Project Description

Operator: Hello and welcome to today’s webcast.

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It is now my pleasure to turn today’s program over to Danny Peltz, Group Head of Treasury Management and Payment Solutions.  Danny, the floor is yours.

Danny Peltz: Thank you, Rebecca.  Good morning or afternoon and welcome to Sooner is Better – Adopting Automation and Digital Payments in the Face of COVID-19.  My name is Danny Peltz, and I’m the Group Head and Business Leader of the Wells Fargo’s Treasury Management and Payment Solutions Group.

First off, I hope you’re all safe and healthy.  Like many of you, I’ve been working from home since mid March, practicing social distancing, and wearing a mask when I am out and about

Over these past few months, maintaining self care keeping in contact with family, friends and supporting the community I live in has been critical.  I hope all of you are taking the time for yourself and loved ones as well.

Today I’m joining you from my home in the San Francisco Bay Area, so apologize for any barking dogs or any unusual noises.  COVID-19 has shifted the way we work and live and we’ll continue to feel its impact even as we begin to move into the recovery phase.

For many of us COVID-19 has been a catalyst for change and is reshaping our experiences as we adapt to this new normal.  Over the past few months, we’ve all established new ways of working with a goal of making it easier and safer for our employees, customers and suppliers that do business with us, amidst the global pandemic.

For example, many of us have shifted our operating models and in doing such it has reemphasized the importance of liquidity and automation.  The unforeseen challenges on our supply chains have had a dramatic impact on our customers buy and receive goods and services, and we’ve all had to adapt.

During today’s webinar, we’ll talk about evaluating working capital strategies in light of COVID-19 and how automation and digital payments can help your organization.  We’ll walk through how a focus on digitizing processes and leveraging electronic payments can have a positive impact on accounts receivable and accounts payable.

And we’ll touch on the importance of collaboration between treasury, A.P., and accounts receivable to achieve these goals.  These are solutions designed to help your organization now, as well as effectively transition into the post-pandemic world.

I’m joined today by two of my team mates, Krista Sharp, and Matthew Obergfoll.  Krista is a Senior Vice President on our Treasury Management team and leads our Technology Media and Telecom Practice.  Krista is (inaudible) San Francisco (based home).  Matthew Obergfoll, who joins us from Minneapolis is the Treasury Executive for our Central Commercial Banking Group.

Before we begin with today’s presentation, I wanted to thank you all for putting your trust in us, whether it was looked through for help as you pivot your operations or advice on business continuity plans, we are always here to help and serve you.

We know this is a long road to recovery and it may be complicated.  Just know we are always here to help and guide you or just to listen.  We hope you, your business and your loved ones continue to stay safe as we emerge from this pandemic.  Krista, let me hand it off to you.

Krista Sharp: Thanks, Danny.  Well, not to state the obvious, but COVID pushed all of us to make rapid changes to protect our families and communities and rethink how we conduct business.

The good news in all of this is that COVID also made us seriously reconsider our dependency on checks, cash and manual processes, something we’ve all been talking about for as long as I’ve been in banking.  And we’re not going to talk about how long that was.

COVID also forced us to take a harder look at business continuity plans and prepare for the unimagined.  We’ve had to consider factors we’ve never thought we’d need to consider.  And we had to do it in the heat of the moment.  All of us had to figure out how to do those basic things we took for granted before like, “How do I print this new account opening form, sign it and return it to the bank?  Or if I can’t print the form, how am I ever going to do my check run?  Or where’s my token?”

Perhaps you had to dash into your office to print things or pick up checks that needed to get to the bank.  And many of you had to wait outside a branch in line to get in, or use a drive thru to complete normal day-to-day transactions.

According to many I’ve talked to this might have been your first time at a branch in years.  Well, somehow you made it all happen, but along the way, I’m sure you thought things like, “So why didn’t I set up checkout (sourcing) before?  Or why didn’t I convert my vendors from paying by check to pay by ACH already?”  And many more questions like that.

Well, if you were thinking that, don’t be so hard on yourself.  When the world was normal, the path to digital payments and automation wasn’t necessarily mission critical, and to many, it seemed complicated and time consuming.  And you simply didn’t have time to do things like clean up your data and records, design new policies and procedures, get buy-in from many stakeholders who don’t seem to care as much as you do, plan for the transition, which often meant running parallel processes or systems, and finally putting it all into production and hoping it works.

