Demystiying Unpredictable Customer Behavior



Carolyn Etress

Director, Accounts Receivable, EBSCO


[01:17] Carolyn Etress:

Good morning, everybody thanks Angela for the joke. That was great. I’m Carolyn Etress with Ebsco you may or may not recognize our name or our logo. But if you are doing research and databases that are provided by your local public library, your corporate library or in your academic work, then you’ve probably seen or used our products and we appreciate that very much. We’re going to talk today about unpredictable customer behavior. Most of Ebsco’s customers are academic libraries and Health care institutions. And what we’ve learned as we try to improve processes is that it is difficult to manage that customer behavior. I think when I don’t know seven-nine years ago when we were trying to automate our payment processing as much as we could, using bank services and that sort of thing, we assumed that it would be easier than it was to change some customer behaviors to help us become more efficient. So I think all of you are here because you have some similar experiences and we’re going to talk about those today.

[03:13] Carolyn Etress:

First I do want to tell you a little bit about Ebsco. We’ve been in business now, I need to update this slide because we are celebrating our 75th Anniversary this year. We have almost 6,000 employees and over, and few of those are outside the US. We also employ around 225 librarians. Those are people who have gone to school specifically to understand the science behind Library management. We carry a Dun rating of five. That’s the highest rating and we are one of the two hundred largest private companies. We’re pretty diverse. Our largest business is the information Services business that I’ll talk a lot about because that’s the most recognizable. We do own some other companies and a lot of those are companies that serve our other businesses and in some cases, we see an opportunity and we buy business similarly to venture capital groups and that way and one of our other bigger businesses these days is real estate. We’re into like luxury rental properties, apartment complexes that sort of thing. So it’s an interesting business. I do want to talk today about the evolution of the customer experience in the Ebsco Information Services business. So we have all these different levels that we’ve worked through an AR over the years and when I joined Ebsco and accounts receivable, this was mostly one-on-one contact with customers through phone calls, and then we moved on and started doing some dunning with our customers and they were receiving multiple ad hoc correspondences, we automated that correspondence using our ERP system. It was clunky. It wasn’t working well for us or our customers, they have some specific needs and now we’re looking at AI-driven self-service portals as Solutions.

[04:24] Carolyn Etress:

Cash application at Ebsco has been a challenge as long as I have been working with our accounts receivable team there and a big part of that is because of the customer behavior. We have 35,000 customers and around two hundred and forty thousand, two hundred fifty-thousand invoices annually, and we’re right at about 50-50 check and EFT. These numbers bounced around a little bit year to year. We compare them regularly and we just, as much as the banks have predicted that we’re going to be more than 50% EFT by you know, what? Was it 2016, we’re still at 50/50 there for our North American customers. We have remittance coming from emails, EDI and around 45 customer portals for us where our team was logging into those portals downloading advice or instructions to clear payments. We have, we had a seven-member payment posting team at Ebsco before we implemented a cash application. We’re dealing with two banks in scope for the cash app. And we have a 100% manual electronic funds transfer reconciliation and we were running a lockbox for our check payments and we were seeing like a 20 to 50% hit rate depending on what was going on. It was a lot of work to maintain that hit rate with the banks for us.

[05:40] Carolyn Etress:

So one of the questions that I have for all of you today, a show of hands or not will be fine. I’m just trying to understand the audience is missing remittance a big challenge for your organization when your teams are posting payments. Okay. Right, more than half of the looks like so we had some use cases that you might be able to relate to. We had that manual minutes download that I mentioned then we just had manual research for no remittance scenarios. There are if you’re getting payments from outside the US and the banking system that your end customer is in and your banking system doesn’t communicate well together we missed that out on a lot of remittance details we have. The need to standardize payments across multiple subsidiaries, trying to match the deduction codes with internal reason codes like our customers coding their deductions like a 50 means something to a customer and if you see enough payment advice, you’ll figure out what 50 means eventually if you’re an experienced payment poster, but otherwise, you don’t know what 50 means. We’re dealing with multiple payments and remittance formats so if our customer sent everything in the same format all the time, we could just use a robot and solve the problem, right?

