Best Practices for Strategically
Managing Receivables
October 20, 2011
Steven Rowinski, CTP
Vice President
Citibank
Treasury Products Group
Senior Receivables Product Manager
General Discussion
" Ti m e i s M o n e y. "
Benjamin Franklin - January 17, 1706 – April 17, 1790
A Founding Father of the United States of America
“
1
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
Macro Trend: The hunt for cash continues
With credit likely to remain scarce and expensive, identifying alternate sources of internal funding remains a priority
for organizations worldwide.
Cash remains King!
Receivables represents significant opportunity!
Funding Sources
Funding Sources (2007)
Funding Sources (2009)
External
Financing
7%
External
Financing
48%
Internal
Operations
52%
Internal
Operations
93%
Source: Citigroup Global Market Inc. Putting Working Capital to Work – July 2009
 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
(*) Source: REL Working Capital Reports 2010
Which Process has the Greatest Potential for Improving Cash Management?
Gtnews.com Survey of Over 400 Companies
Source: GTNews, Cash Management Survey 2010
 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%*
(*) Source: REL Working Capital Reports 2010
There is a renewed focus on DSO as a largely untapped source of internal funding
3
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.
BUYER
SELLER
ORDER TO INVOICE (O2I)
MIS
INVOICE TO CASH (I2C)
Order to Invoice (O2I)
Order
Management
 Service
Management
 Database
Management
Billing
 Invoice
generation and
dispatch
 Invoice
adjustments
 Sales
management
Invoice to Cash (I2C)
MIS
Accounts
Receivable
Credit
Collections
Customer
Management
Reporting &
Analysis
 Cash application
 Revenue
accruals
 Debt/Credit
notes
 Returns
chargeback
 Discounts
management
 Credit control
 Payment followup
 Disputes
management
 Banking
channels
 Bad debt
provisioning
 Master data
maintenance
 Account
reconciliation
 Query
management
 Customer credit
line updates
 Sales trend
analysis
 Revenue
forecasts
 Cash
management
 Period reporting/
ad-hoc analysis
Addressing These Issues Reduces DSO and Unlocks Trapped Cash
4
 Big trappers of cash
Source: WNS Global Services.
Covering the Bases
 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
 Value to client:
– Improved Financial Performance - Accelerate payment (DSO Improvement)
– Reduced collections costs (Efficiency)
– Improved relationship between financial institution and client
– Improved competitive positioning
Payment Channels
Available to Clients
5
Client
ERP
Receivables
Products
Mail
Cash Deposits / Vault
Walk In / Partner
banks
Check Deposits via
Lockbox
Phone
Electronic Check Deposit
Web
Present & Pay online, C2B
& B2B
Mobile
Electronic Receivable
Services, EBIDS*
Workstation
ACH, EFT, Direct
Debits
Posting File
Integration
CARMS
Comprehensive
Account
Receivables
Matching
Service
Receivables
Vision
Consolidated MIS
Client DDA
Posting
Electronic Receivables Solutions
6
C2B Trends
Consumer bill payment preferences have shifted dramatically from paper to electronic, while walk-in payments have
100%
2%
remained
relatively
consistent
over
3%
3%
100%
4% time
4%
4%
5%
6%
6%
2%
3%
3%
4%
4%
4%
Automated cards
100%
100%
100%
90%
90%
90%
90%
90%
80%
80%
80%
80%
80%
70%
70%
70%
70%
70%
60%
60%
60%
60%
60%
50%
50%
50%
50%
50%
40%
40%
40%
40%
40%
30%
30%
30%
30%
30%
20%
20%
20%
20%
20%
20%
10%
10%
10%
10%
10%
10%
0%
0%
0%
0%
0%
2%
2%
12%
12%
2%
12%
12%
6%
12%
6%
3%
6%
6%
3%
5%
6%
3%
5%
3%
5%
3%
7%
5%
7%
5%
7%
7%
7%
65%
65%
65%
65%
65%
2004
2004
2004
2004
2004
3%
3%
13%
3%
13%
13%
13%
13%
7%
7%
7%
4%
7%
4%
7%
6%
4%
4%
6%
4%
6%
6%
7%
7%
6%
7%
7%
7%
60%
60%
60%
60%
60%
2005
2005
2005
2005
2005
4%
4%
15%
4%
15%
15%
