The Core of A/R: Three-Way Matching



Jason Herrington

VP, AR, Credit & Collections – Shared Services, EmployBridge


[00:10] Jason Herrington:

Oh, I want to personally thank everybody that walked all the way down here and found this because I was actually having a hard time and enduring it’s like 40 degrees here. So, and it’s the end of the day so thanks so much for making the time. So I’ll just set this up circa 2016 where EmployBridge was in its current state. We’ve just gone through a major merger. A 1.3 billion dollar company merged with a 2 billion-dollar company. So we’re trying to figure out how to collectively manage 3.3 billion dollars in transactional activities from two ERP systems.

So the critical first step for us was to look at an automated cash application solution and that’s where we began our journey with HighRadius. And we’re gonna go through this agenda and executive summary, some things about EmployBridge, our business goals for cash application, how we do it, Cash application and EmployBridge and the results and benefits that we ultimately achieved. So the executive summary, what were the challenges in 2015 right after this merger or the cash application process was effectively 100 percent manual. We had a rather large team in-house and overseas you know physically managing the transactional activities that were very cumbersome. We had three different bank accounts or three different financial institutions in over 15 bank accounts. You’re just creating a lot of challenging activities to manage a small volume at 3.3 billion dollars.

Just in summary at the end of this, you’ll see a little bit more detail but the results are that we treated an 80 percent match rate on our auto cash application meaning that of all the incoming cash and invoices being applied 80 percent of them didn’t require a manual touch by human beings. That translated into the material savings for us about a hundred thousand dollars a year and we were able to reduce outsourcing by about 62 percent. So I really didn’t need our offshore support anymore after we did this.

A little bit about the EmployBridge. We’re a light industrial staffing company. Established around 1990. We operate 550 branch locations from coast to coast. We’re the number one grower in our space. We’re very specific to light industrial staffing so we kind of live in that space. 98 percent career satisfaction, 97 percent customer satisfaction and then through the ASA or American Staffing Association they recognize this as best in staffing and 2017 best and staffing talent for 2017 and then they have this five-diamond award that we’ve been fortunate to achieve as well. It’s a little bit about them.

Why a cash application is a logical first step in A/R automation. Well again as I explained our situation. You know merging two companies, you know the tremendous transactional volume, so it’s really just completely manual for. It was the first logical step. Just because you know we were really struggling with it. And it has an impact across the scope of the other areas you know credit management collections, your client interface, you know there’s effectively a domino effect. If you’re not doing this timely and accurately so you’re overstating your receivables if you’re not applying cash timely you’re utilizing credit exposure where you may have the cash and you just haven’t applied it. So it looks like your clients are closer to the credit limits or over their credit limits. You might be sending dunning notices to your clients and they’ve actually already paid. So you’re trying to collect on something they’ve already paid. And then deduction management you know trying to get those on the books and begun researching those as quickly as possible. There’s the recovery rate on those often is not that high. So the quicker you can get those and challenge them with your clients you know the better position you’ll be in.

[04:40] Jason Herrington:

So, what are the major challenges you face due to the inefficiency of cash application? Well, it’s a poor customer service experience and when I say customers, not the end client as much as our sales teams or other internal stakeholders. So it’s all three of those really that you know are impacted by a poorly executed cash application operation, you know delays in credit approval. If we’ve, you know, we haven’t applied the cash again and there is a utilization of the limit that’s you know is creating a conflict. Well then that really looks bad on that, and you know the cash app team if orders aren’t released timely. So longer resolution times for deduction again and getting them on. And recorded vetted and worked creates a higher probability of recover-ability of those deductions.

So cash application – EmployBridge. So just a general overview, two ERP systems: So Lawson and this another system were ISearch it’s actually a PeopleSoft product. About 27000 payments process per month. Two financial institutions, about 10 depository accounts, you know when this was put together it was a completely manual business process. So a large volume of checks versus ACH. And so the greater portion of 27000 here is demonstrated that it was actual check payments. So our goals like what do we want to do? Well, when we engaged HighRadius then we were going through their business case and just learning about their product. I set a goal that if we can achieve 50 percent automation. That puts us in the back on our return on investment meaning what we’re going to spend for the product versus what we save if we could just reach 50 percent. Then you know we’ve hit it we’ve done what we said we were gonna do. Our return on the investment you know is favorable. So, fortunately, Day 1 we were able to you know just we know we turned it on and we were at 50 percent. We’ve grown it far past that since then but really relieved day one that we were able to hit that goal. So reduce the outsourcing cost. So I made mentioned earlier, that we had an offshore support team. We’ve not only reduced it we’ve actually eliminated it.