So the first scenario that I want to dig into with you is the manual remittance download from customer portals. Ebsco has around 45 different portals where we’re going in downloading and processing EDI. It’s taking up a lot of time for our analysts and we had been trying to match the EFT details from the bank and then marry that up with remittance details that we were getting from those portals. Is that something that’s challenging you and your businesses today, the customer portals? I get mixed answers on that depending on the industry that each person is in. So we also talked a little bit about manual research and resolution and those no remittance scenarios. We have a lot of customers who don’t send us remittance when they’re making a payment by EFT, I think for some businesses if you’re still getting handwritten checks your no remittance scenarios or more on the check side. So can we get a show of hands for no remittances on the check side? And a show of hands for no remittance on the EFT site. So we have more check troubles with no remittance, then we have EFT. So that’s interesting. What are some of the reasons why you think you’re not getting remittance from the checks? If anybody wants to comment on that. So CarMax is getting checks from a government organization that’s providing details that are probably coming out of some catalog in their system where they have to choose from a set of information sometimes. Maybe I’m assuming this is like every DMV in the whole United States. Okay. So the DMV is not giving payment advice that matches what’s in CarMax’s system. Do you have a solution for that? Have you not yet? Not yet. Okay, so maybe some Deduction coding type of logic would help you like when this DMV says this what they mean is this in our system. Maybe some kind of intelligence like that. Anybody else has an interesting scenario. There, that’s a good one. Four checks with no remittance. Anybody have those customers who make an EFT payment and then mail a check stub to tell you what they’re paying, usually, some state government organizations are doing that still. Yeah, so you’ve had the payment for like, I don’t know 10 days and your AR is aging when you finally get the instructions to contact the customer. They act like you’re an idiot. Yeah. Yes. So let’s see if we can change that.

[11:55] Carolyn Etress:

What about standardization of payments and remittances from multiple subsidiaries as let’s think about your large umbrella customers who have lots of different subsidiaries underneath Them and maybe you have one bank account that all their payments are coming out of but the payment details are not structured the same way because the approver the buyer is not the same is not entering the information into the purchasing system the same way. Does anybody struggle with that here? It’s a very library problem. So I was my is not here, but she worked for a library in a system of libraries and we were talking about that because Maya has been my customer and I was asking her. Where did you work? And she said the name of the library and I said well tell me what system the library is funded by because I’m going to know the name of the system. So we have um different Librarians at every public library and like the New York Public Library System. It’s a ton of libraries. They don’t all process their invoices the same way and they’re purchasing system. So when the remittance comes in it doesn’t look the same way every time, if it looked the same way every time we could program a robot to say when you see this bank account number look here for the details. It doesn’t work that way because every library is different and they’re very creative people.

So that makes it challenging for me. Does anybody have a similar experience to big customers, lots of different payers? No, okay, let’s move on. All right, let’s talk about what’s taking up the most time on your team’s, there are a few different scenarios that I want to know whether you’re struggling with one of them is the deduction coding and that could be, some people don’t use the word deduction in their business. That could be a situation where the customer is short paying, maybe because it’s a tax exemption issue. They didn’t like or approve the tangible product that they received or they’re not able to access some content if you’re selling online content, or they’re taking a discount that you weren’t aware of, they were going to take so anybody struggles with deduction coding. I struggle with it. We sell books. Sometimes the Publishers are the printers buying the books upside down. Sometimes they’re slightly damaged when they arrive, sometimes the customers say that they don’t arrive in the shipments. I’m not sure how that happens. But I’m sure it does because I’ve got other people socks from Amazon before so at the I believe it happens. I’m just not sure how it’s happening from our warehouse. So, how are your team spending the most time? We’ve some of us are spending a lot of time emailing the customer to ask questions about payments or deductions invoice matching when we’re we’re trying to pay something the invoice number that the customer gives you is different from the invoice number in your system, or maybe you have multiple document numbers in your system. So you’re trying to match or deal with exceptions that aren’t straight forward that don’t balance to the penny when you take all the credits and debits add them up. So we’ll just go down the line with a show of hands who’s the team is spending the most time on deductions.

