Custom Image

Automating Cash App: From Big Box Retailers to Mom and Pop Shops

Highradius

Speakers

Lauren Kennedy

Manager, Retailer Financial Services, American Greetings

Transcript

Lauren Kennedy:

OK. So we’re just going to go ahead and jump right in and talk about American Greetings. And then we’re going to get into our cash application landscape or key solutions why we chose HighRadius, where we are now and a little bit of about a vendor evaluation. American Greetings was established in 1906. We are headquartered in Cleveland Ohio right in Cracker Park if any of you have ever been to Cleveland Ohio. We have ten thousand plus employees. Most of those are part-time merchandisers. We are a creator and manufacturer of innovative social expressions project products such as paper cards digital greetings gift wrap and party goods.

The major greeting card brands are American Greetings, Papyrus, Recycled Paper Greetings, and Carlton Cards. You probably see Carlton Cards up in Canada a little bit more frequently. Ok, so in our cash application landscape, we currently have four company codes for business units, two in the United States and two in Canada. We have about 12 million invoices a year. We receive forty-seven to forty-nine hundred payments on average a month and that’s about seven hundred sixty-three thousand average remittance lines per month. We have a payment split about 77 percent cheque payments, 23 percent ACH and 90 percent of our customers are consignment customers. Scan based trading, a little bit about our consignment customers, if you don’t know much about them if you don’t have any experience with them. We ship products directly to the store locations. We also are now venturing into e-commerce so we ship directly into the DC locations and support and customer online purchases through our e-commerce business. We generate invoices on a daily basis based on sales activity that is provided to us from the retailer. It’s per location, per sale. That comprises about 90 percent of our sales related transactions. They are all ADR communications and we own the reconciliation. For our big-box retailers (non-consignment). We have a traditional shipping Bell model. We ship directly to the store. EDI is the majority of the payment method and the communication method but not all. We still receive a lot of checks. And we deal with centralized AP departments. For a mom and pop or independently owned locations, these are a little bit more challenging. Again, they are a traditional shipping bill model. Should we ship directly to the store but there’s little or no automation in the receiving and in the payment process.

Our AP contact is often the store owner of the pharmacy owner, Grandpa or Uncle Bob. Our remittances from these customers are random emails sometimes, they are just handwritten on napkins with a picture taken and sent into us on email. There are times when we get a lot of no remittances and we get a lot of online bill payments. Call right into their bank and submit right from their bank portal and we just get a payment. We don’t have any remittance details for them. Sometimes we don’t even know who they are because it’s the bank maker, not the customer maker. So for a cash application on a consignment customer and all of our business models the money ends up in the bank account how it gets there and how it’s driven is a little bit different of course across all of them. For a consignment customer, the whole process requires great systems upfront and a POS communication, so every time a POS sale is happening at the store across the register as I mentioned earlier, we get details. POS details that come in by EDI. That’s how we invoice the customer of that information according to payment terms, then turn around and release payment to us within EDI 820 remittance detail. And then we at American Greetings are responsible for translating that information and then sending it out to HighRadius for pre-processing.

Lauren Kennedy:

Some of our challenges for consignment customers. As I mentioned the customer is self invoicing so if we miss a day of POS communication or if that POS communication is late. That is on us to reconcile, we will not blame them for what they send us for payment. There are non-standard invoice formats because again they are self invoicing and self remitting, the document number on their 820 means nothing to our systems at all. So we have to translate all of that information into an invoice number that matches what we have generated. The customer’s master data drives the remittance amount. If their pricing is a little bit different which should never happen if you’re communicating pricing with the retailer but if your pricing is off, you get variances which then falls on you to reconcile. And we have a large remittance volume for one specific customer that we have. Maybe 12 to 15 thousand dollars we invoice every day for that every door. So one remittance can come in excess of 100000 lives that we have to handle systematically. And, that’s it. On that one. On our big-box retailers, these payments are made by the customer, they can come and check ACH, wire transfers. We do have some retailers that do pay us via a corporate key card. So we handle those as well. The remittances always come in separately, they’ll come in an email via CSV spreadsheet, Excel, text file, the body of the email, a PDF document. We take all of them. Then we will send the payment file from the bank into HighRadius. And we send the remittance files whatever we get. We translate them and send them over to HighRadius separately. At that point, HighRadius aggregates the payment details with the payment file that comes in from the bank, the BOI file and they begin their pre-processing.

