Case Study:

EIPP+ARC Solution

Objective

To deploy a solution to replace the traditional collection methods of a multinational power tools manufacturer and reduce their DSOs

Background

An american multinational tools manufacturing company with an active customer base of more than 800 dealers across the country had issues with their collections process. The client collected their receivables from each of their customers by means of cheques. In addition to the difficulties faced in collecting and handling cheques, the manual processes behind the same led to increasingly worrisome DSO figures. 

The client reached out to Global PayEx with the following challenges.

The Challenge

The dealers were spread far and wide across the country and would mostly issue cheques and PDCs for payments to the company. 

  • CD Policy Leaks: The CD policies were slab based, however with cheques being collected the cheque realization dates would move into subsequent slabs. Frequent disputes with dealers on the CD amount and company out of goodwill gave away CD thus leading to large financial leaks
  • 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
  • Who Paid?: Some dealers did pay through NEFT and RTGS, however it was a challenge to track which dealer paid
  • Reconciliation Pains: Large recon team manually scanning through the bank statement and reconciling it into the ERP. A tedious and costly month end process
  • 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 act on requests. They were auto-approved by the outsourcing centre due to the sheer volume of requests and failure rates
  • 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 

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 offered the following solutions to their existing challenges:

  • Move Electronic: Company introduced special additional Freepay discount of 0.5% and thus encouraging dealers to move into Freepay. The company also adopted consent-based NACH pull thus helping eliminate cheques
  • 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 a 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.
  • CDs Managed efficiently: Since CD slabs were controlled through Freepay, this became more efficient and tightly controlled without any “goodwill leaks”.
  • 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

90% of the collections have become electronic. Freepay reduced the DSOs by almost 3 days. Freepay encouraged the customers to move into electronic payments. With a tightly controlled CD slab calculation and tracking mechanism, Freepay reduced leakages in CDs. Freepay also reduced disputes with dealers because of the transparency of credit notes. Earlier reconciliation used to take an average of 2 days and this cut short to same-day recon. Company’s cost and bandwidth of collection activities reduced by 80%. 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 much easier.

By deploying Freepay, the client was able to not only simplify and improve their existing receivables processes but also set up a platform to expand and onboard other non-ACH customers with a comprehensive customer experience offered. 

%

Collections have become electronic

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Bandwidth of collection activities reduced

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