So by now, you’ve made a lot of emergency changes to how you’re paying or getting paid.  And mostly you put out the fire.  So it’s all great, right?  Well, close, but the task ahead of you now is to catch up your old processes and automation with the new changes you’ve had to implement.

The ideas we’re going to talk about today will help you get through this COVID environment.  And in my opinion, it’ll also help set you up for a better future.  Matthew, what are you hearing from your customers?

Matthew Obergfoll:  Yes, thanks, Krista.  Everyone’s focus right now is liquidity, customer retention and safety.  Cash flow and working capital are table stakes.  Whether you are on the Treasury, A.R., A.P. or any other part of the finance and accounting team, the same applies to you.  It’s kind of like the golden rule, “Do unto others as you would have done unto you.”

So on one hand with DSO, you need to get paid, but our new reality is making that tough.  Payments have been the cool kids in town recently, getting all the attention.  But right now, it may be the time to let the A.R. team shine and be the heroes.  On the other hand with DPO, you might need more options to keep the lights on.  So how can you leverage some of these same strategies with your vendors who need to get paid?

It’s worth noting, some of the strategies we’ll discuss today are a departure from how we would have talked about DSOs and VPOs in the past.  Times have changed.  Organizations need to be nimble as you consider economic challenges, customer loyalty, supplier relationships and improvement to back office efficiencies.

There are a lot of ways to both improve relationships and drive back office efficiencies, as well as take steps to improve working capital because just one day’s improvement in working capital can make a positive difference.

So for publicly-traded companies, performance relative to peers is readily available (in use).  Their challenge often lies in what the root cause of their issue might be, and how to prioritize their efforts for maximum impact.

Privately held companies, on the other hand, are less likely to have pure performance information at their fingertips.  Again, even if they do, the challenge still lives in where and how to prioritize efforts to maximize impact.

Whichever category you fit in, and whoever your banking partners and treasury providers may be, if you’re looking to improve, work with a team that uses proprietary methods and tools to assess operations, diagnose specific causes, quantify your opportunity and provide a path forward.

That said, we also realized current times are unique.  Benchmarks will change but should still remain representative of an industry as a whole.  Helping you with working capital management will require a partnership and thoughtful planning that acknowledges how to address your challenges now and in the future.

Krista, I’m pretty sure you’ve seen similar trends in your space.  What’s your advice on where people should start?

Krista Sharp: Thanks, Matthew.  I think the first place you want to focus on to improve your DSO is with your accounts receivable.  As liquidity and payment trends are changing, you need to equip your team with updated policies and procedures to help your customers pay you in different ways than before.  So I start by asking some of these questions.

First, are you starting with good clean data?  To really understand your customers and their normal payment patterns, you need good clean data that will be important when we talk about how you consider offering different alternatives to help your customers pay in a way that works for both of you.

Another one, can you initiate invoices earlier?  Old procedures may not include the same sense of urgency you need now to get paid quicker.  So how can you accelerate that workflow?  Perhaps you can send them electronically instead.

Do you have customers that have cash flow issues?  If so, you may need to reassess creditworthiness of your customers.  But, alternatively, can you offer incentives or attractive discounts to your best creditworthy customers to get paid quicker?  Having both strategies right now may help you even out your cash flow.

And lastly, do the right controls in place to support recent changes you’ve made to get paid differently than before?  For example, if you agree to receive electronic payments, are you protected against unauthorized ACH debit?  Or if you now accept credit card payments or debit customers accounts, are you properly handling this sensitive account information?

So now let’s talk about some of the best practices for improving your DSO while protecting your customer relationships and improving your accounts receivable process.  As I mentioned before, good clean data is important.

Two places that are worth focusing on are updating your receivables accounts by removing inactive accounts and duplicates.  A clean list here will help you make applying payments easier and will help you avoid exceptions.

Second is post any unapplied payments by researching these exceptions and properly applying them, you free up credit for your customers’ accounts so they can buy from you again without delay.

The next best practice would be to move to electronic receivable.  With COVID, checks became a big problem for everyone, printing them and depositing them became very challenging.  Many companies do like to offer their customers a variety of payment options to make it easy for their clients to pay how they like the pay.

One idea is to indicate on your invoice what payment options are preferred or available to help drive them towards an electronic payment method like ACH or credit card.  Well, let’s face it, though, the reality here in the U.S. is that the check is probably still going to be part of the equation for quite some time.  As a matter of fact, according to a pre-COVID AFP survey, it said that 42 percent of business to business payments are still received by check.  So what does that mean for you?

