Industry Best Practices in Receivables Processing...Receivables Processing 2015 SoCal AFP Expo •...
Transcript of Industry Best Practices in Receivables Processing...Receivables Processing 2015 SoCal AFP Expo •...
Industry Best Practices in Receivables ProcessingProcessingSoCal AFP 2015
Jesse Sandoval AAPJesse Sandoval, AAPEast West BankSVP and Group Manager
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Agenda
Best Practices in Receivables Processing2015 SoCal AFP Expo
• A collaborative discussion regarding Accounts Receivables
• A/R Overview2015 SoCal AFP ExpoJesse Sandoval, AAP
A/R Overview
• Industry Facts
• Working Capital and A/R
• Pain Points
• Deductions 101
• Before you Start
• Where to Start
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• Q/A
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Receivables Processing is Critical to our Customers and Business
Best Practices in Receivables Processing2015 SoCal AFP Expo
• Regardless of size or market, receivables is the lifeblood of a business.
• The payments environment is changing so rapidly that customers2015 SoCal AFP ExpoJesse Sandoval, AAP
The payments environment is changing so rapidly that customers of all sizes are challenged with finding ways to be efficient and reduce costs.
• With business activity expanding and markets becoming global, with th I t t bli th i f d d i tthe Internet enabling the sourcing of goods and services, customers are demanding new and improved solutions to help them better manage their business.
• There is a growing customer demand for increased visibility to the payments transaction process; customers are demanding increased transparency to the exception processes.
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SoCal AFP Expo
Receivables Processing is Critical to our Customers and Business
Best Practices in Receivables Processing2015 SoCal AFP Expo
• Regardless of size or market, receivables is the lifeblood of a business.
• The payments environment is changing so rapidly that customers2015 SoCal AFP ExpoJesse Sandoval, AAP
The payments environment is changing so rapidly that customers of all sizes are challenged with finding ways to be efficient and reduce costs.
• With business activity expanding and markets becoming global, with th I t t bli th i f d d i t
Existing (traditional) product and services alone do not address these challenges
the Internet enabling the sourcing of goods and services, customers are demanding new and improved solutions to help them better manage their business.
• There is a growing customer demand for increased visibility to the payments transaction process; customers are demanding increased transparency to the exception processes.
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Known Industry Facts
Best Practices in Receivables Processing2015 SoCal AFP Expo
• The “old way” of obtaining payment details and applying receivables is lagging behind technology.
2015 SoCal AFP ExpoJesse Sandoval, AAP • The out-of-date semi-automated (or manual)
approach of applying payments inflates cost, introduces risk, and has a direct negative impact to
fit bilitprofitability.
• Adding deductions, chargebacks or returns to the mix makes it unsustainable, especially in a bad economy.
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Known Industry Facts
Best Practices in Receivables Processing2015 SoCal AFP Expo
The Billing Process Working Capital
Cycle Apply R ti2015 SoCal AFP ExpoJesse Sandoval, AAP
ReceivablesReceivablesLiquidityLiquidityMgtMgt.. Key
Steps
Cycle
SalesCreditRisk
DisputeMgt.
ApplyCash
Reporting
Information Information Mgt.Mgt. PayablesPayables
OrderInvoice
CollectionMgt.
What looks to be an easy process can easily become very complex, more so in business to business transactions aging ERP systems decentralized approach
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business-to-business transactions, aging ERP systems, decentralized approach or expanding payment channels.
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Deductions 101Introduction to Deductions
Best Practices in Receivables Processing2015 SoCal AFP Expo
A Quick Look at Deductions
Buyer Supplier2015 SoCal AFP ExpoJesse Sandoval, AAP
Purchase Order
Shipment
Invoice $2,000
Sends $1,500 Payment
Damaged GoodsShortages
Staff
Short$500.
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Staff Researching shortage
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Common Pain Points and Efficiency Obstacles Inside the Billing Cycle
Best Practices in Receivables Processing2015 SoCal AFP Expo • T di k i
A Close Look at the Problems
2015 SoCal AFP ExpoJesse Sandoval, AAP The Billing Process
• Tedious re-keying • Inefficient paper processing• Check centric system and/or unable to
handle electronic paymentsThe Billing Process
ApplyCash
Reporting
handle electronic payments • Missing information• Unable to read remittance• R itt i t
KeySteps
SalesCreditRisk
OrderInvoice
CollectionMgt.
DisputeMgt.
• Remittances issues across payment types
• Re-association of data
• Deductions
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• Deductions
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Deductions Overview
Best Practices in Receivables Processing2015 SoCal AFP Expo
Types of Deductions
2015 SoCal AFP ExpoJesse Sandoval, AAP Intentional
• Agreed upon discounts
Preventable
• Compliance• Fill Rate
Unauthorized
• Compliance• Buyers
• Rebates• Pricing
• Shortages attempting to obtain discounts or other creditsother credits
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Deductions Overview
Best Practices in Receivables Processing2015 SoCal AFP Expo
Deductions Recap
2015 SoCal AFP ExpoJesse Sandoval, AAP • Deductions impact the bottom line (up to 10% of sales*)
• Although most deductions are part of doing business, some are a direct result of poor internal processes
• Key Obstacles• Requires cross departmental team work and buy in• Don’t know where to start• ERP systems are lacking features needed to meet
todays demands• Relationship with vendors
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*2012 Consumer Credit Counseling Survey
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Back to the Billing CycleHow to Fix the Problem?
Best Practices in Receivables Processing2015 SoCal AFP Expo
• Look for areas where automation k
Where to start?
2015 SoCal AFP ExpoJesse Sandoval, AAP The Billing Process makes sense
• Start with basic lockbox, BAI or consolidated EDI reporting
• What can your existing ERP systems doApplyCash
Reporting
• What can your existing ERP systems do today?
• Have you looked at having your banking partners centralize and/or normalize
KeySteps
SalesCreditRisk
OrderInvoice
CollectionMgt.
DisputeMgt.
the information for you and integration with your back office? Banks and vendors are beginning to focus more in this space
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this space • Measurement… metrics
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Best Practices
Best Practices in Receivables Processing2015 SoCal AFP Expo
• Study the benefits of making arrangements with your trading
Where else should you look?
2015 SoCal AFP ExpoJesse Sandoval, AAP
partners• Selecting acceptable payment types and parameters• Are they paying you using the agreed upon format/channel?
• Drive automation by providing clear payment instructions andDrive automation by providing clear payment instructions and enforcing them
• Can they pay you via ACH/EDI using their banking platforms (EDISTP820)?
• Have you explored the benefits and of EIPP?• Consider incentives and track progress (adjust where needed)• Look at technology from all sides – can exceptions be worked
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on earlier in the billing cycle?
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Closing
Best Practices in Receivables Processing2015 SoCal AFP Expo
Start taking a different approach to fixing the problem. Recognize h i i i l (LBX ACH ) d b h
Before you start…
2015 SoCal AFP ExpoJesse Sandoval, AAP
that existing services alone (LBX, ACH, etc.) are good, but not the complete solution to a BIG problem. Spend time learning about their daily processes.
• What are the biggest challenges in managing receivables?• What major initiatives and/or investments are being planned
within the next 12-18 months that could impact your processing?processing?
• Find out how they collect payments, the pain points and changes they’ve seen recently (shift in settlement “rails”)
• Measurement… DPO, DSO, CCC, DIO, etc.
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, , , ,
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Questions?
Best Practices in Receivables Processing2015 SoCal AFP Expo2015 SoCal AFP ExpoJesse Sandoval, AAP
Thank you!
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