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

1

SoCal AFP Expo

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

2

• Q/A

SoCal AFP Expo

Receivables Processing is Critical to our Customers and Business


• 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.

3

SoCal AFP Expo

Receivables Processing is Critical to our Customers and Business


• 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.

4

SoCal AFP Expo

Known Industry Facts


• 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.

5

SoCal AFP Expo

Known Industry Facts


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

6

business-to-business transactions, aging ERP systems, decentralized approach or expanding payment channels.

SoCal AFP Expo

Deductions 101Introduction to Deductions


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.

7

Staff Researching shortage

SoCal AFP Expo

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

8

• Deductions

SoCal AFP Expo

Deductions Overview


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

9

SoCal AFP Expo

Deductions Overview


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

10

*2012 Consumer Credit Counseling Survey

SoCal AFP Expo

Back to the Billing CycleHow to Fix the Problem?


• 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

11

this space • Measurement… metrics

SoCal AFP Expo

Best Practices


• 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

12

on earlier in the billing cycle?

SoCal AFP Expo

Closing


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.

13

, , , ,

SoCal AFP Expo

Questions?

Best Practices in Receivables Processing2015 SoCal AFP Expo2015 SoCal AFP ExpoJesse Sandoval, AAP

Thank you!

14

industry best practices in receivables processing...receivables processing 2015 socal afp expo •...

Documents