Intuitive Surgical's Roadmap to Kickstarting a Successful Shared Service Transformation with Cash Application Automation

In this session, you will learn how Intuitive Surgical started its order to cash transformation to build a world-class global finance shared services function.
Scott Phillips

Scott Phillips

Head of Global Finance Shared Services, Intuitive Surgical
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Session Summary:

Takeaway 1

Learn how to implement automation and build a world-class global finance SSC

Key Points-

  • For continuous improvement, implement scalable, sustainable automated solutions
  • Provide world-class customer service by leveraging technology to deliver high-quality and consistent results while managing costs
  • Build an SSC optimization maturity framework to identify current and ‘desired’ future state
Takeaway 2

Know how cash application automation can yield quick results to kickstart the automation at your company

Key Points-

  • Acquire quick wins with cash application automation to kickstart overall A/R process automation
  • Timely cash application is critical to enable world-class customer service
  • Minimal resources are required to ensure that the implementation is straightforward
Takeaway 3

Automation enables future growth and support for rapidly growing global organizations

Key Points-

  • Increases sustainable efficiencies that enable future cost control
  • Real-time reporting to enable an agile team that can proactively address (transformational) issues that may arise
  • Helps improve the cash cycle and refocuses the team on more engaging work that results in employee development and helps in retaining talent
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Scott Phillips [00:05]
All right, good afternoon, everyone. Hope everyone’s having a great day. In joining the radiance conference, I’m excited to be back here. This is my fourth radiance conference intuitive or excuse me, a HighRadius always does a great job of putting on an awesome networking event for everyone. Hope everybody’s taking advantage of that. So let’s get started talking about tiny little about intuitive first. And in our Cash apps journey, so super excited to share this. It’s now we like, we’re calling it the award-winning Cash Applications implementations. It’s we just won an award for it. So we’re super pumped and super excited and ready to go party tonight and celebrate. But let’s, let’s go through this and tell you guys what we did and how we think that we were successful. All right, before we jump into the actual project, and Cash Applications, let’s say a little bit about intuitive not a lot of people may not have heard of us yet. But Intuitive Surgical is a pioneer in assisted robotic surgery. So the primary product that we make is called the DaVinci Robot system. So it’s it’s a think of like a cockpit, the doctor actually sits into it and puts his fingers into these little gloves. And every little tiny movement, he does control these arms and actually performs the surgery on the patient. And so it’s, it’s an exciting industry to be in and growing rapidly. So we’re right now we’re a $5 billion company, targeting 6 billion and looking forward to growing in the future. We have a DaVinci system in 67 countries. And we hit an exciting milestone this year and with crossing 10 million procedures that have been performed with the DaVinci system. So it’s really cool organization very easy mission to get behind it. And what we’re doing as an organization, really over the last five to seven years, Intuitive has been kind of in the hyper-growth phase. So it’s been growing at double digits every year. And everybody’s been like super excited and focused on getting the product to market and getting more physicians trained on how to use it. And, of course, you’ve probably we’ve all heard the stories when you have organizations like that, that experienced growth really fast. You look up one day and say, oh my gosh, we’re a $5 billion organization. And but now all the customers are starting to complain about their statements and vendors are not getting paid what’s going on. And you get back and take a look at it. You’re like, oh, well, we forgot about the support functions, right. So everything’s like heavy manual. And our you know, our teams are getting stretched with the workload and the daily grind. So that’s why I was hired to intuitive in July of 2020. The organization realize that, so it’s time to start pulling all this together and building a shared services organization. And we’re starting with finance. So off the bat, in our service catalog is OTC B2B, Global Payroll, T and E, and some other functions, some GL functions and fixed assets that we have in there as well, that tells you a bit about the company and kind of where we are as a, as a shared services organization. Just getting started here and building out the team and our automation journey. All right, before we move into the project, we’re going to start right off the bat with a poll question. I think we’re gonna do so hands, right. So what is the biggest challenge your organization is facing in your current Cash Applications process? Multiple remittance formats? I can’t figure out how to get them all posted. Okay. Couple. They’re expensive lockbox services. No, nobody has expensive lockbox services? We did. I’ll tell you about them in a minute. And manual exception coding, is that an issue for anyone? Okay. Got it? And then what about lack of visibility? Reporting? Can you see what’s going on with your Cash Applications really understand it? Okay. So it looks like the coding was that was the big one there. All right. So here are the some of the challenges that we had, and will line up really nicely with the poll question there. So for the finance, finance functions, some of these, the faster growth that I was talking about, that we’ve experienced, led to these challenges. So we had, again, a number of manual processes, specifically Cash apps all through the OTC process, just a great people, great teams, but heavily manual and struggling to really keep up with the growth that the company’s seeing. And it’s not just the growth of the organization on the sales side, but that that is really driving the transaction volume. So we’re seeing it even I’ve been here almost 18 months, and it’s just content, which is a good story, good problem to have. But it’s every quarter, every month, it’s more and more transactions and how do we keep up with that? And how are we going to be able to ensure that we’re able to absorb this going forward?