Reduced lockbox fees – So we were engaging these two financial institutions to keystroke in certain amounts of data to us and then send it to us that it was a per keystroke charge. We were able to completely eliminate those fees.

Avoid in-house I.T. projects – So this implementation you know outside of delivering you know extract files to a HighRadius involved very little of internal developer work. So most of them you know heavy lifting fell on HighRadius to understand how to accept the bank files and convert them into a data format that conforms to our ERP systems. So we didn’t do any custom modification on the import of the data files, we used standard module applications to bring the transform data from a HighRadius directly into our ERP. So we didn’t have to rewrite code in our ERP systems in order to import this data. And that really speaks to the rich functionality without custom development. You know we didn’t want to do something like that. We were gonna proprietorially create and that only a handful of people really knew how it worked. I wanted to just utilize a standard functionality and let it operate as it’s supposed to and not get into.

[08:34] Jason Herrington:

If we went to a new version of the ERP then that programming wouldn’t work and we’d have to redo the development. And glad we did that because we’ve already jumped the version since we originally implemented this cash app system and that you know no development change has occurred. Of course, we did testing but everything came over fine in the next version of our ERP.

Cash application before and after:

So the manual process went into a bit about that of course payments received in our banks. So we got you to know, check images, payment files, keying in certain amounts of header data that transforms or translates over to the cash app team. You know they’re doing some things in excel and you know prepping you know some interface with the ERP system. There are two other components of our team. The VMS team and this outsource team that was also key stroking remittance data into Excel files so that we can actually interface with the ERP but it was you know co-dependent on getting the keystrokes right and utilizing you know an internally developed. Excel interface program to take away some of the labor in the ERP systems. So it beat me, you know key-stroking every single item but it certainly wasn’t the answer we were looking for. So you can see here there’s a lot of steps in this work-flow which you know, creates an opportunity for oversight you know prone to mistakes and generally just wasn’t very efficient in terms of turning around daily lock-box receipts into you know reduced AR transactions. So these are some of the areas where you know these things exist that we wanted to address. So lots of manual tasks, high bank and outsourcing cost, error-prone to manual handling. So all these additional touches here we were looking at you know how do we implement a technology solution that eliminates these components of the work-flow steps. And this next image here was you know we begin we had to bifurcate check payments from ACH payments because the HighRadius system handles them quite a bit differently. And I’ll walk through some of the critical data on a check image which is obviously the check number or the check amount and the MICR information you know this A.B.A. and account number is unique to a customer number that’s in our system. So most ERP systems hold a MICR table that allows you to map A.B.A. and account number to a corresponding customer number. And that works really well for identifying customers who were paying by check. Where the shortfall can happen is the quality of the remittance image because it is a scanned image. And this one’s actually a pretty good example where we can see the circle there. Those are 10 digits invoice numbers in the fonts pretty good. And a lot of cases you know we’ll find that customers remittance print jobs aren’t exactly lined up. So one of these lines could actually go through the invoice number you know and that skews obviously the technology and its ability to read the invoice numbers correctly. Fortunately, this one’s formatted very well and works well with the HighRadius system, data capture can actually recognize these as invoice numbers in our ERP system. And correlate it to a corresponding customer based on the MICR mapping. And then give us a file that allows us to apply the corresponding payment amounts without any manual intervention. A cash application process after HighRadius.

[12:30] Jason Herrington:

Okay so banks are still receiving the payments, that’s not going to change. So, today we’re receiving payments across our 10 depository accounts. So what HighRadius is going to do is they’re going to receive a series of EDIA 20 files from both of our financial institutions, segregating ACH payments from check payments. They’ll also receive a check imaging file so images of all the checks that were received. Overnight, they use their data aggregation engine to prepare an imported file that we will have tomorrow morning at 6:00 a.m. So tomorrow morning my team comes in, there’s a series of files waiting on them. We import those into our ERP system and post the payments and then we run another job to actually apply for the payments and then we’re doing our bank recon to ensure that each file that we process matches back to the bank deposits for that prior day. That’s a recurring exercise and here this work-flow demonstrates you know from the bank’s data aggregation into their system they generate an output that conforms to our ERP system standard module application to bring payments in and apply them. And then there are always exceptions. So there’s some fallout you know like I made mentioned earlier about that check job if a line was going through it. HighRadius could find the customer based on the MICR or post the payment in full but the application won’t occur and somebody would need to come in and finish it off and recognize oh there’s a line going through the aids, they couldn’t read the invoice number. So that happens very quickly and we can finish off the full days where the catch batch processing.

