WHITE PAPER
HOW AN INTEGRATED
RECEIVABLES SOLUTION
ELIMINATES THE BARRIERS TO ELECTRONIC PAYMENTS
© 2013 WAUSAU FINANCIAL SYSTEMS, INC. All Rights Reserved.
4 Check Payments Decline, But Business-to-Business Lags Behind
4 Barriers to Adoption: Inertia, Standards, Other Businesses
5 The Resulting Problem
5 Solutions Are In Reach
6 Integrated Receivables Aggregates & Accelerates Payments,
Overcomes Data Challenges
7 The Bottom Line
7 The Way Forward
7 Arrange for a Private Consultation with WAUSAU
8 About WAUSAU Financial Systems
TABLE OF CONTENTS
COMPANY CONFIDENTIAL
Wausau Financial Systems, Inc. Proprietary — This document contains confidential and proprietary information of WAUSAU, and is not to be copied, disclosed or distributed, except to employees of the recipient with a job-related need to review this document. By accepting this document, the recipient agrees to take all reasonable steps to ensure that this confidential and proprietary information will not be disclosed to any third parties, in whole or in part, without the prior written permission of WAUSAU.
EXECUTIVE SUMMARY
While business-to-business checks are declining, they are not declining as rapidly as consumer checks, despite the benefits businesses perceive in using electronic payments. Several research studies have found that a lack of services, standards, and other tools that automate the reconciliation of payments and remittance data is a key barrier to higher adoption of electronic business-to-business payments and automated remittance data exchange.
In fact, a recent survey found that over three fourths of businesses who do process electronic payments receive the payment separately from payment information. This situation has become a major impediment to increasing the use of electronic payments in business-to-business environments. However, there is a solution to these challenges— deploying an integrated receivables hub.
Integrated receivables technology can eliminate the barriers to adoption of electronic payments and automated remittance data exchange. In turn, integrated receivables can help billers reduce payments processing costs, accelerate receivables posting, improve liquidity management, and gain actionable insights into receivables. Above all, integrated receivables solutions can solve the key problem of matching electronic payments data to receivables data from multiple electronic and paper channels.
CHECK PAYMENTS DECLINE, BUT BUSINESS-TO-BUSINESS LAGS BEHIND
According to the Federal Reserve, the past decade witnessed a decline in paper check volumes from a high of approximately 39 billion in 2001 to an estimated 20 billion in 2012. On closer examination of the underlying data, the bulk of the decline in checks reflects widespread consumer adoption of electronic payment methods. In contrast, corporate check volumes (about 6.8 billion in 2012) have only shrunk 2 percent since 2006, according the Federal Reserve’s payments research.
Over half of companies make and receive business-to-business payments all or mainly as checks, 60 percent and 65 percent, respectively, according to the Remittance Coalition, a group formed in 2011 to promote the use of electronic payments and remittance data for business-to-business payments. Similarly, a 2013 survey conducted by the Institute of Financial Operations (IFO) found that companies still make 53 percent of their business-to-business payments using paper checks. In fact, at the Bank Administration Institute’s 2013 Payments Connect Conference, a panel of U.S. bank executives revealed that many of their corporate customers treat electronic payments as exceptions.
However, three-quarters of respondents to IFO’s 2013 AP Automation Study say their volume of electronic payments has increased over the past three years. And most respondents to IFO’s survey expect to make most of their business-to-business payments electronically within the next four years.
To this end, billers express moderate or high interest in increasing their use of electronic payments and the automated exchange of remittance data (90 percent and 86 percent, respectively), finds the Remittance Coalition. This suggests a gap between billers’ desire state of mainly electronic and automated compared to their current environment, which remains mainly paper-based and manual.
BARRIERS TO ADOPTION: INERTIA, STANDARDS, TRADING PARTNER RESISTANCE
So what are the major barriers to adopting more electronic payments and electronic remittance data?
