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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
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
ShippingOrder 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 ReductionOne estimate shows that businesses can save $4-$8 per invoice when
migrating from paper to electronic1
Improved Efficiency92% of invoices received electronically are approved and paid on time
versus only 45% of invoices received manually2
Cash Flow & Visibility More predictable cash flows and reduced DSO management.
15
Future Vision
PUBLIC
In 2017, there was $18.6bn in Americas Fintech Investment across 587 Deals
B2B Solutions attracted a significant amount of attention from US investors during 2017
Total US Fintech investment activity (VC, PE and M&A) in Fintech companies 2010 – Q4'17
Source: Pulse of Fintech Q4'17, KPMG Global Analysis of Investment in Fintech
0
50
100
150
200
250
0
2
4
6
8
10
12
14
16
18
20
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2010 2011 2012 2013 2014 2015 2016 2017
Deal Value ($bn) # of Deals Closed
$
16
Future Vision (cont’d)
PUBLIC
Digital technologies are creating unprecedented opportunities to streamline processes, improve financial metrics, save
cost and gain valuable insights into your customer base
Recap of key trends in the AR space
Innovation in the AR space is alive and well!
Paper and electronic
remittance processing
Operational Efficiency
and Cost Reduction
Exception
Management
DSO Reduction
Integrated Receivables
Unique virtual account
for each payer
Flexibility in defining
structure and
accounts
Supports ROBO
structure
Self Service
Virtual Accounts
Available 24x7x365
Supports extensible
messaging (ISO
20022)
Supports two way
communication
Request for Payment
Real Time Payments
Native electronic
format
Strong cost reduction
benefits
Buyer-Supplier
Networks
Timely processing by
customers
Electronic Invoice
Question & Answer
PUBLIC
18
Speaker
PUBLIC
Robert Cleary
Regional Head of Domestic Payments
HSBC
Robert Cleary is responsible for the delivery of U.S. domestic payments
products (payables and receivables) for HSBC. Mr. Cleary has been
active in the financial services industry since 1993 and joined HSBC in
2009. He holds a BA from Old Dominion University and an MBA from
Rutgers University. He earned his Certified Treasury Professional
accreditation in 2002.
19
Important Notice
PUBLIC
This document is issued by HSBC Bank USA, N.A.(“HSBC”). HSBC does not warrant that the contents of this document are accurate, sufficient or
relevant for the recipient’s purposes and HSBC gives no undertaking and is under no obligation to provide the recipient with access to any additional
information or to update all or any part of the contents of this document or to correct any inaccuracies in it which may become apparent. This
document is intended for discussion and receipt of this document in whole or in part shall not constitute an offer, invitation or inducement to contract.
HSBC shall only be contractually bound by a formal written agreement duly executed by HSBC Bank USA, N.A. creating such a contractual
agreement.
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Copyright: HSBC Bank USA, N.A. 2018. ALL RIGHTS RESERVED