Why the back office
matters. Like, a lot.
Booming business can mask an operational bust—until it can’t anymore.
WERE THINGS IN ACCOUNTS PAYABLE
REALLY THAT BAD?
(NO. WORSE.)
The Situation
There are a couple lines in a Hemingway novel that work to illustrate why some organizations seek outside help. Paraphrasing: How did the trouble happen? Two ways: Gradually, then suddenly.
And so happened the troubles at a global consumer product company; organic growth had long masked underlying issues with organization structure, finance tools, and processes—until one day, suddenly, it couldn’t. In fact, it was the growth that finally tipped the scales … maybe because a pandemic spiked consumer demand for products or maybe because it was just time. In any case, more and more vendors were sending invoices to the company’s accounts payable (AP) department, and because AP’s structure, tools, and processes weren’t built to handle the load, they couldn’t pay them on time.
Some weren’t getting paid at all—no one knew to pay them. The vendors started getting frustrated—emailing, phoning, asking for meetings with the CFO. Chaos. Morale in AP spiraled. Fingers were pointed. Key veteran AP employees left. AP had a backlog of 40,000+ invoices when the holidays arrived, bringing even more pressure from vendors trying to close out their books for the year’s end.
Finally, the company’s major suppliers—all of them—issued a credit hold, significantly compromising the company’s ability to produce and sell product. And suddenly, what was left of the AP team crumbled.
This is what Deloitte professionals encountered when leadership asked them to look into helping the AP department. Their assessment? Even standard industry processes and controls were missing. “We were shocked.”
THE SOLVE
MAINTAINING RAPID
GROWTH MEANS
TRANSFORMING HOW
BUSINESS IS DONE.
The Impact
The first breakthrough in stabilizing AP operations came when the team brought the company’s top 100+ vendors current—lifting the credit hold and bringing production back online. The next boost came when invoice-to-processing dates were reduced from 50+ to five days, meaning suppliers could be paid on time. This in turn reduced the volume of emails about past-due invoices still in backlog from ~350 to ~25, which in turn allowed team members to spend less time on crisis management and more time on improvement initiatives.
To wit: Deloitte redesigned the company’s AP department to handle future growth and business, creating new processes and building a strong foundation within AP so that the company can migrate to more modern tools.
Cash forecasting accuracy is now 1–2%, with payment accuracy steady at ~99.9%. While the RPA automation decreased payment errors to less than 1% per week and reduced the AP team’s workload by 16 hours per week, centralizing and standardizing processes have reduced the company’s costs overall.
For example: by supporting the company with nearshore and offshore resources, Deloitte improved controls and improved working capital by 5%.
And with accounting stabilized, the company can move forward with bringing in new technologies, automation, and processes to improve operations overall.