Ok. So some of our cash application challenges on big-box retailers. There is an EDI communication but it’s not guaranteed. We have no standard remittance format. So as I had mentioned, remittance can come from any different method. We have a high volume of remittances and due to a large number of transactions a high number of unidentified transactions. And again remittance variants vary by customer. Not much difference here between the big box and the Mom and Pop but these are our highest credit card customers, very few ACH, very heavy on checks, very heavy on online bill payments. Again everything goes to the bank. The bank gives us a payment file. We communicate that payment file to HighRadius. We send all of our remittance details into HighRadius. They aggregate for us and begin processing. One of our challenges here is that there is a frequent occurrence of missing remittance details. There is no standard format. They are more likely online bill payers which do complicate everything. This is the highest use of automation of A.I. here and to drive efficiencies in Cash App and this group is our target EIPP audience. From a global cash application challenge perspective, some of the things that we have to think about and deal with regardless of the customer base. We have cash discount eligibility that is based on contractual terms. It is different in the USA and Canada and we extend a grace period which is also different in the U.S. and Canada.

Lauren Kennedy:

So all of these things we have to determine and we incent the customer to pay us early, so HighRadius does that thinking for us. Are they eligible for the discount if they are doing this? If they’re not doing this. We have a lot of seasonality in our business because we have a seasonal format. We have nine seasons throughout the year. So we have a really high spike on Valentine’s Day which we just had going into Easter. Those spikes increase our volume significantly so HighRadius has to accept and be able to manage and work through a large number of transactions in cash app pre-processing without missing a service level agreement. Because we have those seasons, we also practice post-holiday crediting at the door level. So whatever customer didn’t sell in their door, a big box retailer or the individual Mom and Pop store they returned for credit. When they claim those credits those are deductions. Sometimes they’ll reference our number, sometimes they won’t. But that just further complicates cash application. So obviously if you don’t have a good cash application process your invoices remain open for a long time and age for an extended period of time. That then drives your reporting, it drives your financial metrics. It also doesn’t know if any of you are involved in asset-based lending but it also impacts the lending amounts that you can borrow against your AR. And it also has a negative impact on downstream processes. If you have a rebate structure that requires payment for which the invoice is paid. And you are paying those invoices then or clearing off those invoices then your rebate structure is a little bit out of whack. And the slower cash app impacts things, It just makes our resources inefficient. I’d rather have some of my people helping out with Cash App then being able to jump in on deductions or be able to jump in on credit processing and if they’re spending all their time on Cash App they can’t help out on those other areas.

So why did we choose HighRadius? We needed the elimination of transactional tasks. We needed a single source of the truth. We needed a straight-through cash posting. And we needed better hit-rates in less time. So we required a solution that did the thinking for us. We did not want to jump back and forth between systems. Each click or screen change is a loss of efficiency for everybody in the system. We needed cash posting to occur at the same time despite the fact that remittance details and payments never came in together. And we need visibility to the performance and the ability to analyze performance swings. So what has HighRadius done for us? They’ve automated cash application through AI. They’ve segregated auto aggregated information from multiple sources. They’re handling all forms of remittances like EDI, email attachments & web portal files. And they’re giving us accurate cash posting with minimal human intervention. A few of them to expand on some of these things. AI was used to identify payment patterns like if we didn’t get a remittance for a customer, they looked at the amount of the remittance, they looked at the open invoice and they said does it balance.