We have one person and me. All right. So it’s only three of us we won’t talk much about the deductions. What about emailing the customer? three four five people invoice matching you guys are probably selling a lot of tangible products to your customers at one time and maybe EDI with one item per invoice or a small number of items per invoice, right? What about dealing with exceptions? Like the payment just doesn’t balance. For me, that’s kind of wrapped up in emailing customers to so who’s found some solutions or who are looking at solutions for that right now that you’d like to discuss. A lot of invoice matching people here. Okay. Interesting paying by purchase order. That’s a challenge for us at Ebsco as well because we get an invoice by purchase order. Our order management system doesn’t invoice that way. Anybody else having that struggle customer pays by purchase order, but your system doesn’t invoice by purchase order.

Speaker 1:

Some of the times customers will pay by their PO number Sometimes they mention the engine serial number. We have all this data into the system, but from a cash app standpoint, the people who are doing cash app are not equipped enough to find all those information go to the system and then find so it takes a lot of time obviously that could figure out whenever they pay okay if it’s not an invoice number than what field they have mentioned. It’s customers each unique all one the globe and all of them have their things what they mention on the remittance.

Carolyn Etress:

So your customers repeat customers frequently or when they buy orders from the US. Is it going to be a long time before they buy something again?

[14:25] Speaker 1:

We don’t have many customers but whoever we have, we deal them pretty frequently.

Carolyn Etress:

Okay, so there’s some potential there to learn how each customer formats their payments and follow some rules based on that for you. Good point. Yeah. Yes, sir.

Speaker 2:

Utilize the reference field for PO and then according to our auto cash program looks not only at the document or the invoice field but also purchase order filled if it doesn’t find it first.

[17:57] Carolyn Etress:

So you have some rules that say look at invoice number first. And then if you don’t find your match look at document number first and your program looks at the reference field for and that might be your customers PO number and the reference field, okay. Okay, and you’re doing that out of your order system. So when the invoice is a load to your AR system, the reference field is already populated with a PO number if you have it. That’s a good one. Anybody else struggling with something. I’d like to share ideas about it. So you mentioned the serial number for local sales? And as your cash team also familiar with that serial number and that concept so you have customers in one place where the business is done a different way and cash posters in another place where they’re not familiar with the business practice. Okay, the Indian serial number that you mentioned. Is that what you said? It was, does it match the customer or does it match the sale? More or less with sales. Okay? Yeah. uh, So it’s like an order reference number for your local business, okay. Could there be more than one serial number on an invoice?

Okay. All right. There’s some potential there then right you have to expose it train people or train a solution. What about dealing with General exceptions where your payment amounts don’t match your total, the sum of your debits and credits when your customers are paying we had a lot of people who said they were struggling with that and I think that’s where the emails to your customers are happening any solutions there. Do you think that you or your customers would be open to an automated solution that contacts the right person and says can you help us reconcile this payment? I would be in 2019. I would be, I don’t think in 2016 my customers are ready for that. What about you? So you think you could make a decision customer by customer type or something to say it be alright to let our system or program email these customers so I don’t have to have a person doing that. But for these other customers, I need a person to customize the touch on every email.

[18:55] Carolyn Etress:

That’s interesting to me because the government doesn’t care if I say I have a nice day or how is your dog? So my perspective is you could automate a lot of things with the government because they don’t care about the service, they care about the price and the delivery for it in our business. So with selling engines and things like that. Are you a government contractor for the US Government? They tell you how to do business, right and you either do it or you don’t that’s been my experience as well with the US government. There are some other governments where it’s very important to appeal to the egos of the people that you’re dealing with but not for the United States for me.

