Executive Briefing Paper. Integrated Receivables Merging Payment and Remittance Information

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1 Executive Briefing Paper Integrated Receivables Merging Payment and Remittance Information

2 Fiserv Executive Briefing Paper Merging Payment and Remittance Information from All Sources Corporate treasurers are in need of more accurate, less expensive and more efficient ways to manage changing payments types. Treasurers also need enhanced understanding of how the different payment types affect daily cash positions. Receivables processing has traditionally been a complex and time-intensive function that inhibited the ability to get information effectively. However, corporations and banks are now finding ways to enhance and integrate payments management to bring together electronic and paper processing, accelerate cash flow, prevent errors and reduce operational costs. Processing Silos Result in Inefficiencies and Errors Businesses receive payments in a variety of ways, including paper checks and electronic transactions in the form of ACH, wire transfers, and credit and debit card payments. Remittances may be mailed to a lockbox, made in person, or made by phone, ATM, electronic bill payment, EDI, wire or mobile devices. According to results of a survey conducted by the Aite Goup in 2010, more than half of the large companies they polled reported having inconsistent payment handling due to the growing number of payment types. There is no debating that with all the points of capture and proliferation of payment types that receivables processing requires intensive management. A significant barrier to streamlined receivables processing is siloed technology. As channels and payment types have emerged, new systems have been added to manage individual payment types. This has resulted in processing silos that increase costs, risk and inefficiencies. Having different systems for different payments types complicates both processing and liquidity management. The Need for Integration The 2010 Federal Reserve Payments Study found that in 2009, more than three-fourths of non-cash payments in the U.S. were made electronically this represents a compounded annual growth rate of 9.3 percent since That trend continues as we find that businesses are increasingly making electronic payments and more consumers are using online tools and mobile devices to pay their bills.

3 Fiserv Executive Briefing Paper Electronic payments are expected to keep growing in popularity. In addition, there are other trends that are increasing the urgency for more streamlined, efficient remittance processing: Obtaining credit is difficult due to the challenged economy. This has put increased pressure on maintaining a positive cash flow. Corporate treasurers require integrated receivables data for accurate cash flow forecasting and liquidity management. Organizations are experiencing a growing number of exceptions and returns, which in turn, delay posting. In the Aite survey, 74 percent of large corporations reported that exceptions have a negative impact on their operations. Having integrated receivables data can accelerate awareness and resolution of exceptions. The need to reduce operational costs is cutting across all industries, and businesses are looking to their financial institutions for solutions. However, many banks are still recovering from mergers and acquisitions and have redundant systems that are independent, rather than integrated. Others may have antiquated technology. Using disparate and out-ofdate systems does little to prevent the posting and detection of duplicate and inaccurate payments. It is not surprising that the Aite Group survey also found that nearly 60 percent of senior receivables and treasury managers are not satisfied with their remittance processing systems. Corporate leaders and their bank executives know that an integrated receivables solution one designed to accept all payment types is essential for business growth, risk mitigation and cost containment. In November 2010, Fiserv surveyed financial institutions as to the potential value that could be created by consolidating and automating treasury services technology, including accounts receivables. Almost unanimously, the financial institution respondents agreed that there would be benefits derived from such integration. Respondents also indicated a preference for having a single provider supply all related technology. Integrating Receivables Financial institutions and technology providers have responded by implementing receivables processing hubs that integrate the processing of receivables information for multiple payment types. However, a truly integrated, comprehensive solution that accepts all payment types is still in the making. What should an integrated solution look like from a receivables perspective? Industry experts define an integrated receivables solution as one that merges payments and remittance detail for all payments types from multiple sources, including lockboxes, into one integrated and commonly formatted payments file. Potential benefits of a uniform and consolidated payments data stream include: Accelerated cash application Consolidated reporting with the ability to extract and export data and also facilitate trend analysis across payment types Automated receivables posting, exceptions management and invoice matching Enhanced understanding of cash and credit positions 1

4 Fiserv Executive Briefing Paper Integrating paper-based and electronic payments data would simplify and accelerate the entire receivables cycle for businesses, reducing manual tasks and the delays caused by errors and exceptions. Most importantly, an integrated solution would provide businesses with a more accurate view of their cash position and the health of the enterprise. Building the Solution Step by Step, Starting with the Lockbox As per the results of the Fiserv research, uniting multiple payment types and payments channels may seem overwhelming to financial institutions with siloed payments processing. A prudent approach, therefore, might be to build out the solution one step at a time or to outsource remittance processing in lieu of investing internal resources to upgrade independent or outdated systems. The electronic lockbox would integrate the electronic transactions with the corporate customer s existing output options. This in turn would enable all payment information to be merged into a consolidated file for posting into any accounts receivable system. Once the payments hub and electronic lockbox are up and running, additional payment types can be brought into the hub, starting with credit cards, ACH payments and remittance information and expanding to wires, remote capture, mobile payments and other payment types. Leveraging technology to reduce the cost of receivables processing has become a mandate in today s business environment. Working with their financial institutions and technology providers, businesses can begin consolidating payments received from a few channels and payment types today, and expand these capabilities over time. Regardless of the approach taken, an integrated receivables processing solution should have, at its core, a payments hub designed to aggregate payments and remittance detail from any source. The payments hub sits between the front end payments channels and back end payments systems. It features a rules engine that governs how various transactions from each source should be processed. To facilitate integration, the traditional lockbox should be expanded into an electronic lockbox service that processes both paper and electronic payments. The electronic lockbox service would provide the ability to view check and remittance document images as well as electronic payment information in a single location. It would also provide merchants with the ability to accept online bill payments. 2

5 About the Author Joe Mikel is senior vice president of business development for Remittance & Check Solutions at Fiserv. About Fiserv Fiserv is driving innovation in Payments, Processing Services, Risk & Compliance, Customer & Channel Management and Insights & Optimization, and leading the transformation of financial services technology to help our clients change the way financial services are delivered. Visit for a look at what s next, right now.

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