Lauren Kennedy:

If it does, they cleared everything, created the remittance and sent it into SAP. If the invoice or the payment amount was paying invoices less cash discount, they determined that it was paying that invoice plus the appropriate amount of cash discount and created the remittance incentive into SAP. All remittance data is stored within their system and it’s available for us to report. I can go to cash up and pull a copy of the cheque or we also have the linking capability of the cheque image directly into SAP. So my collectors never have to leave the system. They can stay within SAP open up the accounting document and the check images there. As I had mentioned. That’s not always possible that we get our remittance detail and our payment at the same time so HighRadius enables us to hold onto that payment header until the remittance comes in. The process continues to recycle until the remittance detail is received and then they are linked and then released into the SAP.

So where we stand right now. We went live with SAP in December of 2013. At that time we had six Cash App folks. We had five dispute analysts and 15 collectors. We recently upgraded well in February of 2017 to their V6 version. I now have one and a half cash application processors. I have four dispute analysts and nine collectors and my hit rates are great. I have a ninety-six percent check level hit rate and a ninety-nine percent transaction-level hit rate. So, some of the things that we consider when identifying the right vendor and things that we’re constantly asking ourselves is do they understand AR? I talked to many consultants on our SAP process, they just don’t understand AR and it’s very frustrating to understand AR. So are they flexible enough to adapt to your business requirements? Will they listen to you and build a solution to address your unique scenarios? And can they handle the volume of transactions that you deal with on a daily basis? A few of the other things that we had was their proactive approach to performance management. Their reporting in the system, their receivable analytics tool, I can go in and monitor the hit rates and find out what’s happened. If there’s something that’s fallen below we can log a ticket we can get them to give us the information and we’ll do what we need to do better so that it doesn’t happen again. OK. So do you guys have any questions?

Lauren Kennedy:

Oh yeah, of course, that’s the one number I don’t know off the top of my head but well forty times hundred we each flat, lots of money, lots and lots of money. I mean because we’re getting target payments, Dollar General payments, Walmart payments, Government payments, Mom and Pop stores & Rite Aid CBS, we’re getting all that money that’s coming in on a daily basis.

Audience Question:

So what was your hit rate before you went with HighRadius?

Lauren Kennedy:

So before we went live in SAP we didn’t really have a great measurement right of metrics but we had algorithms. We had a homegrown system that ran through algorithms and tried to identify statement balances and so on and so forth. But we still had a lot of people working cash, so I mean I’m going to venture a guess, it’s like maybe 20, 30 or maybe 40 percent but I don’t have the numbers to back it up. That was a long time ago. We’ve put that in our rearview.

Audience Question:

So. When you went live, was it like a gradual increase where you’re having to implement to get to that 90 percent on cash?

Lauren Kennedy:

Well, that’s a good question. So when we first went live with SAP in 2013. The HighRadius consultants were there with us along the path. So when we flip that switch and went live, we went live with the cash app. In 2017 when we went live on their v6 model, we started seeing the impact immediately. We had a retirement of a cash app person a couple of months after we went live and we didn’t need to replace her. So it’s pretty quick.

Audience Question:

How do you able to?

Lauren Kennedy:

Well, it’s few and far between. But we do get them. So it depends. We don’t have OCR capabilities with HighRadius but we do get image files of the checks from our bank and remittances. So if they put a remittance napkin or whatever in, with their checks we get a PDF image of what that check is. So it depends. It’s up to our analysts to determine whether or not they want to key it in themselves. Picking to click the remittances in the cash app system or if it’s faster for them to send it offshore to an agency to have a key overnight.

So we leave that to them and it’s working but we usually tell them it’s like 10 or fewer items. Just go ahead and you know send it out, sometimes we change that to five but it’s up to them I should say.

Lauren Kennedy:

Right. Yes. All of our cash application and all of our matching happen based off of that maker information on customer master exactly. That poses a little bit of a problem with online bill payers right. Because they’re not sending you their own personal bank account MICR information, they’re sending you the banks’ MICR information so multiple customers can share that same MICR information. It’s a matter of then what do we do from there to identify who they are. So we have a dummy maker process setup and SFP to identify who they are and then there are an invoice matching and the remittance details and then further confirm that it’s that account that it belongs to.

