automatic reconciliation of accounts receivable · autobank cash & liquidity management payment...

AutoBank Cash & Liquidity Management Payment Management Treasury Management eBAM


Automatic Reconciliation of Accounts Receivable: An Effective Means to Optimize the Order-to-Cash Cycle

April 26th 2013

4/4/2013


Hanse Orga Overview

Corporate Presentation 2 11.01.2011

Current Cash Application Customers Hanse Orga

n HQ in Hamburg, international offices in Netherlands, France, UK and USA

n 160 people

n Privately owned

n Solutions have SAP-certified integration

n 500+ clients

n International consulting team supporting worldwide deployments


FinanceSuite for SAP®

3 4/4/2013

Cash & Liquidity Management

Intragroup Workflow

Cash Management

Cash Forecasting

Cash Pooling

Plan vs Actuals Analysis

Cash Position Worksheet

Payment Management

AutoBank

Treasury Management

eBAM

Finance

Suite

HR IS-U

CO FS-CD

BW

MM

FI

SD

In-House Banking

Derivatives (FX, IR, Swaps,...)

Limit Management

Loan Management

Intercompany Netting

Treasury Accounting

Payment Factory Payment Workflows Ad-hoc Payments Payment Monitor

Bank & SWIFT Connectivity Bank Statement Monitor

Performance Cockpit Dispute Management

Optimized Post-Processing

Remittance Advices

Lockboxes Bank Statements

eBAM Messaging

Bank Account Administration

Workflows

Bank Performance Analysis

Bank Scorecarding

Bank Relationship Management

Corporate Presentation


Cash Conversion Cycle Detailed

4


What is Cash Application


• In the US, the largest efforts in Cash Application are typically in the O2C process. • Cash Application is also part of the Procure-2-Pay (P2P) process when reconciling

A/P and GL items from the bank statement. • In the US, Cash Application for A/R is frequently part of the accounting function. • With multiple owners in the O2C process, Cash Application is often overlooked

when attempting to gain efficiencies.

ORDER TO CASH (O2C) PROCESS

Receive Order Authorize Credit Fulfill Order Issue

Invoice Customer AP Process

Collect Payment

Cash Application

Deduction Mgmt.

Collections & Credit


How Does Your Company Measure Hit Rate?

• Definition: Automated posting of transactions to the invoice or line item level

• In reality, companies define hit rate differently Ø Payment counted as hit if posted on account

Ø Payment counted as hit if at least one line item matches per payment

Ø Hit rate only measured on check; electronic payments not counted in calculation

Ø Payments with Direct Remittance not counted in hit rate


Big Box Retail Inc. Page 11060 W. AddisonChicago, IL 60613

Vendor ID Vendor Name Payment Number Check Date Check NumberACME0001 Acme Widgets, Inc. 8100000456 23451PO Number Reference Number Date Amount Discount Writeoff Net710008348123 910012365885 11/3/2012 $1,283.00 $38.49 $0.00 $1,244.51710008358140 910012366938 11/5/2012 $829.34 $24.88 $0.00 $804.46710008448163 910012371819 11/8/2012 $324.82 $9.74 $0.00 $315.08

DMG1923045 11/12/2012 ($230.00) ($230.00)

EXAMPLE REMITTANCE

12/12/2012


Other Factors Affecting Hit Rates

Industry n For example, Consumer Package Goods

(CPG) companies selling to large retailers typically have a lower hit rate than B2B manufactures due to the large number of deductions in CPG.

Transaction Size n Distributors with a very large number of customers and a high volume of

low dollar invoices typically have a lower hit rate.

Tolerance for Write-offs and Posting Errors n Companies can increase hit rate by increasing tolerance levels or by

allowing less strict posting rules.

7


How Are Your Customers Paying


CHECK

Banking P

artner

Cash A

pplication Process

BAI, BAI2, EDI 823

ACH & WIRE

DIRECT REMITTANCE

Custom

er

ACH (CTX, CCD, PPD) EDI 820, MT940, BAI2

EDI 820, Excel, PDF, Email

n US Companies still receive a significant amount of inbound payments via check » Lockbox services at a banking partner typically

used to capture payment details

» Remote Deposit growing for companies managing their own check processing

n Electronic Payments » ACH CTX has structured remittance details

» Wires and other ACH (CCD, PPD) may have details in the notes fields

» Electronic payments frequently handled manually

n Credit Card » Starting to increase in B2B transactions

n Direct Remittance » Remittance send directly to company rather than

with payment


Issues in the Cash Application Process

Operational issues affecting manual efforts » Invoice details are truncated, miskeyed, or incorrect

» Customer delivers a reference number other than an the invoice number (e.g., PO #, BOL #, Order #)

» Hit rate decreases when customers move to ACH since bank does not key invoice details

» Customer delivers remittance directly and invoice details are input manually

» Parent company pays on behalf of multiple customers

Strategic issues affecting other processes » No capabilities to measure and report on hit rate

» Efforts to automate requires limited IT resources

» Downstream processes are affected:

– Orders held when customer is at credit limit and payment is not posted

– Customer services impacted when payments not posted timely and accurately

– DSO metrics not reflected properly

– Real cash collection affected by delays in deduction and collection processes

9


Critical Reasons to Improve Cash Application

n Improve DSO n Improve Sales

» Streamlining the cash application process allows credit department to release orders sooner

n Improved Customer Service » Better quality … Fewer exceptions … Fewer errors

n Cost – STP Efficiency n Quicker Responses on Unearned Deductions

10


Options for Enhancing Your Cash Application Processes

Option Definition Pro Con ERP Leverage the functionality

already inside your ERP system

• Leverages existing investment in ERP

• Integrated with other processes

• Functionality may be limited

Custom Solution

Custom solution developed by in-house IT staff or external consultants

• Solution tailored to your business requirements

• High costs and efforts to support, maintain, and modify

External Solution

Third party solutions provided as installed software or SaaS.

• Packaged solution supported by provider with functional expertise

• Requires development of interfaces and support for data import/exports

ERP Bolt-on

Third party solutions embedded in ERP

• Packaged solution supported by provider with functional expertise

• Integrated with ERP with minimal interfaces

• More difficult when multiple ERP systems are utilized

11


Building A Business Case

Analyze and document metrics for current process

» FTE » Number of payments » Number of line items processed

Evaluate options for enhancing Cash Application process Estimate Savings:

» Hard Costs: Labor Savings » Softer Costs: Other processes

Evaluate other strategic factors

» Business Growth, Acquisition, Shared Service Centers

EXAMPLE BUSINESS CASES

CURRENT PROCESS Ex. 1 Ex. 2 Ex. 3 Line Items / Month 20,000 40,000 60,000 Total Cash App. FTE 5.0 5.0 4.0 Current Hit Rate 70.0% 85.0% 90.0% Manual Items / Mo. 6,000 6,000 6,000 PROJECTED PROCESS Targeted Hit Rate 80.0% 90.0% 92.5% Manual Items / Mo. 4,000 4,000 4,500 Required FTE (same productivity) 3.3 3.3 3.0 Estimated Productivity Gain 50.0% 50.0% 25.0% Required FTE (w/ productivity gain) 2.2 2.2 2.4

12



Questions and Answers

Corporate Presentation 13 4/4/2013

Scott Williams – Director of Consulting, North America [email protected] 734-302-3000

Mary Ann Rydel – Director of Product Management, North America [email protected] 734-302-3000

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