Boosting Automated Cash Application Performance

23rd May 2012

Citi Transaction Services

Hanse Orga

2

Introducing the Speakers

Basak Toprak is the Europe, Middle East and Africa (EMEA) senior market manager for Citi

Transaction Services (CTS), responsible for the market development of end-to-end receivables and

channel services solutions. Toprak held product management roles in EMEA payments and liquidity

management, and was responsible for developing and commercialising best-in-class liquidity and

investments solutions for clients in EMEA. Prior to her current position, Toprak was EMEA senior cash

management sales manager. She holds an MBA from Cass Business School in London.

Frank Gastl is managing director of Hanse Orga International, the international subsidiary of the

German financial software specialist Hanse Orga AG. He joined Hanse Orga in 2002 and has since

2004 led the significant international expansion of Hanse Orga's activities. Gastl and his international

sales team, which is based in the Netherlands, drive the business development in Europe, Middle East

and Africa (EMEA) and contribute to the ever-increasing number of over 500 satisfied customers

worldwide. Prior to joining Hanse Orga, Gastl worked over 20 years for a number of renowned national

and international companies in the sector of financial and controlling software.

3

Agenda

Receivables Best Practices

Hanse Orga AutoBank Cash Application

Honeywell Case Study

Conclusion

Receivables Best Practices

5

The End to End Receivables Proposition

Instruments

Cash

Cheques, Lockbox

Electronic transfers

Direct debits

SEPA

Cards

Channels

Mobile

Branches

Partner banks

Post offices

ATMs

POS

Web/e-Commerce

Efficient Cash Application

Virtual Accounts

ARMS

Autobank for SAP

ERP Integrator

Information and Data Management

Citi electronic bank statements

Citi STR

Third party bank statements

Customized reports -lockbox, network collections etc.

Receivables Vision

Trade and FX Linkage

Receivables financing

FX for receivables

Collections

Visibility

Reconciliation

Financing and FX

The E2E receivables proposition goes beyond the traditional offering as data management & analytics have

become key for SSCs. Only a combination of banking solutions, adoption of market practices and ERP

integration lead to STR.

6

Citi Straight Through Reconciliation (STR)

Financial Reconciliation

Reconciliation of bank statement balances with GLs / other internal accounts

Confirm Cash position and forecasts to support treasury decisions on funding, investment, FX

Bank transaction codes to collate and post statement entries efficiently

Operational Reconciliation

Check all initiated payments / Direct

Debits have been accepted and

executed

Locate batch & transaction references

Identify rejects and reject reasons

promptly to repair and reprocess failed

transactions in a timely manner

Utilise tools to further automate cash

application

Straight Through Reconciliation concerns both Financial Reconciliation and Operational Reconciliation. The

objective is to automate both as much as possible, reducing manual efforts involved.

7

Statements

Financial

Reconciliation

Citi STR – Financial Reconciliation

Financial Reconciliation is typically the responsibility of the Treasury management area, where the focus is

on reconciliation of bank balances. The reconciliation rates are generally high.

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8

Accounts Receivables

Matching Services

ERP

Citi STR – Operational Reconciliation

Operational reconciliation involves the reconciliation of Initiated Transactions (which are under the control of

the corporate and have a typically large matching rate) and Uninitiated Transactions (such as incoming

payments) which is where most of the challenge and therefore the opportunity for improvement lies.

Status Reports

BANSTA / DEBMUL

Statements

with

Itemisation

and

enrichment

Autobank for

SAP

Operational

Reconciliation

AP and

Direct Debits

Initiated

Transaction

AR Cash Application

Uninitiated

Transaction

Lockbox

Remittance

Advices

Rejects and Returns

9

STR through Itemised Statements for Initiated Transactions

Citi STR offers you the ability to receive the break down (itemisation) of these payments on your statement

or the option to pass a unique batch reference for your payment, to support your reconciliation.

Opening Balance________

DD Bulk Credit__________

Payments Bulk Debit ____

Closing Balance________

Opening Balance _____

Direct Debit 1________ 1,000,000 Ref 123

Direct Debit 2________ 1,000,000 Ref 124

Direct Debit 3________ 1,000,000 Ref 125

Payment 1__________

Payment 2 __________

Closing Balance_________

Itemisation1,000,000

0

3,000,000

2,000,000

1,000,00

-1,000,000 Ref 126

-1,000,000 Ref 127

0

Itemised StatementNon Itemised Statement

Bulk credits and debits on statements make it difficult for companies to achieve STR.

The reconciliation of the bulked payments would need to be done manually.

Itemisation can be enabled on the actual bank statements

Itemisation also include the End to End Reference ID to enable reconciliation back to the ERP

10

Citi’s Accounts Receivables Matching Services (ARMS)

Citi ARMS is a file based solution that integrate receivables data consolidation, enrichment and matching

services in an automated fashion.

