Cash Flow Optimization: Faster Payments in a Fast-Paced World

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1 Cash Flow Optimization: Faster Payments in a Fast-Paced World Patrick Swisher, Field Marketing Coordinator April 11, 2017 CASH FLOW IS KING You can be profitable and still be bankrupt. You must closely plan and monitor your cash flow to be successful and stay in business. - Tim Berry 2 1

2 CASH FLOW IS KING DSO Benchmarks DSO = (Ending Total Receivables / Total Credit Sales) x Number of Days in Period BPDSO = (Current Receivables / Total Credit Sales) x Number of Days Industry Average DSO Building Products 27 Construction 39 Textiles, Apparel & Luxury Goods 34 Industrial Products 44 Technology, Media & Telecoms 40 Chemicals 39 Pharmaceuticals 53 Healthcare Equipment & Supplies 47 Services 43 Automotive 54 Transportation & Logistics 24 PricewaterhouseCoopers Working Capital Survey 3 POTENTIAL CASH TRAPS Staying Ahead of the Curve Cash sitting in non-interest bearing accounts Unnecessary or underused inventory Fixed assets: building, equipment, cars, etc. Uncollected Sales (Accounts Receivable) 4 2

3 INVOICE-TO-CASH IMPACTS Time and Speed of Getting Paid Timing of Invoice Delivery Faster delivery correlates with faster payments Timing of Inbound Payments Electronic payments received sooner than paper checks Manage Disputes & Short Payments Faster visibility into disputes allows for faster reconciliation Customer Self- Service The more buyers have 24/7 access to invoices, the more they can do for themselves Cash Application Timing & Accuracy Achieve high rate of same day posting with automation 5 THE INVOICE-TO-CASH CONUNDRUM 6 3

4 THE BROADER IMPACT ON YOUR TEAMS 7 LEVERAGING BEST-IN-BREED TECHNOLOGY World Class Teams Rely on End-to-End Automation Marketing Procurement Accounts Payable Accounts Receivable? 8 4

5 AUTOMATING INVOICE-TO-CASH Reduce pain points and increase efficiency SHIFT TO ELECTRONIC PROCESSES AP departments are shifting to electronic forms of invoicing and payment processes and away from paper-based forms. EVOLVING AP PROCESSES PAPER-BASED FORMS ELECTRONIC FORMS A/R PRESSURES TO DO MORE WITH LESS 9 Invoice Delivery Print & Electronic Invoicing Best Practices Next-Generation Invoice Delivery 10 5

6 OBSTACLES TO PRINT INVOICE DELIVERY DSO-Centric Issues Manual processes billing errors Postage costs Difficult to track postal mail based on customer data (account #, PO #, etc.) Non-customizable invoice templates 11 PRINT INVOICE DELIVERY BEST PRACTICES The Print Solution Shrink the country Batch those bills Use a multi-envelope strategy Be Postal Smart 12 6

7 INVOICE DELIVERY Electronic Invoicing: Multi-Channel Capabilities Some customers expect the ability to pay vendors online Others prefer to receive invoices by or fax An electronic platform with automated multi-channel delivery capabilities is essential 13 DELIVERY AND PAYMENT METHOD OF CHOICE Phone IVR Online Portal (EIPP) Consolidator Sites Fax Collection Systems (API) Print & Mail AP Systems 14 7

8 ELECTRONIC PAYMENTS Best Practices Next-Generation Multi- Channel Invoice Payments 15 CUSTOMER PAYMENT PREFERENCES ARE DIVERSE Mail a check Call the supplier Log-on to supplier s portal Visit a branch location Bank payment portal E-Invoicing network a credit card 16 8

9 INDUSTRY AVERAGES FOR COSTS $1.57 per check $0.29 per ACH 2.5% per card Payment fees reduce margins and add up quickly 17 PAYMENT SPEED Which payment methods have the greatest impact on DSO? Check 7 days ACH 3 days Credit Card 3 days Wire 1 day Funds In Transit Funded Deposited Applied to Invoices 18 9

10 AUTOMATING INVOICE-TO-CASH Reduce pain points and increase efficiency PAYMENT TRENDS 79% of companies report they are transitioning their B2B payments from paper checks to electronic payments. 19 SELF SERVICE PORTALS EIPP Functionalities For your customers: Ability to pay online 24/7 via ACH and/or credit card Autopay functionality Workflow approval Short pay options For your business: Visibility into payment details Control over credit card usage Dispute handling Reporting 20 10

11 INCREASE IN THE USE OF CARDS IN THE B2B SPACE Card Network and Issuing Banks Perspective Marketing efforts to grow B2B spending Buyers Perspective Card extend terms/improves cash flow Cards are convenient Earn rebates/points/miles Automate payment through AP system Supplier s Perspective Satisfies customer demand Certainty around collection Faster time to get paid High fees/security/manual Keying/Reconciliation 21 STRATEGIC ENABLEMENT Making Credit Cards a Price-Competitive Payment Channel Level II/Level III Processing Prevent Early Pay Discounts When Card is Used Selective Acceptance Set Ability to Pay With Card to Expire within 15 Days of Invoice Mandate Paperless Invoicing When Card Option is Available Automate ed Virtual Card Payments and Payments by Phone 22 11

12 VIRTUAL CARD USAGE CASH APPLICATION Best Practices Supervised Machine-Learning 24 12

13 CASH APPLICATION Processing payments is more complex & labor-intensive Payment types are becoming more and more diverse B2B Checks are not going away Unauthorized deductions are growing Decoupled remittances are growing with electronic payments Multiple divisions and ERP s make posting difficult 25 CASH APPLICATION BEST PRACTICES For Speed & Accuracy Use a combination of templating (accuracy) and artificial intelligence (speed and automation) to: Reduce bank lockbox fees & in-house staffing costs Improve posting time and receivables data quality Maximize hit/match rates Reduce errors and exception items Process deductions automatically Integrate easily with your bank & ERP Systems 26 13

14 COMPLEXITY REDUCTION Leverage Machine Learning to Automate Cash application Hurdles to Automation Today: Processing payments is more complex and labor intensive Payment types are becoming more and more diverse B2B Checks are not going away Unauthorized deductions are growing Decoupled remittances are growing with electronic payments 27 OPERATIONAL EXCELLENCE Streamline Exceptions & Deduction Handling Use a hybrid approach of supervised machine-learning to: Reduce bank lockbox fees & in-house staffing costs Improve posting time and receivables data quality Maximize hit/match rates Reduce errors and exception items Process deductions automatically Integrate easily with your bank & ERP Systems 28 14

15 DRIVING TO THE WORLD CLASS STANDARD Organizations that automate their invoice-to-cash process and employ best practice standards enjoy 26% increase (than their peers) Cash flow 29 WORLD CLASS ORGANIZATIONS vs. PEERS The gap is even larger when you look specifically at the invoice-to-cash process World class organizations SPEND 40% LESS World class companies SPEND 68% LESS managing Accounts Payable to run operations and have 50% lower headcount than their peers. 85% LESS managing invoice-to-cash process 30 15

16 GET IN TOUCH Contact us 100 American Metro Blvd Suite 150 Hamilton, NJ Patrick Swisher Field Marketing Coordinator