Digitized OTC: The future of marketplaces and ecommerce

Connective Payments, July 2020 The covid-19 pandemic has proved that while many online marketplaces and ecommerce businesses thrive from increased sales volumes, their Order To Cash process (OTC) lacks scalability. The OTC process oversees the transition of customer orders into payments and shipped products and services. The margin of error can be reduced and the process optimized to save costs, avoid manual (re)work, cash flow problems and customer complaints. Jil Ebanoidze, Strategy & Change Manager eCommerce & Marketplaces at Connective Payments, has gained substantial experience redesigning and digitizing OTC processes, saving the companies she worked with millions of euros. What lessons did she learn? What changes do you see in OTC processing?

“I think the covid-19 pandemic simply made it clear that digitized OTC is not just “nice to have” but “need to have”. The global crisis has put marketplaces and e-commerce companies to the test. With so many customers shifting to online shopping, business processes were challenged, leading to more chargeback cases, bigger credit and fraud risks, more accounts receivable and more bad debts. In other words, without a fully automated OTC organisation the company´s profitability, and even reputation, are at stake. On the human side, covid-19 illustrated the benefit of process automation and data synchronicity between platforms. For example, in many companies the Finance and Operations teams would spend 30% of their time executing OTC semi-manually and completing month end financial reporting and accounting. During lockdown this challenge became so much bigger, because those people were working from home and even had no back up if they were ill. Today technology is there to fill this gap and build a solid ground.

Has the management attention towards scalable OTC processes changed, in your opinion?

I think management pays more attention to overlooked metrics on cash loss, security and reputation risk which are high due to the transaction peak. Companies need to be able to shift their retail business to e-commerce and accommodate the volume growth. Customer on-boarding, credit checks, prepayments, collections, reconciliation, dunning, shipping, invoicing, reporting and forecasting, all of these OTC process steps were traditionally considered to be merely back office processes. Certainly they weren´t overlooked, because they represent considerable transactional costs, and inefficient design could lead to lost or poor quality sales, but redesign projects were mostly limited to streamlining specific process parts or organizational departments. In my opinion, companies are more aware of the necessity for a more holistic instead of an fragmented approach. Building a Plug & Play OTC organization is a one off investment which is a tiny friction of the cash saving (not to mention reputation and employee satisfaction) that companies get even in the first year. However, this is not just fixing but also building, which means the long term benefits are huge. I think now that companies are hit on numbers and the security risk is higher and they are losing customers due to complex processes, they are willing to consider OTC as a strategic investment. Today customers need simple solutions and companies need secured, scalable, seamless solutions. Among other benefits, this releases resources that can be used in more innovative projects and decreases the cost of employee turnover. In my opinion, management realizes that people simply feel more engaged in interesting projects and want to grow within their companies.

What do you mean by a more holistic approach?

As mentioned, building a strong OTC organization is not a standalone project. It involves many cross functional and cultural teams along three main areas: Platforms, Process, People. The key to success is setting the right expectations, aligning these three dimensions and building a solid umbrella organization of OTC that can be scaled globally, and at the same time fine-tuned with local requirements. As I mentioned before, OTC has impact on the big picture rather than being a small picture isolated from the vision.

What is the most crucial requirement of OTC design, in your view?

No surprise digitization, the seamless flow of data through the company and 3rd party vendors, obviously protected rigorously against attacks by external hackers, is crucial. Second, processes and organizational entities should be scalable: able to adapt to changes in volumes. And most importantly: it should be a simple solution to complex problems. A frictionless customer journey and a user friendly back office.

You have worked within one of the big marketplace companies, improving their OTC process. What did you achieve?

I was lucky to work with one of the leading online marketplaces in the world. At the time, only one entity of this company was losing around 25% of its sales due to an inefficient OTC process, accounting for roughly 2,5M euro annual cash loss. We started collecting, cleaning, completing and rigorously analyzing the process data. Our project team designed and built a plug & play OTC organization from scratch, simplifying the customer journey, streamlining processes with built in compliance and privacy elements, and automating the data flow by seamless integrations.

Can you share the business case metrics?

The collection rate was increased by 24%, the DSO (days of sales outstanding) decreased by 50%, bad debt and write offs were decreased by 76%, chargeback cases decreased by 60%, and operational & customer service cost was decreased by 75%. Together, a business case of more than 2M euros. Moreover, next to a huge increase in conversion rate the reputation of the company was the biggest gain. Customers loved their shopping experience.

How did the project involve the three dimensions you mentioned?

We worked with many IT platforms such as transactional platform ERP, CRM, Payments, both in-house as well as external units, such as a 3rd party collection house, banks, PSPs, risk and fraud etc. We managed to streamline the OTC process by aligning all relevant players: Ops & IT, Finance, Product Management, Compliance etc. You won´t hear me say it was easy, but it was certainly crucial to deliver the results. Internally, this project became a success story and other entities opened up to change. Building an OTC organization is a journey to change and requires trust from stakeholders to open up. They need to see the destination and it needs to be justified by key metrics. The ROI on OTC is easy to prove.

You can reach Jil Ebanoidze by phone +31 6 265 345 93 or by email jil.ebanoidze@connectivepayments.com