Citi ARMS solution consolidate, enrich and deliver the receivables information using Citi and third party

bank statements as well as other information such as client tables (including unique customer codes,

customer account numbers etc).

ARMS enhanced receivables data is delivered via a single file to the ERP.

Citi ARMS can also carry out data matching using the same enhanced receivables information and invoice

data, through flexible matching rules, and providing matched and unmatched items output files

ARMS

Citi

ACH

Citi

Wires

Citi

Checks

Citi

Cash

3rd Bank

Account

Statements

Data Enrichment

Improving the quality of the data consolidated

Citi

Lockbox

Citi

Direct

Debits

Consolidation

Incoming Payments and Remittance Data from all Payment Modes and channels

Consolidated Output File to ERP

Data Matching

Data is matched at individual invoice against payment info received at Consolidation/Enrichment

step

Invoices

11

Integrating Bank Data and Cash Application Optimisation Software

Companies have the following choice of tools in the market:

In order to support corporates with the challenges in improving cash application processes,

Citi is working, Hanse Orga, that has solutions and expertise in corporate financial

technology platforms, particularly SAP.

Hanse Orga’s FinanceSuite AutoBank Automatic Cash Application is fully embedded within

SAP.

Standard ERP Cash Application

Using the standard features of the ERP,

which is often rigid and doesn’t allow for

flexible matching.

Tailor Made Software

In-house developed software, which relies

on in-house programmers and, over time,

could become difficult to maintain and

upgrade.

External Vendors

Cash application software developed by

technology companies or a bank that sit

outside the ERP and work through file

transfers of data. However some corporates

are not comfortable with exchanging data in

this manner.

Integrated Software from External Vendor

This solution sits within the ERP but

developed specifically as a cash application

module which allows for easy algorithm

programming by the business user and

user-friendly screens for manual processing.

Hanse Orga AutoBank Cash Application

13

People

150 people and strong

employee retention

Deep understanding of

products, bank reconciliation /

cash application, bank

communication, payments,

treasury, cash management

and liquidity planning

International consulting team

added with strong partners

SWIFT AllianceLite Wholesale

Partner since 2009. 2010

SWIFT awarded Hanse Orga

the official "Cash Management

Consultancy" label

SWIFT certified consultants.

Hanse Orga Group

Organisation

HQ in Hamburg,

international offices in

Netherlands, France, UK

and USA

Proven sustainable growth

and profitability

Privately owned, no external

investors

Hanse Orga AG is SAP

Software Solution Partner

since 2008, our Solutions

are certified by SAP as

“FinanceSuite 4.3”.

Clients

Proven implementation,

execution with 500+ clients

Clients across all industries

including: industry, oil &

chemicals, financial

services, retail, telecom,

logistics, governments etc

Client size ranges from

global tier-1 clients to local

organisations

Deployment in 40+ countries

14

Hanse Orga Clients (500+)

15

Overview of Autobank Functionalities

A) Optimised Automatic Posting and Matching

Citi ARMS Receivables Reports

Bank statement data

Remittance advices

Cheque payments

Lockbox information

Connection of SAP, non-SAP subledger systems

Posting of foreign currency payments

Evaluation of sending bank details

Analysis of number ranges

B) Optimised Manual Post-Processing

Easy handling due to one selection screen

Identification and processing of data from note to

payee

Integrated dispute management

– For internal and external communication

C) Performance Cockpit

Control and overview over processes

Extensive analytics

Overview

Increases the automated booking and

reconciliation of bank statements, lockbox and

remittance advices and input from Citi ARMS

in SAP

Sophisticated tools to optimise manual

clearing efficiency

A complete, real-time overview of the

reconciliation process

Analytics to actively manage improvements in

the reconciliation process

Key Features

Fully integrated in SAP and using standard

SAP functions when possible

Users adapt their own business rules

Independent of SAP release changes

Multiple subledgers, not just SAP general

ledger

16

Optimised Automatic Posting and Matching

Bank communication

Posting Step 1

USER EXIT

Standard Import

Routine

Posting Step 2

Manual

Postprocessing

Import of bank

statements in different

country formats

Posting from bank

account to bank sub

account

Option to leave for the

user exit

Posting from bank sub

account to

corresponding target

account

Manual matching of all

unassigned items

Flexible and Powerful booking rules

More appropriate cases can be defined - not just

the bank transaction code

More fields are available for matching than just the

invoice number and client number

– E.g. document number, contract, contract

account, business partner, etc.