Audience Question:

Lines of business. Information. As. To which line of business because now.

Lauren Kennedy:

So we have many lock-boxes. Several in the US and several in Canada. The lockbox to which that payment is deposited determines for us which business unit the customer’s paying. So, we can’t cross in our system we have a structure so we can’t cross-company codes and SAP. So all of our payments will stay within that particular company code and we can cross into multiple customers if they’re connected by all pay. So that’s how we clear off multiple transactions across many different accounts.

Audience Question:

That you will be able to produce that information if a lot of business wants? You get it from SAP.

Lauren Kennedy:

Yes to know which payments came in for which cost. Yes absolutely.

Audience:

That date is no cash date. That would be, okay! Now that you are supposed to?

Lauren Kennedy:

So we do, obviously, you can’t. Some of the stuff that we determine without any remittance detail is the comparison of the payment amount with the balance on the account. That’s first and foremost and all of the different interrogations that happen at the cash discount level are either eligible or not eligible. If we choose to send something to get keyed then we have logic in place that then tries to identify a match based on first, who the customer is based on that make or conference combination.

Then how do we cast the net? After we’ve identified who that customer is, do we cross into two or three different customers or are we staying within one, then from there we have invoice character matching six characters, five characters whatever have you? Left to right, right to left, right in the middle. And if you find a match with those same flow matching characters and within a certain tolerance that you’ve established, it’s a hit.

Audience Question:

What is the thing that HighRadius does?

Lauren Kennedy:

Yes, they do that pre-processing that’s all in our pre-processing logic. Well, if it wasn’t all entirely high ratings for cash up. We lost people in retirement and then we changed some of our structure but the disputes and everything also helped us we did bring out some of our disputes, I’m talking about cash app but I do function in the speed space also. So it just kind of helped to make everything flow a little bit smoother but there were other factors other than HighRadius that contributed to that reduction.

Audience Question:

A company like yours, hopefully, the customer base is always growing. There was a grace period between manual and it is automated Customers?

Lauren Kennedy:

Use in terms of like the cash application perspective? We don’t type, we rarely receive payment. The manual we hardly ever do anything in our manual payment application at all right out the gates.

Lauren Kennedy:

Very few. We have terms and customer terms are fairly generous. So we have some time. But when a payment comes in and we don’t know who they are it’ll drop an exception status as an unidentified customer because we don’t have a MICR in the system for that particular customer so we’ll load it and send it right through for reprocessing that night. It’s pretty quick. It was forty-seven to forty-nine hundred on average payments a month Just one and a half. She does all cash-out. Yep, I say half because a person can’t really be a half right. But I mean that half of the half a person is also shared in other cash related functions but more like lockbox reconciliation. She comes in when we bring her in when we need it. But I have one full-time cash out person. That’s it.

Lauren Kennedy:

Yes. So SAP enables tolerance. But some of the stuff that we’ve done with tolerance we needed it and pre-processing because we needed that flexibility. We also needed the ability to track whether it was a dispute that was going to be created because we were going to reach out to the customer because they were outside of those normal terms or grace. But we also wanted to know whether or not their discount was taken outside of standard terms but within gray space. So we have reason code setups to identify whether or not it was and if it was a valid discount, SAP automatically allows it. If we want to be able to keep visibility to who takes outside of terms but within grace, we have a reason code so we can run a report on that reason code.

Audience Question:

Can I ask you what your grace period is?

Lauren Kennedy:

A couple of days. It varies in the U.S. and Canada.

Audience Question:

My second question was around the cash app and identifying the reason behind the deductions. Is that something that you are also able to get smart with and apply deduction by reason codes.

