Recon Challenges and Collection Inefficiencies across LoBs

Objective

Primarily, clients were in cheque collections and were struggling to lower the DSOs due to traditional methods. 

Introduction

With a customer base of more than 5000 dealers, a multinational tyre manufacturer leveraged Freepay as content-based NACH and fund transfer through NEFT/RTGS into virtual accounts.

Challenge

With the widespread of dealers, the payment method was mainly cheques and PDCs. The company had two main LOBs – Passenger and Truck tyres. Shifting the dealer profile to the electronic mode for separate entities was a big challenge

 Dealers manually required to pay separate cheques for LoBs which led to lots of errors. 

 Difficulty in managing led firstly by CNs pertaining to various LOBs which dealers wrongly offset them, and secondly CNs were larger than the invoice amount. 

 Partial Payment was a large challenge and finding the reason used up large bandwidth of all internal teams. 

 Cheques lying with the collecting team led to a delay in deposit, which led to credit getting blocked. 

 A month-end process of recon teams was to manually scan the bank statements and reconcile it to ERP. 

 Dealers cannot access the live view of outstanding obligations, CNs and weekly debit amounts

 Without access to a real-time view of incoming requests, no action was taken timely.

Solution

Freepay offered the following solutions to their existing challenges:

 Freepay segregated LoBs and associated rules of payment. 

 The interface provided better visibility of CNs to the dealers. 

 It enabled partial payments with dealers who compulsorily had to choose pre-designated reasons for departments to take action.

 Unique Virtual Accounts for each dealer allowed visibility of all NEFT/RTGS fund transfers with transparency. 

 The dealers could view & pay anytime from Freepay 

 The live dashboard enabled live view of  outstanding obligations and payments made by customers 

 Freepay automated the presentation of the payments to the Bank

Conclusion

Freepay brought immense benefits that it became a prominent mode of payment among dealers. With its straight-through interface with ERP, freepay made reconciliation efficiently. From 30%, the electronic collection has come up to 75% and reduced the DSOs by almost 3 days. SMS reminders and dunning features enabled faster collection. Partial payments through Freepay made reconciliation and internal workflow management quicker and efficient.

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