To help guide its priorities and work efforts, the Remittance Coalition surveyed
businesses on the main barriers they face that limits their increased use of e-payments and e-remittance data. The Remittance Coalition’s survey identified three main barriers to electronic payments adoption:
1. Existing investments in paper check processing methodologies: One reason that corporate check volumes haven’t declined as quickly as consumer check volumes is that the vast majority of medium to large companies have significant investments in accounts receivable (AR) and accounts payable (AP) systems that are heavily dependent on, and integrated with, existing paper check processing methodologies. Moreover, many businesses lack effective technology and sufficient IT resources to support increased usage of electronic payments and electronic remittance data.
2. Resistance by trading partners: Many businesses say their trading partners, particularly smaller businesses, are unable or unwilling to originate and receive electronic payments and electronic remittance data. This is ranked as the number one major barrier by 27 percent of respondents to the Remittance Coalition’s survey, and among the top five barriers by 63 percent of respondents. An eye-popping 84 percent of businesses surveyed by IFO and US Bank in 2010 identified the difficulty in persuading trading
partners to accept electronic payments as the biggest obstacle to reducing paper check volumes in business-to-business payments.
3. Lack of standards: Non-standard electronic remittance formats and business practices are a major obstacle to increasing adoption of electronic payments and remittance data processing. The top two pain points identified by respondents to the Remittance Coalition survey relate to file data and format issues: “data elements we need are missing in electronic files we receive, so we cannot process receivables efficiently” (43 percent), and “the electronic remittance files we receive come in different formats so we cannot process receivables efficiently (40 percent). The problem is so widespread that businesses frequently must negotiate specific arrangements regarding the X12 EDI 820 formats that their trading partners use to ensure that they will be able to process the remittance files they receive. Worse, remittance data for key fields is frequently missing or incorrect, requiring manual intervention on the part of trading partners.
Tellingly, the top barriers do not vary much when compared by business size, the Coalition reports.
THE RESULTING PROBLEM
Can’t match payment to the remittance data! Difficulty matching payments to remittance data sent separately" and append to the headline above, not here separately.
Seventy-seven percent of businesses receive remittance data separately from the paymentfrom some trading partners, the Remittance Coalition finds. Receiving payments and remittances separately complicates reconciliation in a paper environment by requiring businesses to delay posting receivables or to bank research deposits, depending on whether the remittance or the payment (respectively) arrives first. For instance, the Remittance Coalition reports that 88 percent of businesses receive some remittance data in a document sent via email with or without attachments, fax, or paper, while one-third receive some remittance data via a portal, and one-third receive some remittance data in an electronic file.
SOLUTIONS ARE IN REACH
Seventy-one percent of respondents to the Remittance Coalition survey said it is critical or important to have “technology [solutions that] help [their] organization to exchange more e-payments and remittance data.” Not surprisingly, technology issues ranked high among the top five barriers identified by the survey respondents, including “our back office systems do not integrate easily with electronic payments” and “we do not have internal IT resources we need to support sending or receiving more payments electronically.” Respondents also noted that “it is difficult to verify that an electronic payment is received by the right account owner.”
Businesses have a strong incentive for increasing adoption of electronic payments and remittance data processing: less than half of the respondents to the Remittance Coalition’s survey (46 percent) view their internal processes as “extremely” or “very” effective in meeting their AR needs. A 2011 study by Aite Group also found that most billers are displeased with their receivables processes.
Importantly, businesses that receive payments mainly by check view their internal processes and banking services as less effective in meeting their receivables needs than businesses that mainly receive payments by ACH or card. This reflects the challenges
businesses face in reconciling paper-based payments and remittances—a largely manual affair that is labor-intensive. Forty-three percent of respondents to the Remittance Coalition survey said that manual intervention is required to correct e-remittance data they receive more than one-quarter of the time. Even when billers receive an e-payment, one-third say they must rekey remittance data from a paper, e-mail or fax document provided by their bank, according to the Remittance Coalition’s survey.
INTEGRATED RECEIVABLES AGGREGATES & ACCELERATES PAYMENTS, OVERCOMES DATA CHALLENGES
While the Remittance Coalition warns there is no “silver bullet” to driving adoption of electronic payments, integrated receivables technology is critical.
