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  • Emerging Trends in Receivables Management

    Date: 24 April 2018

    Minnesota Association for Financial Professionals

    PUBLIC

  • 1

    Agenda

    PUBLIC

    Current Landscape

    Business AR Challenges

    Emerging Trends

    Integrated Receivables

    Virtual Accounts

    Real Time Payments

    Electronic Invoicing

    Future Vision

    Questions & Answers

  • 2

    Current Landscape

    PUBLIC

     Business to business (B2B) collections is often a complex process with multiple payment types and

    remittance streams

     Suppliers have to handle a myriad of payment and remittance types. Manual processes result in delays

    in processing, input errors, increased costs and ultimately an increase in Days Sales Outstanding

    (DSO)

    Order to Cash Lifecycle

    Customer Invoice

    Generated

    Supplier

    Invoice Receipt &

    Adjudication

    Payment

    Processed

    Buyer

    Payment

    Received

    Reconciliation and

    Cash Application

    Supplier

  • 3

    Current Landscape (cont’d)

    PUBLIC

    Paper to electronic migration is happening, but check remains a dominant payment method

    Source: 2016 AFP Electronic Payments Survey

    Percentage of B2B Payments Received via Check Payment Method Used to Pay Major Suppliers

    75%

    64%

    54% 50%

    44%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    2004 2007 2010 2013 2016

    Checks (41%)

    ACH Credits (34%)

    Wire Transfer (13%)

    P Card (5%)

    ACH Debit (3%)

    Other Cards (2%)

    Single Use (1%)

    Other (1%)

  • 4

    Current Landscape (cont’d)

    PUBLIC

    Business Catalysts for Increasing Electronic Payments

    Source: Institute of Finance and Management

    Fraud Mitigation (10%)

    Cash Flow (6%)

    Error Reduction (3%)

    Operational Efficiency (43%)

    Cost Reduction (12%)

    Increased STP (25%)

     Strong desire and business rationale to move towards

    electronic payments

     Significant barriers to acceptance remain

  • 5

    Business AR Challenges

    PUBLIC

     Lack of straight through processing leads to increased expense & inefficient resource allocation

     Electronic delivery ≠ straight through processing in all cases

     Remittance information does not travel with the payment & requires manual re-association

    Source: 2016 AFP Electronic Payments Survey

    Methods of Receiving ACH Remittances

    (Percent of Organizations)

    3%

    4%

    5%

    11%

    15%

    18%

    18%

    22%

    55%

    0% 10% 20% 30% 40% 50% 60%

    ISO 20022

    Other

    Supplier Website

    Third Party Website

    Fax

    EDI CTX/CCD

    Customer Website

    Mail

    Email

  • 6

    Business AR Challenges (cont’d)

    PUBLIC

     Process automation and achieving straight-through processing can help deliver a number of business

    objectives

    Source: 2015 Celent Survey of AR Practitioners

    Corporate Accounts Receivables Goals

    11%

    12%

    12%

    21%

    30%

    33%

    35%

    39%

    0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

    Improve AR STP rates

    Reduce unauthorized discounting

    Increase same-day AR posting rates

    Streamline handling of remittance info.

    Reduce AR processing costs

    Migrate payers to preferred e-pmt. Method

    Increase electronic payment rates for AR

    Reduce DSO

  • 7

    Integrated Receivables

    PUBLIC

     To address growing challenges along the financial supply chain, banks and Fintech providers have

    started to develop integrated receivables solutions

     Integrated receivables platforms vary widely in terms of functionality

     Consolidated Receivables Reporting

     Automated Remittance Capture and Payment Matching

     Receivables Matching

     Exception Management

     Artificial Intelligence and Machine Learning

     Data Analytics

  • 8

    Integrated Receivables (cont’d)

    PUBLIC

    Integrated Receivables

    Acceleration of Cash and Information

    Application

    Payment & Remittance

    Analytics

    Match Payment

    and Remittance

    Details

    Exception

    Management &

    Deduction

    Management

    Consolidated

    Reporting, File

    Output and

    Alerting

    Holistic Customer

    and Payment

    Analysis

    Trend Analysis

    and Cash Flow

    Forecasting

    Benefits

     DSO Reduction

     Operational Efficiency and Cost Reduction

     Increased STP

     Facilitates Paper to Electronic Conversion

     Customer Behavior & Root Cause Analysis

     Reduced IT Support

  • 9

    Virtual Accounts

    PUBLIC

     What are virtual accounts and how can they help with receivables management?

