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Best Practices for Strategically Managing Receivables October 20, 2011 Steven Rowinski, CTP Vice President Citibank Treasury Products Group Senior Receivables.

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Presentation on theme: "Best Practices for Strategically Managing Receivables October 20, 2011 Steven Rowinski, CTP Vice President Citibank Treasury Products Group Senior Receivables."— Presentation transcript:

1 Best Practices for Strategically Managing Receivables October 20, 2011 Steven Rowinski, CTP Vice President Citibank Treasury Products Group Senior Receivables Product Manager

2 General Discussion " Time is Money." Benjamin Franklin - January 17, 1706 – April 17, 1790 A Founding Father of the United States of America “ 1

3 Receivables Client Trends A recent internal survey of clients/prospects indicate… Consolidate services with a single service provider Leverage all possible receivables channels to drive sales --- market is moving from paper and toward electronic payments ---- Outsource non-core competencies Ensure they meet regulatory requirements Have an easy customized service offering Compress the billing and reconciliation cycle Obtain comprehensive, transparent and consistent information to feed a single ERP Adopt emerging technology to meet industry trends 2

4 Source: Citigroup Global Market Inc. Putting Working Capital to Work – July 2009 Source: GTNews, Cash Management Survey 2010  Market analysis indicates that the top 1,000 US companies currently have over $750B in trapped liquidity; the top 1,000 in Europe have approximately EUR740B*.  Analysts view working capital as an indicator of the overall efficiency & control a company has over its production cycle and cash management  Efficient working capital management is an enabler for a company to self-fund its operating or production cycle, invest surplus balances or use funds to pay down debt Which Process has the Greatest Potential for Improving Cash Management? Gtnews.com Survey of Over 400 Companies Macro Trend: The hunt for cash continues Cash remains King! Receivables represents significant opportunity!  While DPO/DIO have traditionally been the primary focus of optimization efforts, DSO remains the critical missing link in maximizing working capital efficiency  By adopting best in class practices, the typical large, multinational company could reduce working capital financing requirements by up to 30% and boost Earnings Per Share (EPS) by 2-3%* With credit likely to remain scarce and expensive, identifying alternate sources of internal funding remains a priority for organizations worldwide. There is a renewed focus on DSO as a largely untapped source of internal funding (*) Source: REL Working Capital Reports

5 ORDER TO INVOICE (O2I) INVOICE TO CASH (I2C) Order to Invoice (O2I)Invoice to Cash (I2C)MIS Unlocking trapped cash in the O2C cycle Cash gets trapped due to variety of upstream root cause issues emanating in the order to cash cycle. Order Management  Service Management  Database Management Billing  Invoice generation and dispatch  Invoice adjustments  Sales management Customer Management  Master data maintenance  Account reconciliation  Query management  Customer credit line updates Reporting & Analysis  Sales trend analysis  Revenue forecasts  Cash management  Period reporting/ ad-hoc analysis  Big trappers of cash Source: WNS Global Services. Accounts Receivable  Cash application  Revenue accruals  Debt/Credit notes  Returns chargeback  Discounts management Credit Collections  Credit control  Payment follow- up  Disputes management  Banking channels  Bad debt provisioning Addressing These Issues Reduces DSO and Unlocks Trapped Cash SELLER BUYER MIS 4

6 A Financial Institution that provides comprehensive receivables suite of services that support multiple channels and methods of payments Facilitate migration from paper based payment channels to more efficient electronic channels Increase straight through reconciliation through on line dispute management, data enrichment, AR matching, interactive suspense management Provide central information management and workflow portal to enhance visibility, analytics, performance metrics and workflow Payment Channels Available to Clients Mail Walk In / Partner banks Phone Web Mobile Workstation Receivables Products Cash Deposits / Vault Check Deposits via Lockbox Electronic Check Deposit Present & Pay online, C2B & B2B Electronic Receivable Services, EBIDS* Covering the Bases Receivables Vision Posting File Integration Client DDA Posting Client ERP Consolidated MIS ACH, EFT, Direct Debits CARMS Comprehensive Account Receivables Matching Service Value to client: –Improved Financial Performance - Accelerate payment (DSO Improvement) –Reduced collections costs (Efficiency) –Improved relationship between financial institution and client –Improved competitive positioning 5