Scott Phillips [04:41]
One of the other challenges that we had were delays in the Cash posting so I mentioned kind of complaints coming in from customers. So we’re doing a good job of getting that cash on the account, but then their statements go out and hospitals are very particular about wanting to see all those invoices cleared. And when they don’t, some of them you know, can get upset or have feedback. for you. So we need to make sure you know that’s impacting directly impacting our customer, external customer. So that was definitely a high-priority item that we wanted to make sure that we addressed. And then the banking tools that we were using were not the best, and probably because partly because of how they were set up, but also, just because of the lack of automation, not lack of automation, but the lack of continuous improvement in those tools to kind of progress and be able to meet our needs in terms of where we wanted to go as an organization to automate the process. And then also the Due to this, as I mentioned, that the transaction volume just increased on us, we’re continually adding headcount. So I have my senior manager of accounts receivable here. And every month, Chris let Scott, I think we need another one, I think we need to add another one. And Alyssa is our Global Business Process lead and the same thing, and she’s out there seeing this in Europe as well, that we were continually trying to add headcount to keep up with our transaction volume. All right, I mentioned transaction, and I just mentioned the headcount that we’re adding, so we’re adding all this headcount. And even though we’re doing that we’re finding every quarter, we have a pretty good process in place of assessing the resource needs, and how good we were, we were projecting in almost every quarter, we find out as we go through our analysis, we’re still operating at over 100% capacity, which means our teams are stretched, people are getting frustrated with having to continue and just try to do all they can do just to get the job done during the day. So we need to make sure that we fix that we’re not having to continually deal with a moral issue in the department, as well as trying to keep up with the volume. I mentioned the banking tool. So our auto-posting rate, before we started this project, I think we’re being very generous, calling it 40%. So because of the lack of visibility that we had, and trouble really assessing this, we had to do really estimate it. And the team initially was estimating it pretty high. But when we dug into the process, early found out that a lot of these transactions are still touching. So it wasn’t a true unattended. 100% no touch auto-posting rate. So we had ours pegged at 40% was our as estate, operating in Europe, in the hospital system and dealing with a lot of the publicly-owned hospitals, we had some really unique scenarios that we just couldn’t get, couldn’t address that through our banking tools, or even through our ERP. And even our IT department struggled to help us come up with ways to be able to address those. And then especially in the European market, have, a lot of our customers are publicly owned by the government and national hospital systems there. And there’s not a lot of flexibility when you’re dealing with the government. If they say we’re going to get paid in this, this currency or they’re going to pay you in a certain currency. That’s what you’re going to paid in. And you got to figure out how to how to accept that currency. All right, so we identify the challenges. We know we know we have some problems to fix here, right are some things some opportunities to improve on. But first, again, we’re a new shared services organization, the concept is new to Intuitive Surgical. So even though I was hired to do this, I still needed a little bit more proof. And intuitive historically, everything had been driven through the ERP system, there wasn’t a very strong appetite for third-party applications or bolt-ons to the ERP. So we wanted to go through a little project here, just to prove out our point and get some additional validation that gave executive leadership, that little extra bit of confidence they did to that they needed to invest in us. So we’re actually no, I’m talking about cash applications. Today, we have another stream going on in the collections process. And we actually used one of the collection challenges to prove out this point or to test this point, or test our theory with our IT department. So our Dunning process was a major pain point for the team, especially in hospital systems, we have hospitals that will have three different AP departments. And if you send an account statement that has
a state invoice for the capital expense department and put that on the operations, and they get that, especially in Europe, they just delete your email. They don’t they just ignore it until you They consider it incomplete, incorrect. And you have to fix it, and then they’ll pay your invoice. So we wanted the Dunning letters to go to the right departments and our IT department. They are super, super smart people, great people to work with. But they felt they could do this through the ERP system. So we did that we had a very, very elaborate project plan and had it mapped out on how they were going to do this. And after six months, we haven’t made any progress zero. So we were able to come to an agreement that third party was the way to go. And that was going to when we put our roadmap together for best-in-class automation and started to kick that off. So we have, I don’t have that here to share with you today we’ve got 11 projects, we live in transformational projects that we’ve identified, that we feel when we complete that we can say that we have best in class automation. And then Cash apps was the first one that we selected. To start with. And the second piece that we wanted to make sure that that we had in places that we were aligning this up with our vision. So our global financial services division, I have it there for you. But we want to make sure that we’re automating our processes, and that we’re delivering high-quality output, preferably real-time business results in quality reporting. And but we’re overall we’re enabling our business to focus on patients first. And to kind of go down in more detail to that. There, we want to focus on providing world-class customer service through leveraging best-in-class technology to deliver timely, high-quality results, while being conscious, cost conscious, and consistent on what we’re delivering and consistently improving our services. Alright, so I kind of gave you an overview of the current state and what that was, and the way that we turned that was transactional. So we felt that the team was constantly having to react. So they’re having to add resources, they’re having to address customer complaints. They were thinking globally and acting locally. So there was no in because of the volume and the capacity issues, there’s really no time to focus on continuous improvement to really design a project. And they were operating that that was the kind of framework that was inadvertently being set up for the team. So we wanted to make sure that we were focused not just on finding a tool to automate things, but really looking at this as a true transformational project from people process and technology. And what we want to get to, at the end of this flicking, click the button is to be transformational. And as transformational what we define that as being able to look ahead, being proactive, being able to see that volume coming based on what we know the growth rates are from FP&A, plan our resources, and have the technology in place to be able to absorb that future growth. Looking at the process globally, not just in the US, not just in Europe, not just in APAC, but trying to look at a holistic process, how much of this process, can we truly globalize and what percentage of it still needs to operate locally with our regional resources? Alright, well, I’ll point out one more thing. I mean, this is kind of interesting is this. So everything that we focus on through our whole, whole journey of becoming or getting to best in class automation, is making sure that we’re implementing scalable, so sustainable solutions that are going to enable us to achieve or absorb our future growth. And this is just very quickly the model that we use to build out our plan. So we use an optimization maturity framework. So we’ve assessed our as a state, we define what our future state needs to be. So our long-term plan goes to 2025. And each one of these attributes, we’ve actually have a very detailed project roadmap of how we’re going to get there from the beginning of this year 2022 to the end of 2025. So that’s the path and that that we’re working towards. So to kind of summarize that up, we wanted to focus on trying to globalize 80, to 75 to 80%, in the process, leave that last 20 to 25%, for local statutory requirements, leverage our regional resources to manage that piece, especially in more complex European countries and in APAC, where it’s needed, be able to make sure that we’re right-sizing our people. So it’s a transformational project, right. And we wanted to make sure that we’re focused again on those scalable solutions and standardizing the process and making sure that we’re focused on as much as possible repeatable rule-based transactions so that we can automate those.