15%
15%
9%
9%
9%
9%
5%
5%
9%
5%
5%
8%
8%
5%
8%
8%
7%
8%
7%
7%
7%
7%
3%
3%
14%
3%
14%
14%
14%
14%
10%
10%
10%
10%
5%
10%
5%
5%
5%
9%
9%
5%
9%
9%
6%
9%
6%
6%
6%
6%
54%
54%
54%
54%
54%
52%
52%
52%
52%
52%
2006
2006
2006
2006
2006
2007
2007
2007
2007
2007
4%
4%
15%
4%
15%
15%
15%
15%
11%
11%
11%
11%
6%
11%
6%
6%
6%
10%
6%
10%
10%
10%
6%
10%
6%
6%
6%
6%
49%
49%
49%
49%
49%
49%
2008
2008
2008
2008
2008
4%
4%
4%
15%
15%
15%
15%
15%
12%
12%
12%
12%
12%
7%
7%
7%
7%
11%
7%
11%
11%
11%
7%
11%
7%
7%
7%
7%
44%
44%
44%
44%
44%
44%
2009
2009
2009
2009
2009
5%
5%
5%
5%
14%
14%
14%
14%
14%
13%
13%
13%
13%
13%
8%
8%
8%
8%
8%
13%
13%
13%
13%
13%
8%
8%
8%
8%
8%
39%
39%
39%
39%
39%
39%
2010
2010
2010
2010
2010
6%
6%
6%
6%
14%
14%
14%
14%
14%
14%
14%
14%
14%
14%
8%
8%
8%
8%
8%
14%
14%
14%
14%
14%
9%
9%
9%
9%
9%
35%
35%
35%
35%
35%
35%
2011
2011
2011
2011
2011
6%
6%
6%
6%
14%
14%
14%
14%
14%
16%
16%
16%
16%
16%
9%
9%
9%
9%
9%
15%
15%
15%
15%
15%
10%
10%
10%
10%
10%
30%
30%
30%
30%
30%
30%
Automated cards
Automated
Automated cards
cards
Automated cards
Direct debit
Direct debit
Direct
Direct debit
debit
Direct debit
Home Banking
Home Banking
Home
Home Banking
Banking
Home Banking
Biller Direct -Cards
Biller Direct -Cards
Biller
Biller Direct
Direct -Cards
-Cards
Biller Direct -Cards
Biller Direct - ACH
Biller Direct - ACH
Biller
Biller Direct
Direct -- ACH
ACH
Biller Direct - ACH
Walk-in
Walk-in
Walk-in
Walk-in
Walk-in
Walk-in
Mail - Lockbox
Mail - Lockbox
Mail --- Lockbox
Lockbox
Mail
Mail
Lockbox
Mail - Lockbox
2012
2012
2012
2012
2012
 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
7
What to Look for from Electronic Receivables
Offering which enables consumers to view their bills and make payments directly on the biller’s web site and by
phone.
Channels
Web
IVR
CSR
 Fully branded
and linked to
biller’s website
 Dedicated 800
numbers; option
for link from
biller’s IVR
 Payment initiation
using browserbased 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
Client Need
Solution/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
8
Electronic Receivables Services
Electronic Receivable Services electronically delivers payments originated from online banking websites to a financial
institution client.
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
Payment Sources
Client
ERS
DDA Account
Online Banking
Sites
Bill Payment Sites
(MyCheckfree.com, etc)
A/R System
Kiosks /
Walk - in Payment
Agencies
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
B2B Trends
100%
2%
2% has lagged
2%is now occurring.
2%
2% C2B, a2%
2%
2%2012 the 2%
While
penetration
in B2B
similar shift
By
majority of B2B
100% electronic
2%
2%
2%
2%
2%
2%
2%
2%
2%
8%
8%
9%
10%
11%
8% be made8%
payments
will
via electronic
methods.
9%
13%
10%
14%
11%
90%
16%
13%
14%
90%
100%
100%
80%
80%
90%
90%
70%
70%
80%
80%
60%
60%
70%
70%
50%
50%
60%
60%
40%
40%
50%
50%
30%
30%
40%
40%
20%
20%
30%
30%
10%
10%
20%
20%
0%
0%
10%
10%
2%
15%
15%
2%
8%
8%
2%
16%
2%
16%
8%
8%
15%
15%
16%
16%
76%
76%
76%
76%
74%
74%
74%
74%
2%
2%
18%
9%
18%
9%
18%
18%
72%
72%
72%
72%
2%
2%
19%
10%
19%
10%
19%
19%
69%
69%
69%
69%
2%
2%
13%
13%
24%
24%
2%
2%
11%
21%
21%
11%
21%
21%
24%
24%
66%
66%
62%
62%
66%
66%
62%
62%
2%
2%
14%
14%
27%
27%
27%
27%
57%
57%
57%
57%
16%
2%
2%
18%
18%
2%
2%
Wire
Wire
16%
16%
18%
18%
Wire
Wire
34%
34%
Purchase
Purchase
Cards
Cards
30%
30%
30%
30%
52%
52%
34%
34%
46%
46%
Purchase
Purchase
Cards
Cards
ACH
ACH
ACH
ACH
Checks
Checks
52%
52%
46%
46%
Checks
Checks
0%
0%
2004
2004
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2004
2004
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
B2B payment methods are driven through three primary channels:
1. Paper Invoice + Check
2. File Transmission
10

