Skies Clear for Receivables Automation - Managing Electronic Payments in the Cloud

© 2014 The Hackett Group, Inc. All rights reserved.
Reproduction of this document or any portion thereof
without prior written consent is prohibited.
@OPENSCAN
Skies Clear for Receivables
Automation - Managing Electronic
Payments in the Cloud
May 6th, 2014
Dynamic Enterprise Cash Flow Processing

@OPENSCAN
Timothy F. Ray joined Open Scan in 2007 as a major account
executive. Following a string of successes, he was promoted to Chief
Operating Officer. In this role, Tim is responsible for all operations,
including sales and implementations.
During his tenure at Open Scan, Tim has led the organization in sales
by closing opportunities with many Fortune 500 companies. He has built
a top notch sales organization resulting in better forecasting, increased
sales, and growth for the company.
Prior to Open Scan, Tim founded a commercial lending organization
that focused on serving small to medium-sized businesses. As well, Tim
was the Director of Western U.S. and Latin America Sales at Moldflow
Corporation, the leading provider of CAD/CAE software products and
services. While at Moldflow, he was responsible for building the sales
organization from the ground up and developing a reseller network in
Latin America.
Tim has a Bachelor of Arts Degree in Business Administration, including
the Completion of Entrepreneurial Studies Program from the
Department of Economics and Business at Washington & Jefferson
College in Washington, PA. Tim and his wife live in Denver, CO, with
their two children.
Welcome Timothy F. Ray
Chief Operating Officer
Open Scan Technologies, Inc.
tray@openscan.com

@OPENSCAN
Founded in 1998
Denver, CO
Software-as-a-Solution
Development Company
• Enterprise solutions
• Wholesale environment
• Accounts receivable
• Accounts payable
Delivering industry-defining
automation technology to
Fortune 1000 companies since 1998
”
The leader in
financial workflow
automation including
A/R & A/P with
proven success in
the market for 15
years.
“
About OPEN SCAN®

@OPENSCAN
• The Pain of Electronics
• The False Promise
• World Class Companies
• The Cash Application Opportunity
• Traditional Model to process most EFT’s
• Technology Options
Agenda

@OPENSCAN
The Pain of Electronic Payments
• Coupled payments and remits don’t follow a standard and are
not human-readable
• Heavy IT overhead to map EDI820’s
• Processed manually
• Most remits are decoupled from the payment
Apply Technology to:
• Automate the ingestion of EDI820’s and decoupled remits
• Intelligently match and correct data before it flows into the ERP
• Eliminate the majority of the manual tasks done today

@OPENSCAN
Invoice Volume
Average Payment Volume vs. Value
10%
80%
10%
Electronics
Lockbox
Remote
Electronic Volumes are
Low but Increasing.
Invoice Value ($)
30%
65%
5% Electronics
Lockbox
Remote
Many of Your Most Valuable
Customers are Moving
Toward Electronics

@OPENSCAN
Hackett 2012 Metric: Automatic
remittance posting match rate
40%
66%
Peer Group World Class
A Hackett-Certified Practice that all
productivity-focused A/R managers should
take steps to incorporate automatically
matching at least 80% of all customer
remittances to the appropriate invoices. This
percentage represents payments that are
completely applied, resulting in zero manual
effort required. Depending upon the nature and
complexity of the business, measuring the
percentage of closed invoices (80%) can be an
equally effective measure. Achieving this level
of remittance-matching greatly reduces the
manual workload for accounts receivable.
This was
Published in 2005
80% - Easier Said than Done

@OPENSCAN
The result is that
approximately 61
percent of all B2B
payments are
forecast to be
conducted
electronically by
the year 2010.
http//www.emarketer.com. (June 2003) “Electronic Payments: From Online Bill Payments to Credit Cards – Statistics, Strategies, and Trends.”
This was Predicted in 2003
B2B Payment Predictions

@OPENSCAN

@OPENSCAN
Why Didn’t Electronics Fulfill
its Promise in the Last
Decade?
What Happened?

@OPENSCAN
100% straight-through
processing (Touchless)
in B2B environments
has not materialized
quite yet.
Electronic Payment Chaos
No agreement on
standardization
Difficulty of forcing
payers to change

@OPENSCAN
WORLD-CLASS
PERFORMANCE
METRICS AND BEST
PRACTICES

@OPENSCAN
0.018% 0.015%
0.036%
0.008%
0.021%
0.006%
0.037%
0.016%
0.020%
0.004%
Peer World-class
Process Cost as a Percent of Revenue
Credit Billing Cash application Collections Dispute Management
63%
0.048%
0.132%
The performance gap is significant…
Taking an end-to-end view we see that Top Performers use significantly
less resources than Peers
Process Cost as a
Percent of Revenue