[14:20] Jason Herrington:

This is a look at the HighRadius Automated cash application cloud. So if you’re logged into the system and we were drilling down on this specific payment this is a view that you would see and you can list off the payment number as the payment amount. This method checks payment. You know just general information you can view the check image. You know we saw that a couple of slides ago. So that’s something we’re doing even though we have 10 depository accounts and two financial institutions a HighRadius cloud puts all those images into one place. So we don’t have to go to this bank account and that bank account and look for check images it’s all channeled in one place. And the original payment file, now that’s the EDI file that they received from our financial institution. And you can bring it into text format or Word format and do a search on it. And sometimes that has helped us identify additional data that’s you know resolve some mysteries for us so that we find that helpful. And down below there is a section here. That we saw earlier on that remittance advice that HighRadius retrieve those invoice numbers from that remittance and transform the data into this section called Received Data. So this is what they’ve received and are plotting it as the remittance information and that becomes available when you’re inquiring on any of these payments that they’re processing for you. The remittance details are automatically fetched. Well, we’ve kind of covered that. They pull those invoice numbers off it and they’re making sure that those invoice numbers actually correspond to the customer that’s making that payment. That’s kind of a critical thing. You know what 10 numeric characters you would be surprised how often clients pay another client’s invoice because they just keystroke it in the wrong characters in the AP system. And you know that’s just a key-stroking error on behalf of an AP team. But we don’t actually want to pay or offset an invoice from one client that’s actually outstanding on a different client’s A/R. So that you know that’s definitely something to keep an eye on. And it’s a business rule that you build in with HighRadius when you’re doing your implementation. As you know a programming specification that they can just do a match and say oh that invoice doesn’t go with that customer. Well just leave it open as un-applied cash and we’ll go figure out what happened.

[17:02] Jason Herrington:

So this is a snapshot of the A/R extracted so it lists invoice numbers, the amount pending. It’s just another view of you know if you were navigating the cash app system you know insights into you know a particular client payment. So generally if there is reconciling differences or we’re researching something we’re using this to dig into the details to you know fully to resolve an outstanding payment.

E-Remittances: So ACH payments are obviously a very popular form of payment. We’ve trended much more of our incoming cash to ACH payments than when this you know was the first project and initiated a few years ago. So it’s a little bit more sophisticated mapping and you can’t use the MICR mapping to correlate to a customer number in your ERP system. That’s a very reliable matching system. In the cases of ACHs, you utilize an alias payer name. So you know my company is called EmployBridge but when we disburse funds from our AP system the payer name shows up as Employment Solutions Management Inc. Well, none of our vendors know who that is because they’re not dealing with that company. But that’s just you know the institution or the economic entity we created that relationship in with our financial institution. The same thing happens across almost the entire scope of our ACH paying clients who we know them as and who are you know recording them as on our AR system. That’s not their alias payer name. So we had to identify client by client what their alias payer name is and then create a mapping within the HighRadius platform and say – Oh, XYZ company which is alias payer name actually equals ABC Company in our ERP system. But once you have it you know it’s set in. The next component is when you’re receiving emails. So you get these electronic payments and then here comes a peripheral email. You know we channel those emails into a centralized inbox HighRadius monitors that inbox and whenever they see a key index and often it can be the domain name of the client, so at ABC company then they go oh there’s an alias payer name that has that same. Now we know who that customer is and we can build the remittance based on the incoming payment. You can also use something that’s consistent in the subject line. So if you know your client puts a vendor number that they’ve assigned to you in their subject line well then that’s a consistent variable that you can rely on and map it to the corresponding customer. And also there’s content available within the body of the email. So really you’re just looking for something that’s going to be the same every time you get remittance advice from that particular client. As a reliable index to court you know to create the correlation back to your customer master.

