- Vikram Gupta
- Global Receivables Product Manager, Global Transaction Services, Citi and Moussa Soukal, Managing Director, North America, Hanse Orga International Corp.
by Vikram Gupta, Global Receivables Product Manager, Global Transaction Services, Citi and Moussa Soukal, Managing Director, North America, Hanse Orga International Corp.
Optimising receivables is a growing focus for treasurers and finance managers globally. Ensuring that cash is received as quickly as possible is essential to accelerating the cash flow cycle, providing liquidity and reducing the need for borrowing. However, just as important as receiving cash is ensuring that it is reconciled quickly and accurately. Technology can be a key enabler in addressing this challenge. Consequently, Citi recently announced a partnership with leading financial software provider Hanse Orga, to develop a solution that provides close integration between the bank and clients’ ERP platforms, consolidates, standardises and enriches data, and facilitates highly efficient reconciliation.
The importance of reconciliation
Companies globally are increasingly focusing on collections and optimising accounts receivable performance indicators such as DSO (days sales outstanding). To achieve this, they have frequently centralised accounts receivable into shared service centres (SSC) or collections factories, either in-country or regionally. The introduction of SEPA (Single Euro Payments Area) instruments and integrated receivable files in the US is likely to accelerate this trend further by standardising collection methods. By centralising collections, companies can collect cash more efficiently, standardise performance monitoring and achieve consistent processes for chasing collections and reducing delinquency. However, while accelerating collections is one function of an effective accounts receivable SSC, this is not enough in itself to achieve an efficient receivables process.
Companies need to know that cash has been received in order that appropriate liquidity or investment decisions can be made.
Firstly, companies need to know that cash has been received in order that appropriate liquidity or investment decisions can be made. This requires efficient bank connectivity with timely and complete access to bank statement information, an area in which Citi excels, both through its proprietary systems and third party connectivity channels such as SWIFTNet.
Secondly, receivables need to be reconciled promptly against outstanding invoices and posted to customer accounts. These amounts can then be moved out of suspense accounts and cash flow made available, and customer credit limits freed up to permit new business to be signed. Any delays can inhibit efficient cash management and hinder sales efforts, potentially damaging customer relationships and the company’s competitive position.
Technology as an enabler
Citi prides itself on its technology investment and innovation. However, in order to create the financial ecosystems of the future, Citi recognised the opportunity to augment its capabilities through partnerships with third parties to deliver comprehensive, integrated solutions. As Vikram Gupta explains,
“As a bank, we are committed to leveraging innovation to address specific customer challenges. We realised that there was an opportunity to extend our electronic banking capabilities further into our clients’ treasury and accounts receivable environment to facilitate more rapid, accurate reconciliation.”
Facilitating the financial ecosystem
Many companies have invested heavily in their internal ERP platform and/or account receivables systems that offer reconciliation capabilities. However, collections may come through a variety of different channels and in different formats. This can hamper reconciliation efforts as it is difficult to match data fields consistently, resulting in a large number of exceptions. Vikram Gupta, Citi continues,
“The data that clients require for reconciliation is typically held within their systems already, but it may be difficult to harness this data where the technical and information environment is fragmented. We wanted to focus not simply on delivering data through our electronic banking channels, but also on creating an information ecosystem to enable data to be consolidated, standardised and enriched, which would in turn facilitate more rapid, accurate reconciliation.” [[[PAGE]]]
To achieve this, Citi has a collaborative approach to working with third parties to create integrated solutions to solve client challenges and facilitate information flows. The bank has a long history of developing highly successful partnerships that leverage the strengths of each party to enable rapid and cost-effective solution delivery. Consequently, to enhance clients’ reconciliation efforts, Citi decided to work with an experienced technology partner that had solutions and expertise in corporate financial technology platforms, particularly SAP. Having reviewed different options carefully, Citi made the decision to work with specialist financial software provider and SAP Solution Partner, Hanse Orga. Vikram Gupta explains the reasons behind this decision,
“We recognised Hanse Orga’s long heritage and expertise in delivering pragmatic, efficient financial management solutions that are embedded into clients’ ERP environment. This creates an additional level of sophistication and automation by being able to obtain data from across SAP and other ERP providers.”
For Hanse Orga too, the new partnership is highly consistent with its client strategy, as Moussa Soukal, Managing Director, North America, Hanse Orga outlines,
“We work with the banks that we consider the best in the industry, to deliver integrated solutions that deliver a broader business proposition than either Hanse Orga or the bank would be able to provide individually, in order to increase and leverage bank-to-corporate integration.”
Integrated solution in practice
The solution combines Citi’s proprietary reconciliation technology, Citi® Accounts Receivable Matching Services (ARMS) with Hanse Orga’s Autobank tool, which is a module embedded into the client’s ERP. This comprises a central engine that takes in collections data from a variety of channels. The data is then consolidated and may be corrected and/or enriched based on a series of rules and sub-rules. Sophisticated matching rules can then be applied, and as these are based on complete and consistent data, reconciliation and account posting is rapid and accurate, with minimal exceptions. Critical to the success of the solution is firstly the integrity of the standardisation and enrichment process, but also the accuracy and granularity of reconciliation rules, as Moussa Soukal, Hanse Orga outlines,
“We have developed a series of user-defined matching rules based on experiences derived from multiple projects across various industries, in order that clients can achieve the highest possible auto-reconciliation rate with maximum accuracy. We help clients to design specific processes that are relevant to their business, including dedicated screens for handling exceptions, monitoring key performance indicators and providing executive dashboards.”
Vikram Gupta, Citi explains why an integrated approach was taken, as opposed to providing an outsourced reconciliation service,
“Some companies are uncomfortable about sending files of accounts receivable data outside their own ERP based on the commercial sensitivity of this information. Therefore, in addition to providing this service outside of their ERP environment through ARMS, we also decided to deliver a solution within it using a simple drop-down option within SAP. Clients therefore benefit from the greatest possible integration, security and control over data.”
Cost savings and competitive advantage
The benefits of efficient, integrated reconciliation can be very substantial. The primary tangible benefit is the cost savings that can be achieved by reducing the administrative effort required for reconciliation by reducing the number of exceptions as well as consolidating data automatically. Posting amounts to customer accounts quickly enhanced customer relationships and enables sales to sign more business, supporting companies’ competitive position. Working capital metrics such as DSO are enhanced, and treasurers can take hold of cash for liquidity management purposes more quickly.[[[PAGE]]]
The partnership between Citi and Hanse Orga was announced very recently, but there is already considerable interest in an integrated reconciliation solution, particularly amongst large multinationals with disaggregated collections functions. The benefits extend to all industries, with the greatest advantages to companies with complex supply chains and high degrees of manual reconciliation. As companies globally increasingly recognise the importance of efficient collections and seek to centralise the accounts receivable function, we anticipate that treasurers and finance managers will seek integrated technology solutions that enable them to maintain control over their data whilst enabling highly efficient, automated reconciliation tools.