Scott Phillips [13:56]
Alright, so here’s the title of the presentation, why did we start with Cash Applications. So number one, we thought that we would be able to improve the service of our customers. So I mentioned the complaints we were getting from our customers, so that was going to be addressed. And that’s also in line with our vision of being customer service focused, and would also decrease the heavy manual workload that we had on our teams by being able to move that increase the automation rate and move that manual work to an automated tool. We also felt confident in the solutions that were available in Cash apps. Fortunately, it had previous experience with HighRadius. So this is my second time around. And having had experience with the tool, I knew what it could do. And we were I knew we were selecting a best in a class partner that was not only going to be able to allow us to automate, but it was going to most likely provide significant savings to us, which I’ll talk about in just a minute. And it also allowed us to set what we felt was a very aggressive success measure to communicate to our executives, as this was going to be the first part object that we’re starting off, this was really the first automation project, if you will, for shared services, and the new organization that that, that the executive team had invested in. And then we wanted to make sure that we’re going to be successful at the end of this, that we would gain that confidence to keep that investment coming in and be able to continue down our journey of what we plan to build out. And then we felt that the Cash Applications process would also from an internal resource standpoint, would require less resources, so we didn’t feel like it was too heavy on IT resources. So I didn’t need to go ask for 15 different people, just give me one or two, and we and we can go knock this out. So it was a low cost internally as well. Alright, some of the challenges that we wanted to focus on in the project. One, of course, again, was the low Cash Posting rate. Again, it was 40%. So our target was 80%. So we wanted 100% increase by executing this project in our automated cashouts, and that’s unattended, true, no-touch. The team knows I’m very adamant on that. I want anybody touching anything, I want to see 80% And I want the machine to do it all. It was going to eliminate the manual coding. So I’ll talk a little bit more about that, on how we set up how we saw hire radius help us in that area. Going to provide us visibility, real-time visibility, as as the team is doing the exception handling, what are pre What are pre-auto-post rate was and post-exception handling rate was, and then the North America team an added benefit that we got from it. They’re also responsible for nontrade AR transactions. So we have a number of buildings where we have tenants, so we have rent payments coming in, and other items like that, that team is also tasked with having to apply those manually, which are sometimes much harder than the trade AR payments. So even though the tool is not built for that, hardiest doesn’t advertise that, but we saw a way to leverage that. So HighRadius. So again, I had prior experience with it, but we wanted to make sure that we’re focused on it as we build out our tech stack. For our global shared services organization, we’re gonna make sure we’re focused on best in class, as I communicated to the HighRadius and all of our vendors, we’re looking for long term partners, we have a long term plan to 2025, I’m looking for an organization that wants to one help us initially automate it. But that is just phase one for us, we’re gonna come back to this after we get through all these 11 projects, and then our process and our continuous improvement is going to start and we want to partner that’s going to be there, we want to an organization that’s going to continually be developing their tool, which already has does. And I’ll talk a little bit more about that. As a community, for those of you that are not hiring as clients, you may not know this, for those of you who are like Larry out here who I’ve worked with before, it’s a really cool network. And a lot of people say everybody, but a lot of people really like to talk about the tool, and we exchange ideas and how it works, what it could do better. And you got these super-smart people at HighRadius, you’re who are sitting back there or in Houston in India, working on the next two versions of how they’re going to improve this, then they’re also listening to us and listening to our feedback and say, hey, we’d like it to do this, or what if you guys could do this. And they’re taking that feedback, and they’re actually doing it. And I was outside. So I implemented how radius another company I’m doing again now. And just in those two years when I was away, I just saw a ton of improvement in the project. And it’s amazing, a lot of development of what these guys are coming up with that. It’s very exciting. And that’s another one that’s just going to help us out as we continue to focus on continuous improvement. We know we have a long-term partner that’s focused on the same thing.