Lauren Kennedy:

We do have some reason codes set up in the system but it’s not as robust as maybe some of you might be looking for. So we have you and I reason codes typical we don’t know what they are. They are unidentified. We have cash discount related dispute codes. The UN eyes pretty much catch the lion’s share of what we work on. And we do have logic then in SAP that comes in and says if a certain you and I reason code deduction is under a dollar amount, just wipe it out. We don’t even want to deal with it. So we clear off a good chunk of that every day automatically. Anything else?

Yeah. Great question. So we went live with EIPP in the United States two weeks ago and it’s been great. Our customers love it. Some of the things that I’ve been talking about is that you don’t have to be paying an EIPP to be a customer who gets the benefit out of EIPP. You get your own invoices. You can get your own credit memo copies, you create your own statements. You never have to call us. They also get automated emails whenever a new invoice or credit memo post their account they get an email that says this is posted and here’s a copy. So it’s been fantastic from that perspective. It’s too early to say what it’s going to do to write my in call numbers and how many customers are going to adapt to it but so far so good. And in Canada, we go live tomorrow. So wish me luck. Anything else?

Yep. No that’s OK. So yeah that they can go in, we make ACH payments, we take credit card payments and then they get receipts. It’s the whole thing. It’s wonderful. Yes. So every day that payment detail is all sent to the bank. The remittance detail is sent to the HighRadius cash app and it’s aggregated like every other payment that comes in.

Audience Question:

Is there a threshold or a maximum ceiling?

Lauren Kennedy:

Well, we just hit our maximum ceiling that I configured surprisingly so I know out of the gate depending on what processor you use they’ll ask you to set that threshold up. What is your maximum dollar amount? One thing that I’ve learned over the past two weeks is that EIPP has significantly opened the customer base to self-service. Those customers that we never would have thought about being self-service are now going self-service. So that’s increasing our threshold. So depends whatever your processor might set. But if you have to go over that you probably have to provide some documentation about what that is.

Audience Question:

With respect to the fees?

Lauren Kennedy:

Yeah. No, I don’t. Not yet. And I don’t charge fees yet. Yet I’m configured to allow it but I haven’t turned it on yet. No, it’s HighRadius’s. Anything else? Okay. Thank you!

Lauren Kennedy: OK. So we're just going to go ahead and jump right in and talk about American Greetings. And then we're going to get into our cash application landscape or key solutions why we chose HighRadius, where we are now and a little bit of about a vendor evaluation. American Greetings was established in 1906. We are headquartered in Cleveland Ohio right in Cracker Park if any of you have ever been to Cleveland Ohio. We have ten thousand plus employees. Most of those are part-time merchandisers. We are a creator and manufacturer of innovative social expressions project products such as paper cards digital greetings gift wrap and party goods. The major greeting card brands are American Greetings, Papyrus, Recycled Paper Greetings, and Carlton Cards. You probably see Carlton Cards up in Canada a little bit more frequently. Ok, so in our cash application landscape, we currently have four company codes for business units, two in the United States and two in Canada. We have about 12 million invoices a year. We receive forty-seven to forty-nine hundred payments on average a month and that's about seven hundred sixty-three thousand average remittance lines per month. We have a payment split…

What you'll learn

While operating under the mandate to delight customers, American Greetings focused on striking the right balance between satisfying their customers and fostering e-payment adoption for faster cash conversion. Join Lauren Kennedy as she shares her experience and research around resolving customer pain points and increasing adoption of epayments amongst her customers.

There’s no time like the present

Get a Demo of Cash Application Cloud for Your Business

Request a Demo

Request Demo Character Man

HighRadius Cash Application Software enables the end-to-end automation of the cash application process that covers major benefits such as AI-enabled data capture for remittances, auto-linking of payments with open invoices, cost-cutting on lockbox fees and easy compatibility with any system due to its ERP-agnostic Saas infrastructure. Apart from the major benefits that it has, there are some key features which can not be missed out, some of them are Email Remittance capture, Discounts and Deductions Handling, Check Remittance Capture, Web Remittance Capture, Invoice Matching, and RDC & Mobile Payments.