Case Study:

EIPP+ARC Solution

Objective

To provide a solution that could manage the client’s large dealer base and their low-value invoices which were leading to major reconciliation challenges. The client wanted a solution that could reduce its DSO figures and replace the collection methodology which was primarily via cheques.

Background

The client is a multinational tyre manufacturing company with a customer base of more than 5000 dealers spread across the country. The profile of the dealers varied from large multi-brand tyre retailers to smaller tyre-repair shops, with the latter forming the majority. 

The client used traditional collection methods like “Cheques” & “PDCs” for collecting payments from their customers. In addition to the challenges of managing cheque-based payments, they also had to face the challenge of moving their customers into electronic modes of payment, especially the smaller retailers. 

The client had 2 main lines of business, namely passenger Tyres & Truck Tyres. Each LOB is treated as an independent entity and managing the collection activities separately for each of them was proving to be difficult.

The Challenge

The client faced the following challenges on a day-to-day basis:

  • Line of Business Challenge: The traditional collection required dealers to pay separate cheques for LoBs and they cannot mix CNs of one LoB with others. However this being a manual process led to lots of errors by dealers leading to recon pains
  • Credit Notes Management: The traditional scenario had credit notes pertaining to various LoBs and dealers used to wrongly offset them or have no visibility. Also sometimes CNs were larger than the invoice amount leading to difficulty in managing and tracking CNs
  • Partial Payment Requests: Partial payments made by dealers was a large challenge to reconcile and also finding out the reason for the partial payment used up large bandwidth of all internal teams. Specific reasons required action to be taken by the company to address it quickly. Since the process was manual it was time taking leading to dealer dissatisfactions
  • Collection Delays: Many of the cheques would lie with the collecting teams and delay in deposit would mean credit amount getting blocked. Required senior management bandwidth to better the collection discipline
  • Reconciliation Pains: Large recon team manually scanning through the bank statement and reconciling into the ERP. A tedious and costly month end process. Since dealers used to combine multiple smaller invoices, it was a large challenge to recon them back in ERP
  • Inability of the Dealers/Distributors to View their Weekly Dues: The dealers did not have a live view of all outstanding obligations & credit notes; they were also not intimated about their weekly debit amounts. The sales team also had to frequently connect with treasury team for getting information about the outstanding dues
  • Poor Visibility for Accounts Team: The local accounts team neither had a real-time view of all incoming requests nor could they action on requests. They were auto approved by the outsourcing centre due to sheer volume of requests and failure rates

Our Solution

Global PayEx worked closely with the client’s Finance & IT team to customize and develop a unique solution that is able to address most of the concerns of the erstwhile process.  Freepay built a straight through recon process that pulled invoices and all its associated payload in real-time from client’s ERP. The reverse postings were also straight through into client’s ERP thus reducing all manual activities

Freepay offered the following solutions to their existing challenges:

  • Line of Business: Freepay segregated LoBs and associated rules of payment and hence no more manual errors in payments
  • Credit Notes: Freepay provided better visibility of Credit Notes to the dealers. The challenge of CNs greater than invoices was mitigated with the help of Freepay
  • Partial Payments: Freepay allowed partial payments. The dealers compulsorily had to choose pre designated reasons. Depending on reason selected, Freepay on real time sent email alerts to concerned departments to take action against the reason for the partial payment
  • Easily Identify who paid: The company’s bank introduced unique Virtual Accounts for each dealer. Freepay being integrated with bank allowed visibility of all NEFT/RTGS fund transfers with transparency and seamless knockoff of payments into ERP
  • Interface for Dealers: The dealers were given an interface (Web & App) to view invoices & credit notes; they could view & pay any time from within Freepay and it was automatically reconciled back at the ERP leading to short TAT for clearing credit lines.
  • Live MIS across Business Functions: Live dashboard was provided to Finance and Business teams at various levels so that they could view in real-time the outstanding obligations and payments made by their respective customers.
  • Payment & Reconciliation Automation: Freepay automated the presentation of the payments to the bank (calculating the total dues and applying credit notes) as well as reconciling the successful/failed transaction back to the ERP. This eliminated significant man-days of effort and reduced the risk of manual errors.

The Results

The company saw so much benefit out of Freepay that it became the compulsory mode of payment for all dealers. A dealer who wanted to pay outside Freepay are levied yearly penalties. Freepay and its straight-through an interface with ERP made reconciliation quick and efficient. 75% of the collections have become electronic from earlier 30%. Freepay reduced the DSOs by almost 3 days. The SMS reminders and dunning features of Freepay helped make not only faster collections but also dealers managed to get the CDs without missing it. Managing the reasons for partial payments through Freepay made reconciliation and internal workflow management much quicker and efficient.

%

Collections have become electronic

Freepay reduced the DSOs

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