Well, it means you need to find a way to convert from paper to electronic as soon as you can.  One way would be to use remote capture or virtual lockbox service to eliminate the need to mail checks or deposit the master branch.  It’s an integrated check scanning and remote deposit capture service that can exponentially improve cash application rates and accelerate your cash availability by days.

And finally, consider going digital.  Consumers have been using online payments for quite some time.  But in today’s environment, we’re now seeing businesses more willing to pay online as well.

So to offer this type of option, you’ll need to launch a website that can be branded with your own look and feel and hosted by your bank.  And with just a few clicks, your customers can pay you and an easy, secure and electronic way.  And for you not only is the payment electronic, but it’s now associated with data that tells you exactly what it’s for so you can efficiently apply the payment.

And this website will be tied to directly to your bank account so the payments post to your account almost immediately, within again allows you to free up your customers credit more quickly.

So let’s take a minute to talk about the big elephant in the room that everybody is experiencing during COVID and that is past due accounts.  There’s a delicate balance between your company needing to get paid and your customers needing relief.

So it’s important for you to review your past due accounts and communicate clearly and candidly with your customers.  Connecting with them right now is really important.  You may want to consider adding resources to assist in these conversations.

But first and foremost, be approachable.  Customers have to make tough choices during these uncertain times.  And they may have questions regarding cancellation and refund policies.

A clear communication strategy will address those ambiguities and can also build trust with your customers.  If you offer a self-service portal where your customers can log in and view their transactions, this is a great place to display this information about your policies.

If you send out automated – automatic payment reminders, but your customers are having problems paying, they need a way to contact you quickly and discuss their options.  So make sure you’re including all of your contact information in those reminder emails that you’re sending.

And this extends to cancellations as well.  So if a customer decides to call you before canceling the service, it’s a great chance to figure out a solution so you don’t lose their business.  Make sure you’re taking advantage of all these opportunities.

We know, as a business, your goal is to get every invoice 100 percent paid on time every time.  However, in times like this if your customers are willing to make partial payments, allowing them to do so may benefit both of you.

Your customer’s priority at this moment will be keeping their family and loved ones safe, so payments may come in a little later than usual.  And instead of bombarding them with multiple reminder emails, you might consider relaxing those deadlines for a little while.

And finally, consider offering credit or discount for early payment.  By offering discounts for your outstanding invoices, you’re proving that you care about your customers to give them a break.

So hopefully, I helped set the stage for some overall best practices for DSO improvement.  But Matthew, what are some of the other things to consider when transitioning to electronic receivables?

Matthew Obergfoll:  You know, Krista, the first thing I think of is something you mentioned earlier.  COVID-19 has forced us to reconsider our dependence on checks.  So I want to talk a little bit more about the transition to electronic receivables.

Over the last few months, we’ve seen a lot of customers force to make decisions on how they accept electronic receivables quickly to accommodate work-from-home situations and customer requests.

If you’re one of these organizations, now’s the time to make sure you have the information needed to efficiently post payments.  While electronic payments are efficient, the initial transition can be difficult.  Let me talk about some common pain points.

With workstreams, whenever payment type ACH wire check card requires its own process postings can be delayed, inefficient and manual process supporting these receipts make it difficult to exercise adequate controls, and keep client records up to date.

Consolidated file transmissions or APIs can consolidate all electronic receivables, including ACH, debit, credit cards wire transfers into a single data file that’s pre formatted to the specific requirements of your accounting system.  More efficient processing means more resources to apply elsewhere.

Wires although tried and true, this electronic payment can be the most troublesome to post.  Remittance information accompanies wires however, it often has no structure.  Manual posting is usually the only option.

Some thoughts on how to reduce the manual effort there.  Asked wire emitters to send an email with invoice detail ahead of their payment.  You can watch an ongoing campaign to advise current and new customers of the information you need to post their payments.  Also, make sure have the same day wire detail needed to identify and post those payments.

ACH.  About 61 percent of payers send remittance information separately from their ACH payments, so it takes up to six days to manually post and apply those payments.  Artificial intelligence is being applied to minimize this challenge by matching wire and ACH payments to remittance information to improve straight through processing and auto application.

This technology gets smarter as it continues to process work, repairs fixable errors, such as incorrect formatting, and presents only true exceptions to your staff for additional research.

