Treasury and Trade Solutions

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

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 COVID-19 has exposed the weaknesses of outdated processes, and has accelerated many digital payment trends.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 digitizePayments: 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. Results from our recent Receivables Diagnostic shows that 66% of our clients are receiving 75%-100% of their payments electronically.1

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

Preeti ChaturvediGlobal Head of Core Receivables, Treasury and Trade Solutions, Citi

1 Receivables Diagnostic Survey, September 2020, Citi Treasury and Trade Solutions

Treasury and Trade Solutions2

Invoicing: The Receivables Diagnostic also demonstrates that 66% of our clients are still using offline modes for invoice presentment including email and mail methods. 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

With the preference for contactless payments on the rise, another prominent payment trend is the expanding use of QR codes for mobile transactions. In the US, contactless payments grew 150% between March 2019 and March 2020, as the coronavirus pandemic has accelerated consumers desire to minimize friction and physical interaction at the point of sale.5 In the past few months, forty-nine countries have increased their transactional credit limit in a bid to combat the spread of Covid-19.6

The emergence of real-time request to pay (RTP) payments which debit directly from consumer bank accounts is expected to reach a larger population than cards or digital wallets.

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 successTo 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 top-line revenue.

By digitizing receivables, treasurers can reduce days sales outstanding (DSO) while improving straight-through reconciliation (STR).

2 https://www.thestreet.com/investing/why-mastercard-is-set-to-dominate-business-transactions-150529103 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-payments5 https://www.forbes.com/advisor/banking/banking-after-covid-19-the-rise-of-contactless-payments-in-the-u-s/6 https://www.citibank.com/tts/sa/flippingbook/2017/The-Request-to-Pay-Revolution/files/assets/common/downloads/The%20

Request%20to%20Pay%20Revolution.pdf

3Digitalizing Receivables: Overcoming Today’s Treasury Challenges While Preparing for the Road Ahead

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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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 so 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.

Citi® Smart Match utilizes advanced algorithms and machine learning to accurately match open receivables with payments and remittance data.

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Treasury and Trade Solutionsciti.com/treasuryandtradesolutions

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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. From identification of payer, to use of advanced ML technology, to an instant reconciliation API that packages reconciliation tools and rich data set, our clients can choose from a comprehensive suite of tools based on their technology sophistication and use cases. 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%. Today, there are roughly 7 million Payer IDs used by our clients to automate payer identification.

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.