From flowers to freight, global logistics companies specialize in providing customers with innovative and customized transportation solutions.
When the director of cash services for one of the world’s three largest logistics companies looks back on his company’s old cash application environment, he still shakes his head: it was handling its receivables nearly as much as it handled its customers’ shipments. The company’s in-house cash application and research operation was manually intensive, and it encompassed multiple legacy systems, all with inefficient workflow management tools. At that time, all of the company’s 70 to 80 million open invoices/waybills per day required manual intervention for posting.
This lack of effective payment acceptance tools contributed to excess unapplied cash. Accounts receivables (A/R) applications could sometimes take more than 48 hours, based on data-entry volumes. And inefficient receivables processes required increased facility and equipment expenses. Cash application functions used to consume hundreds of staff.
These were huge issues, yet they were not this company’s alone. Most companies have a very disjointed process for managing receivables, often with inefficient systems and procedures. Traditional A/R procedures require staff to manually open checks and photocopy them, create cash application postings to the A/R system, prepare and physically deliver a bank deposit, and file backup documentation. To corral this chaos, companies have been taking a fresh look at their receivables environment. The idea is to streamline A/R to achieve labor savings, increase posting accuracy, and enhance service to internal and external customers.
Thinking Outside the Box
To get a handle on its cash application expenses — and ultimately its receivables strategy — this top global logistics company recognized that it needed to move toward a robust automation and technology environment that would enable the company to capture and apply cash electronically. This would require a flexible and adaptive, customer-centric solution that would provide enhanced workflow management and reporting tools and online Web access to payments information.
The company’s objectives were to limit manual intervention and paper handling in cash application, optimize funds availability, reduce mail float, cut operating costs, improve the timeliness and accuracy of cash applications, gain new tools for unapplied credits, and tighten cash controls.
The director of cash services and his team concluded that bringing all of these pieces together would require a solutions partner that excelled in: auto-match/auto-posting capabilities; enhanced reporting; productivity tracking; workflow management; centralized data warehousing; 24/7 system availability; industry experience; customer service; and quickly and accurately delivering solutions. After an extensive evaluation, the company selected a solution from Creditron.
The Creditron cash application solution is a Microsoft Windows service featuring scheduled bank FTP pulls, PGP file encryption, optical character recognition (OCR) data reading for onsite scanning, SQL Server 2000/2005 support, and user-configurable auto-matching rules.
Creditron’s technology allows the global logistics company to image-enable its receivables, automatically reading checks to determine the amount and the check issuer (based on MICR data). Scanned checks then can be automatically matched to open invoices, with an electronic deposit file created simultaneously. When, say, a check comes in where a discount, credit or return is applied, the software takes this into account and ensures correct cash application postings.
Today, any employee with a valid login can view images of any open invoice/waybill, anytime, via the company’s intranet – allowing them to keep abreast of their customers’ current A/R status. Employees can search for any field or combination of fields keyed or captured from images. The solution also provides a snapshot of all unapplied cash available for rework in the cash application, with access to all open invoices/waybills; invoices and waybills can be added based on customer, invoice or waybill number. And the solution offers complete posting and audit information, and centralized security administration.
One challenge that the global logistics company needed to address in reengineering its cash application process was validating incoming data from host systems and payment files. To accomplish this, the shipper leveraged the extensive import validation logic in the Creditron system. Similarly, Creditron’s efficient use of SQL Server tools helped the global logistics company manage its bulk data load for its Start of Day, at which time up to 80 million open invoices/waybills are loaded in a two-hour window. Creditron also provided dynamic End of Day/Start of Day logic that drove the company’s 24/7 online Web application. And progressive stress testing after program modifications assisted in the fine-tuning of the Web application to ensure peak system performance.
Using Creditron’s advanced cash application technology, it now takes the global logistics company less than 24 hours to post to A/R, with 100 percent validation and accuracy of postings. More than 90 percent of payments now match automatically, up from 70 to 90 percent per lockbox in the company’s old receivables environment. What’s more, the company has eliminated its duplication of effort in posting, while decreasing its number of open invoices/waybills by 10 percent.
The company also has significantly reduced its number of reversals.
The automation also has enabled the company to reduce and reallocate a significant number of its full-time staff to value-added functions, while cutting its second shift requirements and replacing temporary staff with permanent employees. Today, junior staff can perform most cash application functions, with seasoned A/R employees merely reviewing the work.
With this new cash application functionality, this top 3 global logistics company is ready for its next growth phase.