You may wonder how that benefits your customers in you.  Our customers have found their manual handling is reduced to a minimum.  Resources are repurposed for more important efforts like calling and negotiating pass due accounts.

Online bill payments is another area where customers pay online on biller, bank and retail websites and through payment services such as PayPal.  Many aggregators consolidate online consumer payments, and forward them as a single check and list to a lockbox or to – directly to your work without the information needed to automatically post.

Banks can help you work with aggregators to get the payment detail you need deliver to you so you can update customer records automatically.  Now, let’s transition into another part of proactive working capital management.

Payables.  Currently, we’re seeing a lot of conversion to electronic methods of payments.  And there are a lot of reasons for this, from not being able to access tech stock or printers, work from home environment to vendors not being able to receive and post checks because they’re also not at their office.

Whatever the reason is, issues are coming up because customers are forced to make decisions on how to pay quickly, without having the time to think through process or continuity.

If you have the ability to carve out time to assess your old and new payables process, it is a great time to evaluate, update and prioritize your payables policies and procedures.  So let me talk through some questions you can ask yourself to begin that process.

First of you segmented your suppliers based on strategic importance and risk.  How do your VPS compare to your peers in a cash crisis?  You may need to ask your vendors to grant you longer terms and align your purchases and payments against your most critical needs.

Do you have the right controls in place to protect you – yourself from fraud during COVID?  We’ve seen an increase in fraud, particularly supplier fraud.  Always verify the authenticity of requests to change account information and payment type, confirm those same requests in multiple ways, for example, by both phone and email.  And please don’t assume the contact information provided in the email letter or even the call is correct.  Check it with what you have on file.  In today’s environment, we really recommend double check any requests using both email and mobile phone contact information.

A couple more questions getting back to that.  Do you pay your invoices early without the benefit of a discount?  A lot of companies receive an invoice and cut the check or send an ACH in the next payment rent even when the terms call for payment in 30 days or more.  You’ve negotiated these terms with your vendors.  Now is the time to adhere to them.  Consider (tweeting up) do not pay until do rule in your AP system.

And lastly, and sort of conversely, this may be a time to reconsider processes that prevent you from paying on time.  Are you actively communicating with your key suppliers?  And if you need to extend the payment make sure you contact your vendor see what options or combinations they have available.

As you work through those questions and more, let me share some best practices to optimize days payable.  Reach out to suppliers.  If you have invoices that are difficult to process, tell your suppliers how they can make it easier.

It may be as simple as including the P.O. number invoice number on their bills, 55 percent of A.P. group say managing supplier bank account details is their most time consuming and challenging payment process.  Cleaning up master vendor files like vendor contact names, phone numbers, addresses, terms all keep changing.  So to help avoid duplicate payments and fraud, validate the information on file, remove the duplicates and archive any inactive vendors.

Handling uncashed checks, no one wants checks to go into a sheet.  If you have checks on cash past their sale dates, you’re probably trying to contact at A.P. to learn why they haven’t been cashed.

Moving away from check payments to electronic payments can lessen the likelihood of creating unclaimed property.  Along the lines of moving away from checks, as I noted earlier, if you’re having trouble printing checks your customers are having trouble receiving them.  Offer electronic payment options such as ACH real time payments and commercial card and automate payment processing through your ERP or A.P. system.

Over the last few months, we’ve seen a lot of customers forced to make quick decisions on how they manage suppliers projects and approve payments.  If you’re one of these, now’s the time to make sure you have the right strategies in place to effectively manage your working capital, support strong supplier relationships and protect yourself from fraud.

Krista Sharp: Yes.  As Matthew mentioned paying electronically as a best practice and a necessity right now, but even before COVID electronic payments were becoming more and more popular.

In fact, according to a B2B payments automation playbook 49 percent of middle market firms use electronic payables and 35 percent of large corporates also use electronic payables.

Most electronic payments can be used for both business to business and business to consumer payments.  However, just like on the receivable side, there are a few things you need to consider before jumping on the bandwagon.

With multiple payment types, you get multiple formats, different cutoff times for processing, different settlement time, different limits on how much you can send in one payment and whether or not they’re irrevocable.

So if you need to make business to business payments, your options include things like wires and ACH payments which have been around for a long time.  But as we mentioned earlier, one thing that can help those who are you are paying is to reach out to your suppliers to see what information they need to efficiently post these payments.  And you can also see if they might want to offer an early payment incentive to get their money quicker.  And did you know ACH payments can now settle same day and can be for amounts up to $100,000.