Scott Phillips [18:38]
Alright, so the automated invoice matching that that hardiest offers, to me, is the best in class, I haven’t we did a lot of research, and even the second time going around, we looked at other vendors. And we couldn’t find anything that we felt could compete on the level that Hira uses. So just a number of different methods to try to match those payments. Besides just your standard email remittances and automation that is great in my opinion, is great OCR capability, they offer our scanning options, and they have bots to go out to the payment portals to get through remittances to pull them in. So just anything you can think of to be able to really automate the transactions, how radiuses has already thought of a lot of that. And some of those specific special calm special transaction unique transactions that we had in Europe, they were even able to come up with some ways to help us be able to auto-post those and working with our banking partners, the chance to kind of change the files a little bit. So just a excellent job and being able to leverage their ideas and their experience as we’re going through this. Our automated reason code so we went live on April eighth with Cash Application. So I’m gonna show you the results here in a minute. But just in those three weeks, I mean, they the morale of the team that was like they won, but we’re happy now. All right, good. No more reason coding. They’re all automated out-of-the-box capabilities that HighRadius has, I don’t think we added any new ones that we Alyssa, they were there, everything we wanted was already there. So that was awesome that we were able to to be able to leverage that. That reason coding, which then transition to our IT department, we’re able to automatically clear those invoices in our ERP system. No more clicking through 10 different screens to find a invoice to clear. So we’re team is super excited about that. And in one of the things that I’m personally excited about, and Crysis to is the reporting, so just the out-of-the-box analytics package that they have. It’s not just reporting guys, they’ve done Harry’s just done a great job. And this was one of the biggest improvements that I saw from when I used it before to now is some of the dashboarding capabilities. It’s not just a static picture, these actually can go click on things, and it filters. And that allows our team to really drill in immediately down to the customer level to say, hey, we’re trying to target 80%, semi all the customers that aren’t hitting 80% automation, let’s dig into those. Let’s reach out to our AP contacts there and see what we can work out to start getting that auto pay post rate up. And you’ll be surprised at how many of your AP counterparts want to do that I met some shared services leaders here and we were talking with a few that are our biggest customers, we were fortunate enough to meet here and that we hadn’t got to talk to before. And we were talking about when we have some meeting setup. So they’re super excited about trying to get they don’t want to see the aged payables on their side either, just like we don’t want to see the aged receivables on their side. So we felt that visibility and reporting capabilities, and I know they have even more advanced reporting capabilities and dashboarding and analytics tools that we’re going to look at in the future as well. And we talked about, so the direct coding and during the payments in, in our ERP system, we were able to successfully we spent a significant amount of time on these nontrade AR transactions, does anybody have those in your organization in your groups, so you know what I’m talking about what a pain to have to go through, you’re basically an accountant, right. And a lot of our Cash Applications teams are not CPAs. And that can be challenging for them and take them a lot of time. So we were able to actually, in our ERP system, create some nontrade customer accounts. And they’d be able to pull those nontrade AR payments and just like they were paying on a regular customer account. And we’re automatically clearing those in our ERP system. So just a great added benefit that we’ve got out of the tool so far. All right, we’re getting to the results, which is what you guys all came to see. Right? All right. So again, just went live on April eighth, but having only been live three weeks. Take that in the context. But these are some pretty awesome results, in our opinion. So we’ve already we’re already over our success measure. So 100% increase in auto-posting, again, three weeks of data, but we’re just nailing it every single day. 80%. And just the I mean, the relief that us that we see on the teams face, right, Chris is just amazing. They smile now. So it’s like, wow, you guys can smile. Cool. But so that that’s been an awesome result. And just in those three weeks, they’ve been able to already repurpose our resources, which was what we said we want to do repurpose those resources into more added value work. So they’ve already like dug into all this unemployed cast that was sitting in our ERP system, yet 70% of it knocked out. Like I don’t have to worry about the day-to-day Cash Posting anymore, I’m gonna get focused on cleaning this up and maintaining it going forward, we were able to eliminate our significant amount of banking fees from other tools that we were using, and keying fees. If any of you haven’t dug into your bank statements and done a word search for keying,
