remittance challenges in a digital world · 2018. 4. 2. · remittance challenges in a digital...
TRANSCRIPT
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Remittance Challenges in a Digital World
Gary Halleen, CEO, President, API Outsourcing Inc.Joel Goldberg, Senior Vice President, Project Leader, Rosenthal & Rosenthal
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Introductions
Gary Halleen, CEO, President• Gary Halleen has 40 years of experience in information technology and back-office automation.
His time at 3M, founding of Com Squared Systems, Inc. in 1980, and founding of API Outsourcing Inc. in 1998 with the purpose to provide technology for the back-office, has provided deep knowledge of the industry. Gary received his BSEE from the University of Nebraska.
Joel Goldberg, Senior Vice President, Project Leader• Joel Goldberg joined Rosenthal in 2002. Founded in 1938, Rosenthal is a commercial finance
company specializing in factoring and asset based lending. As Senior Vice President and Operations Manager, Joel oversees the implementation and operation of Rosenthal’s software platforms, domestic and international technology vendor relationships, and the back-end systems associated with the firm’s banking services, including its lockbox. Prior to joining Rosenthal, Joel spent 20 years at CIT and Heller Financial. He is currently the President of the Factors Controllers Association. Joel received his BA from Brooklyn College.
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Overview
• The Problem• Why is this happening?• Rosenthal’s Story• Solving the Problem
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The Problem
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The Wonderful World of Electronic Payments
• Electronic payments are wonderful • Provide cash faster• Simplifies cash application when payment comes with remittance embedded
• Electronic payments are wonderful• More difficult to apply cash when remittance comes separate from payments• More difficult to apply cash when remittance is on a website
The problem
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The Wonderful World of Electronic Payments
• Payments information by ACH, Card and Wire come from multiple financial institution
• Typically receive payment for many invoices in single transaction• Typically no remittance with the payment
• Remittance • Payer sends remittance to financial institution making electronic payment to imbed
remittance (CTX)• Payer sends remittance by email, EDI or other means to seller• Payer indicates seller must log into their website for remittance
• Cash Application• How to match a single electronic payment to many invoices• How to match remittance information to a single payment• How to match payment and associated remittance with invoices being paid
The problem
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• The transition to electronic billing and payment has created advantages and disadvantages for both buyers and sellers.
• ACH, Wire, and Card payments, remittances, and deductions are provided through disparate sources and processes.
• Remittances are provided by email with attachments, by EDI, or a website.
• This makes matching payments to remittance information and reconciliation of payments to invoices difficult.
Cash Application When Transitioning from a Paper/Imaged Based Lockbox to Electronic Payments
The problem
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Why is this happening?
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Traditional Lockbox vs Electronic Payments
Traditional Lockbox• Remittance with your check• MICR from check image• Remittance captured – seller or
bank• Match payment, remittance, and
invoice – seller
Electronic Payments• Remittance by separate email, EDI,
etc.• Payment information in file from
financial institution• Remittance captured – seller
and/or third party• Match payment and remittance –
seller or third party• Match payment, remittance, and
invoice – seller or third party
Why is this happening?
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Check 21
• Over a decade ago on October 28, 2004 the Check 21 law which created a new piece of paper called the substitute check took effect. The law also paved the way for image exchange and electronic payments
Source: Association for Financial Professionals. 2013 AFP Electronic Payments Survey. 2013. Print.
Why is this happening?
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Electronic Payments
Source: Association for Financial Professionals. 2013 AFP Electronic Payments Survey. 2013. Print.
Why is this happening?
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+ Pay just in time, extend DPO
+ Reduce check & postage costs
+ Minimize opportunity for fraud
Why is this happening?
Advantages (+) for Buyer/PayerElectronic Payments and Remittance
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- Capture of remittance information from email, EDI, and websites
- More costly processing to match remittances and payments
- Longer time period to complete cash application, increase DSO
Why is this happening?
Disadvantages (-) for Seller/ReceiverElectronic Payments and Remittance
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Receiving Remittance
Source: Association for Financial Professionals. 2013 AFP Electronic Payments Survey. 2013. Print.
Why is this happening?
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Advantages (+) and Disadvantages (-)Electronic Payments and Remittance
Buyer/Payer
+ Pay just in time, extend DPO
+ Reduce check & postage costs
+ Minimize opportunity for fraud
Seller/Receiver
- Capture of remittance information from email, EDI, and websites
- More costly processing to match remittances and payments
- Longer time period to complete cash application, increase DSO
Why is this happening?
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Joel Goldberg, Senior Vice President, Project Leader
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Problem - Missing Remittance Information
At Rosenthal & Rosenthal in 2015 we processed:• 5,732,408 in invoices• 478,300 payments
• 418,342 checks• 59,758 ACH/wires
• We closed 4,045,517 invoices by checks received and 1,706,691 by ACH/wires received
• Of the 59,758 ACH/wires• 11,762 were supported by CCD+ 820 and closed 1,147,855 invoices
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Problem - Missing Remittance Information
That leaves 47,996 ACH/wires with no electronically usable remittance information that pays 558,836 invoices that will eventually be closed
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Problem - Missing Remittance Information
How is information received:1. Imbedded CTX 820 2. Imbedded in wire information3. E-mail from sender
• On the e-mail• In a PDF• In Excel
4. None provided – go to WEB site5. None provided – NO DIRECTION
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Problem - Missing Remittance Information
API has helped us cure the first three bullet points and is working on a solution on the fourth and fifth
1. Imbedded CTX 820 2. Imbedded in wire information3. E-mail from sender4. None provided – go to WEB site5. None provided – NO DIRECTION
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Discussion
• Cash application is time sensitive• Peaks and valleys with receiving payments• Staffing difficulties• Burnout and overworking
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Solving the Problem
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Having an automated process only to have to manually match remittance is just a bottleneck
automated manual
Solving the Problem
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Overview on solving the problem
• Considered in-house solution • Lack of IT resources (development, implementation, and support)
• Buy hardware and software licenses• Lack of knowledge for the application • Lack of time
• Chose a Software as a Service (SaaS) solution• Provided a solution without capital investment and minimal IT resources• Provided expertise in back-office processes (including remittance processing)
and technology• Provided rapid implementation of the solution
Solving the Problem
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Solving the Problem
• Requirements and Definition• Current processes• Remediation and improvement design• Assess the potential benefits• Cost analysis and return on investment
• Implementation• Develop and test• Rollout• Monitor and control• Process improvement
Solving the Problem
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ERP
ACH
Text
Wire
ACH
Card
EDI/CTX
Attachments
InvoiceUser ID
Password
url Buyer’s Website
Web-BOT
Solving the Problem
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Text
User IDPassword
url
Buyer’s Website
Web-BOTUser ID
Password
url
Solving the Problem
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automated automated
Adding automation clears the road for an overall efficient process
Solving the Problem
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Everything is going electronic
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Are you ready?
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Thank You