So purchasing cards have also been around for a long time, and they support card in hand as well as card not present purchases, and eliminate small dollar checks and petty cash disbursements.

Today we’re seeing many customers renegotiate terms with their supply chain right now.  And using a (P card) to pay strap suppliers helps them get paid quicker, but it improves your DPO since your actual payment doesn’t happen until it’s time to settle your card transactions.

So combining your purchasing card and virtual card spend allows you to hold on to cash without negatively impacting your suppliers, and can generate sizeable rebates that can directly benefit your bottom line, or be used to help fund new projects you’ve been wanting to implement.

Especially during COVID, many of your suppliers have started to offer the ability to pay online.  This channel eliminates your need to issue paper checks and typically support secure ACH and card payments.

And finally, real-time payments as a new low value payment rail being adopted in the industry that offers you the ability to make payments 24/7 with instant settlements and are irrevocable like a wire.  Real-time payments can also be used for payments up to $100,000 and can be another great alternative to hold on to your cash until the last minute to pay.

Now if you make business to consumer payments, your options are similar, but includes a couple more options that are increasing in popularity and don’t require you to collect or store sensitive bank account information.

So Zelle is one of those that enables you to send an instant payment to someone using just their email or mobile phone number.  It starts by the payee registering their account information for Zelle with their financial institution.  And this eliminates your need to manage sensitive account information.

Another option along those lines is push to card, another instant payment option, but uses a debit card number to push payments to their associated bank account.  And these options are becoming more and more popular, because let’s face it, who carries around a checkbook anymore?

We find these electronic consumer payments are also good options for things like emergency payments, refunds and one-time payments.  Well, everyone likes options, right?  But like I said before, all these options come with many different requirements.

Your treasury consultants will know how to guide you towards the best options to fit your business.  And so, now let’s talk about how you approach getting all this done within your organization.

Matthew Obergfoll:  Let me acknowledge that in most organizations, the A.P. department is considered a cost center because it’s doesn’t generate earnings and it receives funding.  In fact, the B2B payments automation innovation playbook identified 59 percent of companies have yet to automate their payments.

But this backroom function can become a profit center if managed and funded with an eye towards releasing working capital throughout the A.P. continuum.  Here’s where a consistent strategy, a strong partnership with Treasury and investment in automation can position A.P. as a contributor to the bottom line.

Your peers are noticing this opportunity, as 30 percent of companies plan to automate B2B payments from invoices within the next 12 months.  Now’s the time to improve your DPO and incorporate cost per invoice into your KPIs.

The medium cost per invoice is just under 6 bucks, but it costs low-performing organizations nearly twice as much to process an invoice.  A successful working capital strategy incorporates efficiencies into its objectives.  Krista, we’ve covered a lot of ground, how can the audience think about starting this path forward within their organization?

Krista Sharp: Sure. Well, first, let’s acknowledge that successfully managing your working capital during these times is challenging.  Automation and digital payments can help.  But most of you are also looking at how to integrate and improve the effectiveness of these electronic payments into your business.

To get there, it’ll take more collaboration and partnership both within your organization and externally with your customers, suppliers and banking partners.  So I can’t emphasize enough the importance of breaking down those internal silos.

Sometimes the division between treasury function and A.P. and A.R. functions can get in the way.  Now’s the time to break down those barriers and come together with one vision for your working capital strategies and align the goals for each group playing a key role.  And so speaking of collaboration, Danny and Matthew, I want to say it’s been really great collaborating with you to put this webinar together.

Danny Peltz: I agree, Krista.  I’d like to encourage our audience to visit our Treasury Insights portal for more information on treasury topics and our commercial COVID update site, which features information and resources related to COVID needs and concerns like fraud, market updates, economic reports and treasury operations.

A replay of today’s webinar will be available on both sites.  The Treasury Insights website can be found at the link on your screen.  The COVID-19 update site is accessible from several pages on including commercial, treasury management, and commercial electronic office homepages.

Wells Fargo is here to support you as you navigate through today’s challenges to your new normal.  Please reach out to your relationship and treasury team to talk through any specific questions or rethink existing strategies.  Thank you so much for joining our conversation today.  We look forward to speaking with you soon.

Operator: Thanks to all of our participants for joining us today.  This concludes our webcast.  You may now disconnect.  Have a good day.


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