Let’s move on and talk about matching customer deductions with your internal reason codes or your internal deduction management. I have around 25% short payments on our books business. It’s a tangible book business and deduction coding for us is manual and error-prone and we have a lot of struggles there. So we try to identify those. We identify short payments during the cash application process. And then we check the remittance for reason codes or logic that looks familiar to us and match those with our internal reasons. Why credit customers would shortly pay and then where our analysts face an exception- we’re contacting the customers, we’re emailing the customers and saying help me understand why you short paid. In addition to that at Ebsco with our books. We have the struggle of this visibility, we are not currently exposing a deductions portal to our customers for books. I mean who doesn’t do that, right? That’s what I feel like any way to say if you’re not going to pay for a book tell us why going to pay for a book before you make the payment and then everything we can work everything out in the system. So that’s a big struggle for Ebsco. Is there anybody else who’s struggling there with customers taking deductions and you’re not sure why? Yeah, it hangs up. If you have separate cash posting and collections teams. It hangs up your cash posters. They’re not able to do as much of their work and that an analyst has to contact the customer afterward. Then they’re not collecting or doing whatever it is. That is more valuable to your organization. Is there anybody here who’s selling to the Walmarts, the world? I hear that deductions with Walmart’s larger retailers are a real challenge. Have you already solved the challenge? I hear that once you get it and once you figure it out that it’s more of a breeze. I won’t say that it’s a total breeze. But until you solve it- it’s a real challenge. If the remittance doesn’t translate well in your system, then you’re struggling with that and throwing a lot of people at the problem. So, where are you guys on that journey, do you have a lot of people selling two big retailers in progress?

Speaker 3:

I feel that larger retailers are easy to deal with because they are putting in a lot of details. So we do have a dispute management system that has rules that will look at the deduction and assign a reason code to it. It’s not always right but it’s pretty decent for the larger retailers because they are somewhat predictable.

Carolyn Etress:

What would you say the percentage of accuracy is for your solution?

[22:10] Speaker 3:

Pretty good, but I don’t want to put a number on it. I don’t know. Yeah. Yeah, we have the data to find out though. Yeah, because, yeah, we could measure how often we have to change it to a different reason code. And if the system can determine a reason code, it defaults to a reason code called unassigned or something and that goes to an offshore collector who has to look at it and decide.

[24:47] Carolyn Etress:

So this is where I would ideally like to be right now as we’re where you are, but for your larger customers, at least you have a solution in place that identifies the reason correctly a lot of times for the deductions that they’re making. Are there people who have deduction solutions that just aren’t working for these big accounts? Okay, that’s good to know. So we’re not failing at our implementations of whatever solutions we’re choosing in this room. Anyway, that’s good.

That’s a challenge and I’m sure that there are a lot of people at these conferences who would attend sessions on how to do business with Walmart. And I don’t know if you guys have- if you’re yeah, although if they’re here in the room, we love you. You’re a great customer, but right. Yeah for sure. Yeah, who doesn’t want them? Yeah, I get it with the US government. Some consultants host conferences that just teach you how to deal with the government and do business in a way that gets you paid. Have you guys ever attended anything like that? Very valuable I can make some recommendations if you want to contact me. What about dealing with multiple remittance format where we have this mix of checks and the FTEs and our cash application end up being manual. We have a lot of errors that we’re dealing with. Sometimes. Is there anybody who would like to share some thoughts on that?

One of the things that we did at Ebsco was just isolating our payment posting team, separating them from our Collections and financial services in developing people into experts on payments. We knew we needed to automate the solution. But before we could even do that, we needed to understand what we’re dealing with so that we knew what to automate and suggest getting that payment posting team isolated so that they became experts in our customers’ payments, which was very valuable to us. It’s that- everybody is already there on that journey. It’s hard to do if you have a really small team. So think about if your company is making acquisitions or you’re selling huge accounts and you’re able to grow your team, think about structuring it so that you could isolate your payments to a smaller group of people because a lot of your opportunity is there and your payments.

So we can keep hiring people and throwing them at these big labor-intensive problems, or we can look at technology and we’re all here because we want to look at technology. Right? We’ve either already hired a lot of people and it’s not working for us or we see that we can’t keep going that way. So what we find is that if we keep throwing people at our problems that are full-time, employee number would increase subsequently with time. We have to keep adding people to the problem and we don’t standardize the way that we’re approaching it plus we just have long-term employees. We’re going to continue to pay them more. Hopefully, we want to get people raises. We want to give them more paid time off as they grow in tenure with the company. And so labor-intensive processes are costly to us over time. What we see with technology is that it would reduce after an initial Capital investment and I’m careful about saying capital investment because not everyone considers implementation fees Capital Investments. That’s between you and CFO probably.