I challenge you to do so you may be surprised at what you may find in your bank statement there. And then on our so I mentioned we were continuously having to add contingent workers or temporary workers. So we were able to eliminate some of those in and repurpose others or to some of the other manual transactions that we have until we get the HighRadius solution in place for that. And then real dollar savings. So there was actual between our bank statements, and what we’re spending on the temporary resources, there’s a real dollars that we were paying out that we’re not going to pay out the $230,000 this year. And then in our calculation, we also avoided an extra 100,000 and additional resources that we would have had to pull into the remainder of the year based on what our projections are for our transaction growth. So great results. And then our leadership has already got word of this, but actually, next Tuesday’s when we get to show this off to the CFO, and but we already know that he’s gonna this is going to give him a lot of validation and what he approved for us. And so and allow us to be able to explain what he’s going to be able to or we’re gonna be able to achieve as a team and as a company with the continued investment in building out the global shared services organization. All right, so some of the things that that we think are important to look at and focus on as you’re looking at automation but specifically Cash apps is increased efficiency. Real Time Management Reporting, I talked about the dashboards, I’m very excited about that. Ask Alyssa every day about them. And it’s, it’s actually fun. I like going in there and clicking on and seeing the results and seeing what the auto post rate was for the day. Improving our cash like also, our customers, as we’re clearing the invoices in our collections team is now able to have more detailed discussions with our, with our customers about what’s actually past due not just guessing on what’s not cleared, and what’s actually passed to enabling this the future support and growth. So we feel very confident that we will not add another full-time employee for Cash Applications, at least through the remainder of this year. And then again, I mentioned this already, but refocusing those resources to do more added value work. And part of the feedback, this actually played into an engagement survey that we had, we had actually in finance overall, we have very low scores on people development. And just the feedback that we got immediately of being able to focus on using a world-class using best in class technology, being able to be part of a project where you have these types of results that the team has just developed just through that. And they’re beginning to see that now. So just the the the uptick we’ve seen in morale and the engagement from the team, and not just on our O2C team. But this is, you know, this project was talked about throughout our service organizations, now the payroll team is super pumped about their global transformation, they’re gonna go through our AP team is just actually just went live with Koopa. And they’re getting ready to address some other data capture issues. So just spark excitement throughout the whole organization, which we’re very excited about. I do want to thank the HighRadius team. So the project team that we had that worked on this project, they were just they were amazing. We have people in five different time zones, crazy meeting times, everybody just put in all kinds of effort. They knew I was presenting today too, so they were keeping us on target with hitting that go-live date, or we’re gonna get ready to give you some awesome results to talk about. It’s got to tell everybody about and they and they delivered. And I will I want to especially point out Avinash thing so this guy we think he’s an intuitive employee. I thought he worked for us so I listen. I was like, strange. Where’s why are we not talking to Avinash today have no meetings on my calendar with Avinash this guy was amazing. I mean, anything we wanted. They do just such an amazing job at sometimes they were actually helping our IT team with coding in SAP, I mean, down to like, telling I was on the call what letters to type. I mean, the HighRadius team was just simply amazing. And just a great partnership. And I would do it again in a heartbeat. And I can’t, I can’t praise them enough for the job that they did. They were a big part of the success of this project.

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