7 Electronic Receivables Solutions 6

8 C2B Trends This shift is driven by consumer adoption of “consolidator” and “biller direct” offerings –Consolidator model (Home Banking)—consumers pay all of their bills at their FI’s website  Drivers: convenience, speed, postage elimination –Biller Direct model - consumers access bill payment information directly on a biller’s website or through a phone system (IVR and CSR)  Drivers: Speed, postage elimination, credit card (defer payments, rewards), real-time confirmation Unbanked –walk-in payments show slight growth from ’08–’09, recently driven by economy (bank account/service charge affordability) and lack of trust of banking system Consumer bill payment preferences have shifted dramatically from paper to electronic, while walk-in payments have remained relatively consistent over time 7

9 What to Look for from Electronic Receivables WebIVRCSR Fully branded and linked to biller’s website Dedicated 800 numbers; option for link from biller’s IVR Payment initiation using browser- based interface Supports enrolled and one-time payers Customized greetings and scripts Can be scripted to improve consistency of calls Pre-populated fields based on billing file Announcements based on date in liability file Access to full payment history for inquiries Ability to reverse payments Offering which enables consumers to view their bills and make payments directly on the biller’s web site and by phone. Client NeedSolution/Benefits Offer Consumers Flexible Payment Options Deliver a variety of payment methods including: Web-based, IVR. Customer Service Assisted Accelerated Funds Availability and Maximized Use of Funds Quick set-up of consumers, Electronic audit trail for tracking payments, Flexible input options Reduced Processing Costs E-Bill presentment eliminates printing and postage costs E-payment eliminates paper processing costs Comprehensive, Customizable MIS Reporting Seamless upload of daily update files into account receivable / general ledger system Portfolio of standard and custom reports, available through PC and fax delivery Exception reports that track non-paying customers Channels 8

10 Electronic Receivables Services What is Electronic Receivable Services? ERS is a service in which a financial institution collects payments electronically from home banking websites, bill payment sites, credit agencies, and walk-in bill pay providers and delivers them to the provider (billers) as a single ACH credit and single payment credit file Electronic Receivable Services electronically delivers payments originated from online banking websites to a financial institution client. Electronic Receivable Services will quickly deliver benefits Accelerates receipt and application of online customer payments, improving working capital and reducing days sales outstanding Eliminates the cost of processing electronically-originated retail lockbox payments as exceptions Delivers transaction data accurately and quickly, reducing customer delinquencies and inquiries Improves internal operating efficiency with improved automatic cash posting to A/R system 9 Online Banking Sites Kiosks / Walk-in Payment Agencies Bill Payment Sites (MyCheckfree.com, etc) DDAAccount A/R System ERS Client Payment Sources

11 B2B Trends While electronic penetration in B2B has lagged C2B, a similar shift is now occurring. By 2012 the majority of B2B payments will be made via electronic methods. B2B payment methods are driven through three primary channels: 1.Paper Invoice + Check 2.File Transmission ACH with Addenda records attached (eg EDI 820) Primarily between large corporate carriers and small businesses 3. Electronic Invoice Presentment and Payment (EIPP) For biller centric insurance carriers serving middle market/small business payers Platform for invoice delivery, dispute management, and payment 10

12 Walk-In Payment Market Demographics 5% speak Spanish only 46% earn less than $30,000 23% do not have a high school degree 67% live in the urban and suburban areas Source: The Center for Financial Services Innovation’s (CFSI’s) Under banked Consumer Study (2008). (2) FDIC National Survey of Unbanked and Under banked Households. December (3, 3a) Walk-in payments are continuing to grow, recently driven by economy (bank account/service charge affordability) and lack of trust of banking system Motivations Consumers do not have enough money or feel they do not need a bank account Service charges/Min Balances too high FI doesn’t offer needed services Holds money until last minute Trust issues with the banking system FI not conveniently located Market Size Total U.S. Walk-In Bill Payment Market Size = 106MM Adults –17MM or 7% Unbanked –43MM or 18% Underbanked –46MM or 20% Other Cash Preferred 11

13 Key Growth Drivers Smartphone's: 44% CAGR vs. 0.3% non-smart phones Data Services: 41% CAGR vs. (10)% voice spend Mobile Receivables Solutions Methods for Conducting Mobile BankingUS Mobile Banking Users 12