Fifty-four percent of corporations see an integrated receivables platform as a means of improving their receivables management, according to a 2011 study by Aite Group. These billers clearly recognize that integrated receivables solutions address the barriers to increasing adoption of electronic payments and automated receivables data exchange by providing three key capabilities:
1. Aggregating all payments and payables information, images and data. An integrated architecture insures the seamless integration to the hub for all payment channels: traditional paper capture, satellite capture, ACH, wire transfer, EDI, credit card, cashiering systems, remote deposit, Web, mobile, EIPP, or EBPP as well as the payables information: email, email attachments (pdf, text, excel, tiff), fax, paper and vendor portals.
2. Automate receivables processing from all channels by leveraging tools to reduce the number of exceptions requiring manual intervention. These tools assist with missing payment detail, incorrect payment detail and payment detail collected from the various channels. An integrated receivables solution also provides enhanced notification, storage, and archive functionality, as well as consolidated outputs for extracts and posting.
3. Accelerating the application of cash to the corporate balance sheet by providing tools and insights for making better and timelier business decisions. This helps billers improve liquidity management by providing actionable insights such as receivables analytics, buyer payment performance, and receivables forecasts.
THE WAUSAU SOLUTION
The key to automating this process is to aggregate the remittance details and the
payment data into a single IR hub. By leveraging OCR, intelligent templating, and contextual search protocols, we can effectively match the payment details to the correct payment. The disconnected payments can now be introduced and follow the standard accounts receivable workflow and are no longer considered exception.
THE BOTTOM LINE
Corporate billers clearly want to adopt more electronic payments and improve the efficiency of reconciling them with remittance data. To this end, billers are seeking help with the development and promotion of more common business practices for populating and exchanging remittance data, and for educating stakeholders on electronic payments and automated remittance data processing. The efforts of the Remittance Coalition will go a long way to helping billers meet these objectives.
But billers also recognize the need for more effective technology services to reducing the barriers to higher electronic payments and remittance data adoption. This is where integrated receivables technology comes in. Integrated receivables solution can help billers reduce payments processing costs, accelerate posting, improve liquidity management, and gain actionable receivables insights.
THE WAY FORWARD
This white paper was sponsored by WAUSAU Financial Solutions.
By any measure, receivables processing is a complex, time-consuming function that hinders the ability of corporations to gain and use information accurately and effectively.
One particular challenge for corporations is the inefficiencies associated with processing and researching receivables via various bank payment systems. Corporations need the ability to access a single receivables solution for all receivables information, regardless of the payment type or channel.
For more than 30 years, WAUSAU Financial Systems has been a leader in payments and receivables automation. During that time, we have been a pioneer in the markets we serve:
• Receivables360 received the top rating from CEB TowerGroup
• WAUSAU has the No. 1 market position in wholesale and retail lockbox • WAUSAU’s RDC solution has received top ratings from Celent and Aite Group • Flexible outsourcing options
• Broadest set of industry-leading partners to deliver comprehensive solutions • Seven of the 8 largest lockbox providers use WAUSAU
ARRANGE FOR A PRIVATE CONSULTATION WITH WAUSAU
WAUSAU experts can help billers eliminate the barriers to increasing adoption of electronic payments and automated remittance data exchange. The combination of WAUSAU’s industry expertise and best-in-class Receivables360 solution can help billers reduce costs, accelerate receivables posting, and improve visibility into financial information.
For more information, please call (800) 937-0017 or contact your WAUSAU sales representative.
ABOUT WAUSAU FINANCIAL SYSTEMS
WAUSAU Financial Systems is a premier provider of payment and receivables processing solutions, helping businesses of all types move money faster. With its products, services and consulting, WAUSAU works with customers to speed check processing, electronic pre-sentment, ACH payments, transaction processing, distributed capture and enterprise content management. WAUSAU holds the No. 1 market share position in retail and whole-sale remittance processing solutions. WAUSAU processes more than $1 trillion in payments each year through its work with more than 650 organizations, and maintains more than 30 percent of all U.S. lockbox volume. The company works with 13 of the 25 largest financial institutions, 42 percent of insurance companies with more than 5 million customers and 24 percent of utilities with more than 100,000 customers. More than 200 financial institutions use WAUSAU’s remote deposit capture service, and industry consultants Celent and Aite Group have ranked WAUSAU’s remote capture functionality above all competitors.
