Institutional Customer Solution
To deploy a solution for a multinational packaging manufacturer to automatically read and account for payments received by them from their large institutional customers.
A leading food packaging supplier, catering to top FMCG companies in India, was facing difficulties in accounting for their received payments. Most of their customers were large institutional buyers who frequently procured an assortment of packaging products from across their product portfolio. However, when payments are made, the supplier faces difficulties for reconciliation as explained below.
As most of their customers were large institutional buyers, they followed the procedure of processing the invoices sent by the supplier through their ERP, and the payments were released accordingly. The challenges faced by the supplier in such a setup are:
- Unapplied Cash: As the customer initiates payment without any intimation, the supplier comes to know that a payment has been made only after it hits their account & the MIS is received. Thus, the cash lies unapplied in the system while the supplier initiates the reconciliation process.
- Receiving Payment Advice: Once the payment is received, the supplier has to follow up with the customer for payment advice or remittance note on the payment received. For most customers, the accounts team has to send a mail requesting for advice and the exchange consumes at least 2 weeks on average.
- Clubbed Payments Across LoBs: The customer usually procures products from across multiple Lines of Businesses (LoBs) and thus makes a single payment by clubbing 3 to 5 invoices. This often leads to a challenge in reconciling on an invoice level across LoBs. Further complicating the issue is the fact that they have 3 separate ERP systems across the LoBs.
- Deductions Made by Customer: Customers typically make deductions like TDS and make a payment. These deductions are usually not mentioned in the payment advice sent by the customer and have to be clarified by the accounts team individually.
- Sales Time lost to Collection Activities: Around 20% of the time of the sales team is consumed in assisting the accounts team with collection related activities. This also includes raising and resolving any disputes that arise in the process.
- Manual Reconciliation: A 15-member team is deployed to take care of all recon-related operations like mailing customers the invoices, following up for payment advice, segregating payments by LoBs, and accounting for deductions and disputes.
Global PayEx engaged with the supplier to deploy the Auto-Recon solution designed for managing the reconciliation of payments made by institutional customers.
The setup consisted of the following key components:
- Information-exchange mechanism between the supplier and PayEx
- Master data mapping from the 3 ERP systems across LoBs
- A mechanism to send payment advice request mails & read the replies in multiple formats (text, excel, PDF or images)
- Existing communication between the collections bank & PayEx for receiving live MIS
- Automated Payment Advice Follow Up: PayEx automated the manual process of sending emails post receiving payments Due to the real-time setup with the collections bank, as soon as the confirmation is received on payment, PayEx auto-generates a mail to be sent to the respective customer. The time-delay between receiving funds and recognizing it via the daily bank statements is saved here.
- Intelligent Fund Allocation (IFA): PayEx’s AI-based engine (IFA) matches the payment & the payment advice against outstanding obligations pulled from the supplier’s ERP systems. The engine is programmed to learn from recon paths and continuously improve its accuracy.
- Payment Advice Reader (PAR): Once the customer sends across the payment advice, PayEx auto reads the data irrespective of the format almost instantly and initiates the reconciliation process. Thus, reducing a lot of manual effort in deciphering payment advice data sent by customers.
- Smart Dashboard: For instances where the IFA is unable to find a match, a dashboard is provided for a user to input how the obligation is resolved (offset with credit note, trade discounts, raise dispute, etc.). IFA learns from these inputs and begins automating similar instances after a particular threshold. Thus, continuously improving automation and reducing manual intervention.
- Live MIS across Business Functions: Live MIS dashboards are provided to finance and sales teams at various levels so as to view in real-time the outstanding obligations and payments made by their respective customers.
- Simplified Recon Process: As PayEx matches the obligations on an invoice level, the recon sent back to the supplier is categorized basis the LoBs. This avoids the cross-divisional application of cash & reduces lost revenue of LoBs. Also, the recon files are sent in formats that can be consumed by the 3 ERP systems thus eliminating duplication of work for each system.
By automating the reconciliation process end-to-end, PayEx has facilitated the supplier to eliminate a significant amount of manual effort and intervention. The time spent on recon-related issues by the sales team was saved and the supplier was able to see a 1.5% acceleration in revenue growth within 2 quarters.
The time taken to reconcile payments was reduced from over 15 days to less than 7 days within the first quarter; thereby reducing the amount of unapplied cash in the system at any given time.
Thus, PayEx has helped the supplier with a platform that allows them to grow their business by improving sales productivity and bringing in working capital efficiency.