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
Walk-In Payment Market
Walk-in payments are continuing to grow, recently driven by economy (bank account/service charge affordability) and
lack of trust of banking system
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
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
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 2009. (3, 3a)
11
Mobile Receivables Solutions
US Mobile Banking Users
Methods for Conducting Mobile Banking
68%
Internet
2010
78%
17.8
56%
Text
2009
44%
21%
App
10.0
13%
4%
2%
USSD
2008
4.9
2%
3%
Don’t Know
0.0
0.0
5.0
10.0
15.0
10.0
20.0
30.0
40.0
Americas
Key Growth Drivers
 Smartphone's: 44% CAGR vs. 0.3% non-smart phones
 Data Services: 41% CAGR vs. (10)% voice spend
12
50.0
60.0
20.0
Overall
70.0
80.0
90.0
New Products in Development: EBIDS
Electronic Billing Information Delivery Service (EBIDS) is an ACH solution developed by NACHA to increase the
availability of electronic bills for consumers
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 lowcost 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
13
Citi , along with dozens of other domestic FI’s are active participants in this venture.
Core Receivables Solutions
14
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
ACH
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
Checks
Other
Incoming payments & remittance data from all payment modes
®
15
Wires
Comprehensive Accounts Receivable Matching
Extraction,
Enrichment, and
Repair of
remittance data
Consolidated
Remittance Data
Automatic
Matching
Report of matched
and suspense items
FI Client
Manual
investigation by
FI
Open invoices and
list of remitters
Lockbox Services
Is your current Financial Institution in the Lockbox business for the long run?

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
WA
ME
OR
-
MT
ND
WY
SD
UT
CA
HI
MN
ID
NV
AZ
WI
NE
CO
NM
VTNH
NY
MI
IA
IL
KS
OK

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
AK
–
–
–
Participate in Phoenix-Hecht study
Real time online decisioning service
Accept a Stop or Positive file
16
LA
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
WV VA
TN
AK

IN
KY
MO
MS
TX
PA
OH
AL
NC
SC
GA
FL
Remote Check Deposit Solutions
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
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
SCAN
KEY
BALANCE
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
17

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
APPROVE
Commercial Vault Services
Considerations
 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
Client Office
Locations
Citi
Cash and Checks
Armored
Carrier
18
Vault
Financial
institution
Closing
“ If everything seems under control, you're just not going fast enough "
- Mario Andretti- World famous race car driver
19
Questions & Answers
THANK YOU
20