Citi Treasury and Trade Solutions
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up at a bank to deposit the sum over the counter.
Not to mention the payment information he
would provide, such as invoice number,
description of goods and payment date, could
well be rendered in different formats and modes.
In short, the MNC may end up receiving partial
information on the invoices that are also in
multiple formats from its diverse clients. This
delayed receivables processing and release of
credit limit, thus impacts sales and makes
automation virtually impossible.
Multiplying these scenarios with thousands of
retailers you have across Asia, it can snowball
into an operational hiccup that hamstrings your
working capital efficiency.
MNCs typically centralize their receivables
processing in shared services centers (SSCs). If
any problem over payment reconciliation or
information matching of invoices occurs, asking
a SSC staff sitting miles away from the frontline
relationship manager or sales team to deal with
the issue with the client is not a sound idea.
One Approach Fits All
To overhaul the collections process, we worked
with our MNC client to re-engineer the Order-to-
Cash (O2C) process. Starting with the move to
centralize e-invoicing, and streamline multiple
collection channels using Citi’s collections
products such as Receivables Lockbox and
Smart PDF, and at the same time, standardizing
and harmonizing the remittance advises from its
customers regardless of their size or location.
When standardization rules are upheld, finance
managers can work on rationalization — reducing
the use of multiple banks down to one or few to
collect receivables from numerous clients. Such
concentration can help reduce processing costs,
lower bank fees and increase visibility and
control on receivables.
Going Electronic
Since paying in cash or paper cheques is still
prevalent in emerging Asian countries and
adoption of electronic payments and automatic
collections remain uneven, companies should
strive to achieve electronic invoicing, which is
gradually permitted in more Asian nations, as
the future of collections processing.
Once invoice formats are standardized, manual
input of invoice data can be replaced with
electronic upload. Hence, finance managers can
have greater visibility over liabilities, enabling
working capital management to be performed
more effectively.
With electronic processing, firms can also
reduce the time required to process and
approve invoices since cost of producing,
mailing and processing hard copy invoices is
eliminated.
Wider use of electronic payment instruments
can offer greater security, convenience and
lower costs as well, making the process less
onerous, which is particularly beneficial to
corporations with business-to-business models.
Receivables Automation
Automation of cash application (i.e. auto-
matching of collections data from the bank
against open invoices in ERP) reduces cost and
time for processing, as well as errors associated
with manual processing in accounts receivables
reconciliation. Besides, it enables finance
managers at the head offices to leverage the
bank’s technology to gain control and visibility
on collections across Asia since collection
information is posted automatically and
provided in real-time instead of end-of-day.
By automating cash application, corporates can
easily bring this process along with invoicing
from individual countries into a SSC, thus
creating economies of scale.
Collection Factory Setup
Since global companies often have multiple legal
entities operating in the same country, they can
designate one entity to receive-on-behalf-of all
the entities. Also known as ROBO or a
“collection factory”, the practice to direct all
receivables to a single entity and centralizing
processing can create efficiency across the
entire process of O2C. In countries where
multiple entities sell to the same customer, a
collection factory reduces the number of
transactions and improves control on cash.