[20:08] Jason Herrington:

So this you know the great thing about the ACH is it’s a little bit more sophisticated mapping to correlate the customers. But the images are so much better because generally, they’re high-quality PDF, text files, Excel files or data embedded in the body of an email. Now that’s actual data and not imaged characters from an OCR scan. So if you can get that mapping figured out and get your e-mails rounded correctly there’s a much greater match rate from ACHs because again it’s reading actual data and not trying to translate an image into character data.

So I kind of jumped ahead a little bit on this alias based customer identification so we kind of covered that. You can see here Halifax Media Group well their actual payer name is GateHouse Media. So that’s exactly what I’m talking about. I mean. If you saw those two names next to each other you never would have connected them. But that’s just how this works.

[21:20] Jason Herrington:

So the results and benefits. Okay. So this is not day one but out of the box. But we continue to develop our product to refine our business processes to create additional business rules. Well, what we would refer to as enhancement requests with HighRadius. To push our hit rate to 80 percent where you know incoming cash and offsetting AR cash application entries at an 80 percent hit rate we’re not touching any of those. This annual savings number that’s really attributed to the bank fees that we’re able to basically you know just rescind those bank services and stop paying for that. 62 percent reduction in Outsourced cost. That number has actually gone up because we’ve eliminated it now. So this presentation has been prepared on you know, you know sort of postmortem of our initial implementation. So those figures have actually even gone. A little bit more favorable now.

So goals achieved. I mean we got our hit rate for cash application. A nice reduction in our outsourcing costs you know a nice reduction in bank fees you know cash savings. We implemented cloud-based software as a service. And again that being HighRadius’s core system. When you create your extract files to accommodate utilizing that system the other systems become a lot easier to add on. So credit collections RadiusOne, it’s a lot less cumbersome to add on those other components once you have the core system in place. So high out of the box functionality that you know definitely you know we’ve centralized where all of our check images go or all of our payment data is you know. So we basically go to one place where we’re we’re going to multiple places to get information. So, really it’s been a success story for us and allowed us to reallocate resources to more critical tasks and just improve our customer experience and run our business more efficiently. So. I’ll open it up.

[23:38] Speaker 2:

Any questions?

Jason Herrington:

I kind of blew through that pretty quick. Right. I’m sorry.

Audience 1:

Yeah. So, just you mentioned IT, you didn’t need a lot of resources. Did your group operate [as this means] with the HighRadius team or did you have an IT resource also embedded in that structure?

Jason Herrington:

Yeah. So let me caveat that. We’re utilizing the get paid system. Right. So popular collections platform. Generally, it works off of you know you extract AR data and you feed that system in refreshes it overnight. So before we even got you to know I got the HighRadius auto cash app, a project approved. I realized that that’s the exact same data that HighRadius would need. So, in our case, the development work had already been done. So I basically just parlayed those extract files and sent it off to a different FTP site. Now HighRadius picks it up pulls it into their system. So there were additional components of information that we needed within those data extract files to accommodate the cash app system. But fortunately, in our case, it wasn’t started from ground zero and then have an IT developer figure out day one, how to extract a series of extra AR files every night to HighRadius. So we’ve had a bit of a head start on that. Sure. There we go.

[25:20] Speaker 2:

Okay. Isn’t there any food for thought on the next ones. Maybe if there’s anything left. Do I have one? One more slide more slide. No. No. Okay. Well, we’ve been having some of that food for thought questions but everyone gives Jason a big round of applause. Cool.

[00:10] Jason Herrington: Oh, I want to personally thank everybody that walked all the way down here and found this because I was actually having a hard time and enduring it's like 40 degrees here. So, and it's the end of the day so thanks so much for making the time. So I'll just set this up circa 2016 where EmployBridge was in its current state. We've just gone through a major merger. A 1.3 billion dollar company merged with a 2 billion-dollar company. So we're trying to figure out how to collectively manage 3.3 billion dollars in transactional activities from two ERP systems. So the critical first step for us was to look at an automated cash application solution and that's where we began our journey with HighRadius. And we're gonna go through this agenda and executive summary, some things about EmployBridge, our business goals for cash application, how we do it, Cash application and EmployBridge and the results and benefits that we ultimately achieved. So the executive summary, what were the challenges in 2015 right after this merger or the cash application process was effectively 100 percent manual. We had a rather large team in-house and overseas you…

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While Cash application might not be of the most strategic importance it is low-hanging fruit for automation and can also positively impact other A/R operations. Join this session to learn Employbridges’ cash application journey.

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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.