Case Study:

Utilized EIPP to solve collection and reconciliation inefficiencies

Objective

To significantly reduce DSOs and avoid cheques as a payment method, leading to reduced reconciliation effort as well.

Background

The client had large numbers of dealers and low value invoices leading to major reconciliation challenges. With a customer base of more than 5000 dealers, this multinational tyre manufacturer was struggling with Collection Inefficiencies across LoBs.

The Challenge

The company had more than 5000 dealers spread far and wide across the country who would mostly issue cheques and PDCs for payments to the company.

  • Dealer Profiles: The dealer profile was mostly of tyre puncture repair shops. It was a big challenge to move them into electronic mode.
  • Line of Businesses: The company had two main lines of business – Passenger and Truck tyres. Challenge was to treat them as two separate entities for all collection related activities. They cannot mix CNs of one LoB with the other. However this being a manual process led to lots of errors by dealers leading to high recon efforts.
  • Credit Notes Management: The traditional scenario had credit notes pertaining to various LoBs and dealers used to wrongly offset them or have no visibility. Also sometimes CNs were larger than the invoice amount leading to difficulty in managing and tracking CNs.
  • Partial Payment Requests: Partial payments made by dealers was a large challenge to reconcile and also finding out the reason for the partial payment used up large bandwidth of all internal teams. Specific reasons required action to be taken by the company to address it quickly. Since the process was manual it was time taking leading to dealer dissatisfactions.
  • Collection Delays: Many of the cheques would lie with the collecting teams and delay in deposit would mean
    credit amount getting blocked. Required senior management bandwidth to better the collection discipline.
  • Reconciliation Pains: Large recon team manually scanning through the bank statement and reconciling into the ERP. A tedious and costly month end process. Since dealers used to combine multiple smaller invoices, it was a large challenge to recon them back in ERP.
  • Inability of the Dealers/Distributors to View their Weekly Dues: The dealers did not have a live view of all outstanding obligations & credit notes; they were also not intimated about their weekly debit amounts. The sales team also had to frequently connect with treasury team for getting information about the outstanding dues.
  • Poor Visibility for Accounts Team: The local accounts team neither had a real-time view of all incoming requests nor could they action on requests. They were auto approved by the Outsourcing Centre due to sheer volume of requests and failure rates.

Our Solution

  • Line of Business: Freepay segregated LoBs and associated rules of payment and hence no more manual errors in payments.
  • Credit Notes: Freepay provided better visibility of Credit Notes to the dealers. The challenge of CNs greater than invoices was mitigated with the help of Freepay.
  • Partial Payments: Freepay allowed partial payments. The dealers compulsorily had to choose pre designated reasons. Depending on reason selected, Freepay on real time sent email alerts to concerned departments to take action against the reason for the partial payment
  • Easily identify who paid: The company’s bank introduced unique Virtual Accounts for each dealer. Freepay being integrated with bank allowed visibility of all NEFT/RTGS fund transfers with transparency and seamless knockoff of payments into ERP.
  • Interface for Dealers: The dealers were given an interface (Web & App) to view invoices & credit notes; they could view & pay any time from within Freepay and it was automatically reconciled back at the ERP leading to short TAT for clearing credit lines.
  • Live MIS across Business Functions: Live dashboard was provided to Finance and Business teams at various levels so that they could view in real-time the outstanding obligations and payments made by their respective customers.
  • Payment & Reconciliation Automation: Freepay automated the presentation of the payments to the Bank (calculating the total dues and applying credit notes) as well as reconciling the successful/failed transaction back to the ERP. This eliminated significant man-days of effort and reduced the risk of manual errors.

The Results

Company saw so much benefit out of Freepay that it became the compulsory mode of payment for all dealers. Dealer who wanted to pay outside Freepay are levied yearly penalties. Freepay and its straight through interface with ERP made reconciliation quick and efficient. 75% of the collections have become electronic from earlier 30%. Freepay reduced the DSOs by almost 3 days.

The SMS reminders and dunning features of Freepay helped make not only faster collections but also dealers managed to get the CDs without missing it. Managing the reasons for partial payments through Freepay made reconciliation and internal workflow management much quicker and efficient.

%

Electronic Payment Collection

DSOs Reduced By

%

Effort Reduction

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