[27:26] Carolyn Etress:

So with technology to the rescue, there are some key considerations when you’re choosing a solution- you may want to choose a solution that automates your payments for any multiple payers scenarios, you want a solution that can process lots of different formats for your EFT payments and you want easy integration with whatever accounting system you’re using and a lot of us are in a mode where we’re maybe looking at changing ERPs or order Management Systems our accounting system. So you want a solution that can change easily, too. So we’ve talked about some features that we would all like and our solutions. And we are, you know, what we’re running a little short on time. So I’m going to breeze through some of this because I think we’ve already talked about it. Let’s see.

Alright, so I just want to share with you the cash application at Ebsco. That’s one of the solutions that we have with HighRadius. We went from around a 20% hit rate to an 80% hit rate and we have about 20 percent of our customers who pay in advance or we have cash with order. So that’s a really good hit rate. We were able to eliminate some savings which are keying fees with our banks and we’ve seen a reduction in our full-time team members and this was a long-term road map over a year-and-a-half or dizziness of our team so we didn’t have to fire anybody. Nobody was laid off or let go as people moved on from our team. We were able to not fill those positions.

So with the artificial intelligence that was using in cash application today, we were able to accomplish so much and I think what we can expect in the future is automatic emails to our customers and system that can deal with repetitive exceptions and invoice mapping when we have multiple reference numbers that we’re dealing with specialized local numbers. I think we could use technology to do that for us without growing our teams or putting too much more work on them. So are there any other unpredictable customer behaviors that you guys would like to discuss before we wrap up? Their behaviors that you were hoping would be addressed today that we’re not talking about.

Speaker 4:

You have a lot of cash advance or cash on delivery. How do you match those payments if you don’t have an invoice yet?

Carolyn Etress:

We’re still using our team to match that 80% and so part of it is that we incent some customers to pay us in advance for their renewals and that’s valuable to the company. For some reason, it even helps with our sales forecasting for the coming year. And so it’s not something that our leadership wants to let go of right now. I am more in favor of a traditional receivables process where you build a customer, they pay and you let our automation take care of that for you for us the best we can do with our cash with order our payments in advance as a match to the customer by their bank account number or something like that. And then some human decisions go into that. I think down the road- when we improve our order Management systems are the order systems that will be able to leverage some more technology upstream from AR to help us match those things. But right now we don’t have a system that matches cash with an order with a sales opportunity or anything like that. We’re still doing that manually. Do you have a similar experience? So are you matching? Mainly, do you have a solution? Okay. Well if you find a solution before I do we should exchange information. Anything else? Well, I want to thank you guys for interacting today and sharing your thoughts and your experiences. It was helpful to me and I hope that it’s helpful to you as well.

[01:17] Carolyn Etress: Good morning, everybody thanks Angela for the joke. That was great. I'm Carolyn Etress with Ebsco you may or may not recognize our name or our logo. But if you are doing research and databases that are provided by your local public library, your corporate library or in your academic work, then you've probably seen or used our products and we appreciate that very much. We're going to talk today about unpredictable customer behavior. Most of Ebsco's customers are academic libraries and Health care institutions. And what we've learned as we try to improve processes is that it is difficult to manage that customer behavior. I think when I don't know seven-nine years ago when we were trying to automate our payment processing as much as we could, using bank services and that sort of thing, we assumed that it would be easier than it was to change some customer behaviors to help us become more efficient. So I think all of you are here because you have some similar experiences and we're going to talk about those today. [03:13] Carolyn Etress: First I do want to tell you a little bit about Ebsco. We've been in…

What you'll learn

90% respondents agree that the biggest roadblock in standardizing payment and remittance formats is changing customer behavior. Cash Application teams deal with multiple payment formats & missing or incomplete remittance information. Join Carolyn as she explains that why changing customer payment behavior is a lost cause and how AI and advanced technology is the only saviour for A/R teams across the world.

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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.