Digitalizing Receivables: Overcoming Today’s Treasury Challenges While Preparing for the Road Ahead

Author

Anupam Sinha

Anupam Sinha,
Global Head of Domestic Payments and Receivables, Treasury and Trade Solutions, Citi

Preeti
Chaturvedi

Preeti Chaturvedi,
Global Head of Core Receivables, Treasury and Trade Solutions, Citi

By taking advantage of new receivables solutions, corporates can better support sales initiatives that drive top-line revenue growth, while reducing manual processes, operational cost, and improving cash flow. COVID-19 has exposed the weaknesses of outdated processes, and has accelerated many digital payment trends. Digital payments and automated processes are no longer a nice to have, but are an absolute necessity.

Power of Technology to Automate and Digitize

Payments: Over the past decade, there has been a transition from paper to digital treasury processes, as organizations have replaced cumbersome manual functions with highly efficient automated processes. In the business-to-business (B2B) world, paper checks have historically dominated, with over 81% of B2B transactions in 2004 being done via check. Now, there is an increased desire to migrate from paper and digitize receivables. This year check usage dropped to a historic low and digital ACH payments now account for nearly half of all B2B receivables.1

Invoicing: Paper-based invoices are costly and burdensome. On average, businesses spend between $16 and $22 per invoice to process manually, and typically take six days to complete.2 In addition, more than 72% of invoices are still sent by snail mail.3 There is a significant opportunity for e-invoicing to reduce cost per invoice with reduction in postage cost, time for delivery, and manual processing.

Reconciliation: Reliance on paper-based processes creates reconciliation inefficiency. A Citi Receivables Diagnostics benchmarking survey found that only 19% of companies have achieved the best-in-class auto-reconciliation rate of over 95%, which suggests digitization and automation holds the potential to deliver important improvements to the AR function.

The evolving payments landscape

The growing evolution of the payments landscape is impacting consumers and businesses alike. A litany of direct-to-consumer digital options are changing the way businesses receive payments from their customers. The push toward digital has brought about a burgeoning utilization of real-time/ instant payments, including Instant Receivables and Instant Direct Debit. According to a recent report, more than half a trillion real-time payments transactions will be processed over the next five years.4

Another prominent payment trend is the expanding use of QR codes for mobile transactions, as the preference for contactless payments worldwide is on the rise. The mobile payments market is growing rapidly, having already reached a value of $1.1 trillion as of last year and one billion people are expected to use a mobile payment app worldwide by the close of 2020.5

The emergence of real-time request to pay (RTP) payments that debit directly from bank accounts is expected to reach a larger population than cards or digital wallets. In Asia, for example, 1.8 billion people have bank accounts, but not credit cards.6 The aforementioned digital wallet offers seamless payments across channels with card number protection through tokenization. This form of payment is ideal for online and in-app purchases and is an increasingly popular choice.

Improving receivables is key to post-COVID-19 success

To ensure post-COVID-19 success, treasury organizations must focus on improving the AR function, and taking advantage of technology advancements. Citi’s One Receivables suite offers digital tools for clients to plan, present, receive, reconcile and report and enables streamlined AR processes to help clients increase topline revenue.

The Citi suite offers an Electronic Invoice/Bill Presentment and Payment (EIPP) tool that automates the invoice-to-cash cycle, providing a convenient, digital method to present invoices. This helps eliminate the risk of manual errors and delays, enabling faster funds processing and ultimately improving the customer experience. The suite also offers a host of traditional and digital receivables channels in more than 100 markets globally. This allows organizations to tailor their payments needs to address customer and market preferences. By digitizing receivables, treasurers can reduce days sales outstanding (DSO) while improving straight-through reconciliation (STR).

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Citi® One Receivables offers an enhanced reconciliation and reporting module that improves visibility through artificial intelligence, machine learning, and automated processes. Tools such as Citi Payer ID®, Citi Smart Match® and Citi Virtual Accounts® deliver state-of-the-art functionality that can easily be integrated into any AR program. Use cases have demonstrated that Citi Smart Match can be leveraged across full spectrum of clients from local, regional, or global needs and has the ability to transform completely manual reconciliation to match rates above 90%.

Alibaba.com is using Citi One Receivables instant reconciliation API to automatically track and reconcile receivables and enable self-service tools to their merchants. Visibility and real-time payment tracking service is helping Alibaba.com’s customers to expand their businesses more easily than ever, especially when COVID-19 challenges are pushing the business to digitalize at an unprecedented speed. Since opening the service to all suppliers, Alibaba’s B2B marketplace has recorded over 300K users, 200K page views and 100K unique visitors by far. On a daily basis the new service powered by Citi One Receivables API, gets 4,000 page views and 2,000 unique visitors, with 50% of merchants using the tool to track their payment and 90% of those customers indicated that they will continue to use it in their day-to-day operations.

Receivables remains the weakest area in corporate cash management. While the pandemic has put strains on AR departments, it has also presented companies with an opportunity to embrace digitization and prepare for the future.

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1 https://www.globenewswire.com/news-release/2019/07/25/1888147/0/en/Digital-PaymentMarket-To-Reach-USD-10-07-Trillion-By-2026-Reports-And-Data.html
2 https://www.thestreet.com/investing/why-mastercard-is-set-to-dominate-businesstransactions-15052910
3 https://www.pymnts.com/accounts-payable/2019/ap-innovation-payments-automation/ 4 https://www.finextra.com/pressarticle/82008/aci-worldwide-forecasts-exponential-growth-in-real-time-payments
5 https://www.merchantsavvy.co.uk/mobile-payment-stats-trends/
6 https://www.citibank.com/tts/sa/flippingbook/2017/The-Request-to-Pay-Revolution/files/assets/common/downloads/ The%20Request%20to%20Pay%20Revolution.pdf