cliche, but, um, as long as there’s a plan to continuously improve, whether that improvement, uh, happens in big jumps or small incremental steps, right. Uh, fixing my, um, data strategy is a small incremental step because, but if I get that right then that pain that I think I’m going, going to feel when I switch from one technology of comfort to another technology will be significantly reduced. Right? Because if you think about it, when we, uh, when you talk to CFOs, when you talk to financial leadership and you start to lay out dependencies and risks, these become biggest dependencies, right. Is my organization mature enough to undertake something like this? Do I have the right digitized data? Is my data structured enough to work with it? Do I have processes that follow at least some semblance of rules, right? These are all small incremental things that you can do towards getting to that readiness where I can take the next leap. So as long as there is a blueprint to get there, it’s, it’s okay to take it slow, right? We,uh, because if you rush into it, I said that, yes, I have a great, but it’s not gonna be doing anything. I’ve seen plenty of platform deployment with the platforms there, right? It’s a great key study and a showcase, but all the teams are working around it, right. That because they want to create so many workarounds, uh, because I’ve driven a platform into a design where, you know, contextually, I was not ready for.
Madhurima Gupta:
So, uh, you know, we are coming to the end of this podcast, Sayantan. And I wanted to understand, you know, in fact, I wanted to ask you what your parting thoughts or parting recommendations would be for CFOs who are right now rethinking their AR function in 2022 and, you know, beyond.
Sayantan Datta:
So number one, uh, focus on design, right? Get the design, right. Make sure that the end-to-end context is built into the design Once we have that, what technology I choose will really not matter because at the end of the day solving a particular problem and there are many different ways to solve that problem. So, uh, you know, sometimes I, I talk to, uh, finance leadership and everybody wants to experiment with AI or somebody wants to touch on blockchain. If I don’t have a design, right, if I don’t have my data strategy in place, AI, blockchain, nothing’s gonna work. We, we all have, uh, great implementations with no results, right? So that’s number one, right? Number two. And I mentioned this, that the growth plan, the future strategy needs to be factored into that design is one of the important things I, because growth for, you know, a Fortune 500 company, if they grow into a new market or a new product, the net impact of that is really small in their overall portfolio. But for midmarket companies expanding into a new product, a new market, a new group of customers or a new price segment is a significant impact on their overall portfolio. Right? So my ability to, you know, my, my transformation needs to have the ability to flex, to adjust, right. And the third is we need to pick the right business outcomes to measure success because its accounts receivable doesn’t mean day sales outstanding needs to be the most important metric. No, it is the most important metric would be compliance. The most important metric would be, you know, revenue leakage, the most important metric, uh, of success really be customer experience is, is have I been able to establish the relationship because at the end of the day, if I’ve sent my invoice out to my customer at the right time, in the right configuration with the right information, I will get paid, um, nine times out of 10, right? It’s it depends on what outcome really matters to the business I’m in and to my customer. And we need to focus on making that the measure of success instead of just focusing on, um, efficiency and, you know, headcount terms and the one thing that can be benchmarked against, uh, the rest of the world. So those are my sort of, you know, three summary thoughts based on many success and failure stories that I’ve seen in terms of driving transformation, across organizations, finance organizations.
Madhurima Gupta:
Absolutely. Thank you so much for taking time and sharing your expertise with us today. I’m sure that our listeners are gonna, you know, uh, get a lot of benefit from it. So thanks a lot. And, uh, for our listeners out there stay tuned. We’ll be back with more episodes with experts, such as Sayantan in time to come.