Corporate receivables exception management

VICOR, Inc. is a leading provider of image-enabled receivables processing solutions. VICOR's flagship platform, RIDS (Receivables Information Delivery System), is the first payment processing and cash management platform to offer full color images and intra-day delivery of receivables data via the internet and other publishing options. Currently installed at 20 sites, RIDS installations will process more than 100 million transactions in 2002, representing over $1 trillion in value.

www.vicor.com (510) 621-2000

In the constant rush to speed up posting of accounts receivables, often overlooked is the corresponding rise in exceptions. Well planned AIR exception management is helping businesses reconcile this conflict.

Corporate customers use a lockbox to accelerate cash collection and facilitate A/R posting. However, payment exceptions can cause numerous issues and create significant expense in the cash application process. As many as 30% of all payments do not post cleanly to the ERP or A/R system. Billing errors and payment excel)tions resolution cost the US economy $700 billion annually. Technology investments have historically ignored the accounting functions in providing productivity and collaboration tools. Even customer service often cannot quickly confirm a problem and expedite its resolution. Fortunately. new collaboration, information capture and distribution tools are available to accelerate exception resolution and lower costs.

Business Situation

Changes In Business Practices-Justin-Time shipments now comprise 50% of US manufacturing shipments. With Just-in-Time shipments, inventory goes down, but the number of invoices increases dramatically, since new inventory is ordered on a daily basis.

Even though invoices are created daily, payments still only occur bi-weekly or even monthly. So each payment covers numerous invoices. increasing the complexity immensely. As payment complexity increases, so do the number of exceptions.

Another factor that is impacting the payment process is a rise in the use of trade credit. As other sources of credit become more difficult to obtain, companies are turning to trade credit instead. This has caused a huge rise in average nationwide Days Sales Outstanding (DSO). which has increased by 10 days since 1990. With DSO high, there is more pressure to post receivables as quickly as possible.

Impact on Corporate A/R PracticesThese changes in corporate business practices have numerous adverse impacts on the A/R process:

* Significant increase in the number of costly payment processing exceptions

* Abundance of paper checks and documents

* Time delays in access to payment information

* Time critical interactions within and outside the company to resolve disputes

* Significant dollars spent managing receivables and exceptions

All of these issues have a negative impact on other departments and the company as a whole. In fact, problems in cash application can multiply and cause issues in finance, customer service, sales, shipping, manufacturing and records management. They can tie up senior management's time and affect share prices by impacting DSO and inventor turn metrics. And most importantly, they can have an adverse impact on customer relationships.

Solutions that Attack Exception

Resolution

Fortunately there are solutions available today that can help attack exception management problems:

* Electronic Invoice PresentmentInvoices and backup documents are presented on the Internet, with collaboration and dispute resolution tools available pre-payment

* Advanced Image Lockbox-Checks and remittance documents are imaged and available on the Internet, integrating both paper and electronic payments. Additionally, A/R Matching tools are available to identify clean matches and exceptions for the cash application process same day.

* A/R Collaboration-Annotations and memos can be added to remittance documents post-payment, facilitating resolution of exception transactions.

To see how these tools can improve the A/R process, it helps to took at the life of a receivable (see chart above). This entire process can take as long as 240 days and can cost on average $34 per invoice.

Relieving Pains in the A/R CycleStep I in this cycle can be attacked using Electronic Invoice Presentment. This solution can eliminate paper-filing hassles by converting invoices and backup documents to electronic format. It can also eliminate mail delays and allow all affected parties to receive the invoice simultaneously.

Step 2 is also aided by Electronic Invoice Presentment, which can help to resolve disputes pre-payment and provide one place on the web for all invoices and backup documents, plus a record of any dispute resolution. This eliminates issues of lost or mis-directed invoices and helps ease future exception management.

Issues in the third step, the Receive Payment step, can be addressed by Advanced Image Lockbox. By combining paper and electronic payments into one place on the Internet, A/R payment data can be accessed in a more timely fashion by all departments who need access to the information. In addition. CD-ROMs can replace expensive and cumbersome paper archives.