@OPENSCAN
Technology Leverage
 Integrate credit, order entry, customer
billing, receivables, and collections
applications, tax applications,
intercompany billing
 Auto interface with Collections and
Dispute Management systems
 Automatic triggering of billing
Standardization & simplification
 Company-wide credit policy,
 Standardized terms & conditions
 Centralized master data management
10.7
2.0
Peer World-class
Secondary applications per $B
of revenue
8.5
6.5
Peer World-class
Billing Terms
(How many different terms used in
past 12 months?)
FTE Gap
1.9 1.8
6.1
1.3
5.3
2.4
4.0
1.1
2.8
0.7
Peer World-class
FTEs per $B of revenue
Credit Process
Customer Billing
Collections Process
Cash Application
Dispute Management
20.0
7.2
Simplification, Standardization, & Automation

@OPENSCAN
*Process Cost = Labor costs + Outsourcing Costs
The Cash Application process challenge is not just payment automation
but also electronic receipt of remittance advice (coupled is ideal)
Electronic payments alone
do not reduce process
costs

© 2013 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
@OPENSCAN #OPENUP2014
Improvements in Automatic Cash Application Rates Have a Direct Affect on
Reducing Average Days Delinquent
4
8
10
Percentile 25 Median Percentile 75
2
6
12
2
5
14
Less than 35% 35% - 65% 65% - 100%

© 2013 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
@OPENSCAN #OPENUP2014
Reducing the Average Time to Apply Cash Has a Significant Affect on Average
Days Delinquent
2
4
7
4
9
12
Up to one Day1 - 2 Day(s)

@OPENSCAN
Average Time to Apply Cash (Business Days
From Receipt of Customer Remittance
Through Successfully Completing the Cash
Application to Individual Accounts)
1.7
1.0
Automatic remittance posting match rate
40%
66%
Automatic Matching of
Remittance Influences Cash Flow

@OPENSCAN
Remittance Processing Costs

@OPENSCAN
Inefficient ways to process receivables:
• Lockbox Processing
• In-House Processing
• Manual Electronic Payment Processing
Technology helps World-Class
Corporations achieve:
• Savings
• 100% Elimination of Data Entry Costs
• 50-75% Process Efficiency Improvement
• 40-50% Reduction in Exceptions
• 1-3 Days Sales Outstanding Reduction
• Process Improvements
• Cash Application
• Deduction Management
• Collections
• More timely and accurate data into ERPs
Cash Application Opportunity

@OPENSCAN
Coupled Payments
Decoupled Payments
Traditional Electronics
Data Entry and
Matching Payments to
Remittances is
Manual, Time
Consuming, and
Resource Heavy
EDI

@OPENSCAN
Coupled Payments
Decoupled Payments
Open Scan Electronics

@OPENSCAN
Electronics Automation
– How it Works
Here’s the Breakdown
Auto Correlation
Solutions Mode
Standard Mode
CTX / CCD+
Payment Only

@OPENSCAN
After training the system, Auto Correlation will Find Matches and Process Them
Without Human Interaction
Newest Enhancements
– Automation Mode
Evaluating a Remit
Payment Remittance Determining a Score
• Complete or partial originator email
address
• Accurate or similar amount
• Manually entered
• In the Subject
• Located next to the word TOTAL
• In the Body
• Other Attributes
• Reference number
• PO number
Score= 89

@OPENSCAN
Newest Enhancements
– Automation Mode
Determine Routing
Remittance
Is it the
highest rated
match?
Is it
far enough
from the
second
candidate
Auto
Correlate
Yes Yes
No No
Solutions
Mode
Solutions
Mode
Does it
meet the
minimum
confidence
threshold
Not a
Candidate
No

@OPENSCAN
• Highly Automated Matching and Scoring
• The System Learns Which Remittances and Payments are Likely to Match
• Simple One-Click Matching
• This Trains the System and Creates History Which is Essential
Newest Enhancements
– Solutions Mode
Choose the
Correct Remit
Manually and
Train the System
While Matching
Scoring is Based on How
Relevant the Remit is to
the Payment

@OPENSCAN
1
Examine a
payment
2
Search and
examine remit(s)
Standard Mode

@OPENSCAN
Correlat
e
3
4
Submit
Standard Mode

@OPENSCAN
• Coupled electronic payments such as CTX & CCD+ are
processed like a check and remit. Even with electronic
payments, there are typos, short pays, and other
anomalies that need to be identified.
• “Payment Only” is simply processed like a “Check Only”
CTX / CCD+ /
Payment Only

@OPENSCAN
Other Feedback & Questions
?

@OPENSCAN
If you would like to learn more or have additional questions, visit
www.openscan.com, e-mail tray@openscan.com,
or call 303.867.7431
Thank You For Attending:

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