14 Citi, along with dozens of other domestic FI’s are active participants in this venture. New Products in Development: EBIDS Industry Challenges & Trends While e-payment has become pervasive in the consumer payment space, e-presentment has limited adoption (<10%) While e-presentment is a mature model at “biller direct” websites (verizon.com, ConEd.com), there are few options in the online banking space Addition of alternatives channels creates greater need for presentment opportunities Solution Concept EBIDS allows bank clients (billers) to deliver e-bills to consumer online banking accounts through the low- cost ACH channel Consumers can view the bills and then authorize payments through their FI’s website; payments are then processed through ACH Network Client Benefits Increases ebill adoption, resulting in presentment saves (cost of paper bill is ~$1.25 vs. e-present ~$0.20) Improves overall customer satisfaction- consumers given the alternative to view all their bills in one place, rather than logging in to each biller’s website Reduces exceptions/returns- consumers do not have to key in account details or payment amount Can be deployed to multiple banks with a 1-time integration effort Not a proprietary solution- encourages multiple banks to participate -> increasing likelihood of adoption Socially conscious message- promotes going green Electronic Billing Information Delivery Service (EBIDS) is an ACH solution developed by NACHA to increase the availability of electronic bills for consumers 13

15 Core Receivables Solutions 14

16 Comprehensive Accounts Receivable Matching CARM is the process of matching paper and electronic payments to your corresponding A/R Records in order to efficiently and accurately apply payments received to open invoices. Typical Service Features Multi-region, multi-currency, multi-language solution that aggregates data from various payment channels Identifies suspense / exception / unmatched items and leverages complex algorithms to enrich, repair and match these items to your open invoices Bank agnostic standalone solution, flexible to accept and reconcile suspense items from third party providers Benefits Significantly reduces number of suspense items Improves AR reconciliation process Reduces costs & frees up FT resources Improves order to cash cycle (O2C) Provides accurate and timely information flow Reduces DSO Rationalizes collection process WiresChecks Other ® Comprehensive Accounts Receivable Matching FI Client Report of matched and suspense items Open invoices and list of remitters Automatic Matching Incoming payments & remittance data from all payment modes Manual investigation by FI Extraction, Enrichment, and Repair of remittance data Consolidated Remittance Data ACH 15

17 Lockbox Services Keys –Investment in LBX business and infrastructure  Expanded Footprint  In-source or Out-source (does it matter) –End-point analysis to identify the optimal clearing locations –Foreign Currency Processing –Ledger cut-off Quality & Customization –End-to-end image processing platform  Online Imaging  Image Transmission Capabilities  Notes on Images Available  Transaction Association –Same day processing available for checks received via courier –Providers ability to handle exception type work –Consolidated data files containing lockbox, wires and ACH –Same platform and services across all sites –Customized quality MIS and reporting at the client level –Participate in Phoenix-Hecht study –Real time online decisioning service –Accept a Stop or Positive file Is your current Financial Institution in the Lockbox business for the long run? WA OR CA MT WY CO NM ID NV UT AZ ND SD NE KS OK TX MN IA MO AK LA FL MI WI IL TN MS AL GA SC NC KY NY PA OH IN WV ME VT NH AK HI VA - Return Item Processing –Re-deposit NSF returns first time –Transmit a reverse file of “hard “ returns Weekend Processing - Can you cost justify it - Does your provider offer it 16

18 Remote Check Deposit Solutions How Does It Work? Client uses a WebClient application and recommended scanner to image checks and in some instances associated invoices/coupons Client scans items, confirms dollar amounts, and then transmits the deposit securely to its depository financial institution Images of checks are cleared via U.S. Federal Bank, or other check clearing associations A/R data file can be retrieved from platform or delivered to the client Access to check images is available on-line via FI electronic banking platform Benefits Convenience (Save a Trip!) –Create a virtual branch in the office, no longer necessary to make a trip to the bank Reduce Float and Presentment Time –Float is reduced. Clients can access deposited funds sooner Reduce Costs –Reduced FI service fees ; eliminate the expense of armored cars and overnight couriers Minimize Risk and Fraud –Checks are presented for payment sooner, notification of returned items gets back to clients faster Remote Check allows depository clients to scan checks in their own offices, then electronically transmit the images to its financial institution—eliminating the hassle of over-nighting paper checks to the U.S. or physically preparing them and delivering them to a branch 17

19 Commercial Vault Services Ability of a financial institution to offer cash (hard currency) and check deposit solutions at critical locations Ability of a financial institution to fill currency orders across the U.S. Well established vault relationships with armor carriers and correspondent banks Clear strategy to in-source or out-source vault services, or might there me a hybrid approach Consistent services and quality across all vault locations Does the financial institution, or out-source provider offer image cash letter (x.937) Does financial institution offer deposit reconciliation and location reporting Citi Cash and Checks Vault Considerations Financial institution Armored Carrier Client Office Locations 18

20 Closing “ If everything seems under control, you're just not going fast enough " - Mario Andretti- World famous race car driver 19

21 Questions & Answers THANK YOU 20


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