Flexible and “human-like” way to

search/interpretation of text fields

Autobank treats many special cases

– Payments for items in a different currency

implied (bank) costs

Finding reasons why a transaction could not be

posted

Analysis of incorrectly posted items made easy

“Auto-learning” function for customer

information

Customer bank information is associated

automatically with the client number

It learns from automatic and manual postings

17

Deduction Types

Automatic posting of remittance

advices in SAP

AutoBank

Table of Conditions

Sales and

Distribution

Table of Conditions

SAP ® R/3 ®

Posting Open Items

AutoBank Automatic Cash Application

Remittance Advice

Invoice Item XYZ

Processing of different

deduction types

• Bonus

• Flat rate marketing

charges

• Flat rate freight

charges

• Flat rate advertising

costs

• Flat rate packaging

costs

• Central agent fee (del

credere)

• Returns

• Floor-space

management

Retail companies often provide deductions to their customers on the invoice amount. This creates a challenge

for reconciliation as the incoming amount is different from the invoiced amount. Autobank has a solution for

deductions to help with reconciliation.

Autobank provides an additional

table for storing unlimited terms

and conditions for deductions

types within SAP environment

On-line validation for Sales &

Distribution (SD) tables possible

Validation possible by percentage and

by absolute figures

Generation of specific reporting

18

AutoBank Manual Post-processing

All in one screen,

instead of 4-6 screens

in standard SAP

Flexible selection

capabilities

Possible posting

suggestions make

manual matching

faster and less tedious

Correct typing errors

in the note to payee

info

Refunding of unknown

receipts

Internal messages

Autobank provides a user-friendly manual processing module that is fully embedded in SAP and has split

screens to aid manual reconciliation.

19

Performance Cockpit

Clear overview of all processes within

AutoBank Automatic Cash Application

– Status is visualised by a performance

traffic light: green, yellow, red

Maximum Performance Optimisation

– Achieve maximum transparency of all

processes

– Measure performance

– Identify optimisation potentials, and

– Initiate further optimisation

Ensure no backlog is faced + clear

monitoring and customized display of

– Import of accounts

– Automatic posting

– Post-processing

– Sub-ledgers

– Flexible exports (archive)

Drill down from the company code group

level to company code and account level

20

Order to Cash Process Improvement Business Case

Corporates with the largest potential to gain efficiencies from cash application optimisation project are those

that have a regional Shared Service Centre (SSC). And when it comes to SSCs, Key Performance Indicators

provide critical data points for monitoring the performance of the SSC.

Results

Description of the solution scenario to the Management

Expected results of the proposed solution based on

customer’s live data

Benefits of the proposition

Implementation Budget

ROI – return on investment calculation

Rough time tables for implementation

Implementation methodology

Monitor the following KPIs to best understand the potential for improvement:

1. Volume – What is the absolute number of invoice items you reconcile on a daily or monthly

basis?

2. Automation – What is your true “automated” daily matching rate? Do you start each day

fresh with no matching items rolled over from the day before?

3. Headcount – How many FTEs do you have dedicated to closing out invoices?

Diagnostic (2-3 days onsite analysis)

Description of current processes

Data volumes and quality

Technical environment

Time effort and results of current processes

Optimisation potential of the current

processes

Honeywell Case Study

22

Autobank Case Study

• Labour intensive cash application process

• Low degree of automation

• Long cycle time

• Process inconsistency across businesses

The Challenge

Fortune 100 industrials company with sales over 34 billion USD and 128,000 employees in 100 countries

has implemented Autobank for Cash Application.

• Complete coverage of cash application process -

Bank statements, Lockbox, Remittances Advices

• Global roll-out by division in Shared Service Centre

organization

– Currently 80% of incoming cash is processed

through Autobank (100% target by end of 2012)

– In India, Honeywell worked with Citi to achieve

optimal feed to Autobank

The Solution

• Overall 30+ FTE saves to date

• Productivity gains realised within 1

month after go-lives

• Increased automation by 50%

• Overall automated matching average is

75%

• Ease of implementation

– Phased implementation approach

– Honeywell fully self-sufficient in

roll-outs

• Stable application with a great deal of

scalability – great potential also on the

AP/GL side.

The Result

23

Summary

• Many corporates have significant

potential to improve their

reconciliation processes through an

efficient, integrated reconciliation

solution, reaping more benefits from

their existing SSC setup.

• Cost savings from reducing the

manual efforts for reconciling

against bulk items on the statements

and for post-processing.

• Reducing the time to post funds

against customer invoices free up

customer credit lines and allows for

sales to sign more business.

Tools Mentioned Today

• Citi STR

• Financial Reconciliation

through Bank Statements

• Operational

Reconciliation through

bank statements,

itemization, remittance

advices

• Accounts Receivables

Matching Services

• Hanse Orga Autobank Cash

Application software

Reconciliation Challenges

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