     Virtual accounts are essentially non-physical accounts that can be used to help streamline cash application

     Funds report at the VA level, but money posts to the physical account

     Ongoing management of virtual accounts can be on a self service basis (open and close through online interface)

     Can help facilitate treasury centralization or receivables on behalf of models

  • 10

    Virtual Accounts (cont’d)

    PUBLIC

    How it works

    Stage 2Stage 1

    Integrated

    Receivables

    Customer

    AR or ERP

    222-123456 XXX Co

    40,000.00 40,000.00

    222-654321 YYY Co

    13,500.00 13,500.00

    222-111111 ZZZ Co

    4,500.00 4,500.00

    Combined with our Integrated

    receivables management solution the

    Virtual Account first identifies the

    payer and then matches the

    amount/remittance details with open

    AR file

    Virtual Account 1

    2 2 2 1 2 3 4 5 6

    Payor 1: XXX Co

    Amount: USD40,000.00

    Virtual Account 2

    2 2 2 6 5 4 3 2 1

    Payor 2: YYY Co.

    Amount: USD13,500.00

    Virtual Account 3

    2 2 2 1 1 1 1 1 1

    Payor 3: ZZZ Co.

    Amount: USD4,500.00

    Customer can identify the payer

    (remitter) by matching the Virtual

    Account number (in red) - as found on

    electronic statement or integrated

    receivables file - with the payer to

    which was originally assigned the

    Virtual Account.

    Customer Account

    (Physical Account)

    24 April 2018

    CR VA 222-123456 40,000.00

    CR VA 222-654321 13,500.00

    CR VA 222-111111 4,500.00

  • 11

    Real Time Payments

    PUBLIC

     Real-time Payments (RTP) combines immediate funds availability, settlement finality, instant

    confirmation, and integrated information flows

     Contextual data needed to identify a payment and the reasons for exceptions can accompany a

    payment

     Two-way communication between trading partners within the secure system

     Request for payment capability allows supplier to send payment request to customer along with invoice

    information

  • 12

    Real Time Payments (cont’d)

    PUBLIC

    Seller/Payee

    Shipping Order Entry

    System

    Order Fulfillment (ASN)

    Buyer/Payer

    Accounts

    Receivable

    Accounts

    Payable

    Seller Issues Request for Payment

    Exchange of Payment Messaging

    Payment Initiated

    Send and Receive Funds 24/7/365 in Seconds

  • 13

    Electronic Invoicing

    PUBLIC

    “An electronic invoice is one that has been issued by the seller, transmitted and received by the buyer in a

    structured digital format which allows for automated processing.”1

     Electronic invoicing (e-invoicing) enables straight-through-processing from “order-to-cash” and “procure-to-pay” for

    business-to-business payment transactions

     e-invoicing approaches are diverse and complex. Differing standards are used depending on the size of the company,

    industry, and country

     U.S. e-invoicing is estimated to be 24% of total bills/invoices generated (6.8 billion out of 30 billion total)2 and is growing

    about 5% annually3

     FRB Business Payments Coalition e-Invoicing work group

    Sources:

    1. FRB Payments Improvement Catalog of Electronic Invoice Technical Standards in the U.S.

    2. E-invoicing/E-Billing: Entering a New Era Billentis

    3. 2014 Global eInvoicing Report, PayStream Advisors, 2014

  • 14

    Electronic Invoicing (cont’d)

    PUBLIC

    Biller Benefits

    Source:

    1. Paystream Advisors 2014 Global eInvoicing Report

    2. FRB Payments Improvement Catalog of Electronic Invoice Technical Standards in the U.S.

    Cost Reduction One estimate shows that businesses can save $4-$8 per invoice when

    migrating from paper to electronic1

    Improved Efficiency 92% of invoices received electronically are approved and paid on

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