Treasury and Receivables: Value of a Comprehensive View

Strategic Treasurer: Treasury & Receivables: Value of a Comprehensive View

Brian Weeks

Welcome everyone to today's webinar titled Treasury and Receivables: Value of a Comprehensive View. This is Brian from Strategic Treasurer and we're pleased you could join us as we discuss the power of an end-to-end view that considers not only internal parties, but also external partners.

Our speakers for today are Rick Scholz, Managing Director, Payment Advisory Services at Deluxe, and Craig Jeffery, Founder and Managing Partner of Strategic Treasurer.Welcome, Craig and Rick, and I'll now turn the presentation over to you.

Craig Jeffery

Thank you, Brian. It's good to be here. Thanks for getting everything introduced. Rick, I'm glad to be on this webinar with you. We are in the same room in our studio in Atlanta, Peachtree City, and so thanks for joining me today.

Rick Scholz

I've been so looking forward to this and we've done a number of these together, but this takes it to another level.

Craig Jeffery

Yeah, it's excellent. And thanks everybody for joining. We know there's so many things that you can do during the day. The fact that you had spent some time discussing treasury and receivables is an encouragemnet to us and we appreciate it. 

Craig Jeffery

What are we going to cover today? So you can see the agenda on your screen. We'll look at the cash conversion cycle or CCC. So that's the entire process of where cash is injected into the business cycle.

Craig Jeffery

So let's say it goes into inventory or it makes its way through receivables. You're investing in receivables as you sold things, all the way through payables, this conversion back and forth. And so we'll look at receivables, payables, and treasury.

Craig Jeffery

And those are some of the different areas that impact the cash conversion cycle. There's certainly some different drivers. We'll look at a few of those. We're going to focus on receivables and treasury, primarily receivables today.

Craig Jeffery

And there can be different drivers, different views. We'll talk about key performance indicators. Sometimes those can be just naturally the way they occur, and sometimes we can set up drivers and measurements and key performance indicators that are at odds with one another.

Craig Jeffery

They can be competing. And anytime that's occurring, we're in a suboptimal position, a suboptimal environment. So we want to make sure that the entire process works, which brings us to the full end-to-end view.

Craig Jeffery

How many organizations take a comprehensive look from the start of a process to the end of the process? I think we're all quite good at looking at what's in our particular span of control and trying to optimize within that.

Craig Jeffery

But we'll examine this more comprehensive or an end-to-end look and why that matters so much for efficiency, liquidity in our processes and particularly in the payment processes, which is our third area.

Craig Jeffery

We'll look at some of the challenges and the solutions that are necessary to allow an organization to scale to run efficiently. So we'll look at efficiency, liquidity, and also visibility. Those have an impact on the receivables group, on treasury groups and even on the AP side of things.

Craig Jeffery

And then finally, for our key takeaways, final thoughts, Rick and I will touch on a few areas about coming to alignment across the different areas as well as an end-to-end perspective, that comprehensive look and then areas and groups, organizations that can lend you assistance in that.

Craig Jeffery

Now that's a lot for our agenda. We've got it covered. And so Rick, I'll turn it over to you with the cash conversion cycle. So there's a picture of a cycle on there or a wheel. I'll let you take it from there. 

Rick Scholz

And I'm sure our friends who work in treasury love this diagram, center of the circle. How I got interested in this whole set of concepts, just a little bit of history.

Rick Scholz

I shared with Craig earlier today, I, many years ago, was in sales and treasury management and had a meeting with my treasury contact at a specific company. And arrived at the meeting and they had included somebody from accounts receivable, somebody from credit and collections and somebody from their billing group.

Rick Scholz

And I was surprised by all of that. And of course, by the end of the meeting, I thought,  "Wow, this really made a lot of sense," and we got a lot of issues out. So it's been on my mind for years and years and years and just in the last few years, I think has come more to the forefront.

Rick Scholz

But anyway, let's just talk a little bit about these, how people are judged and how they view their responsibilities. So of course, in accounts receivable, we focus on DSO, although I'm finding now more and more folks are de-emphasizing DSO and really focusing more in on specific situations with specific groups of customers or categories of customers.

Rick Scholz

But we definitely focus on DSO. That's how AR people are typically judged, but there's always a drive for efficiency. What better way to decrease DSO than become more efficient?

Rick Scholz

And again, we'll get into some of that push and shove aspect between the various groups that maybe makes that a little bit more complicated than we may think it is. There's an impact on customer service and support.

Rick Scholz

So let's think about in AR if I make a mistake, that mistake cycles through different areas within the company, ultimately makes the customer unhappy. If I don't fix it quickly enough, then that customer is going to continue to be unhappy because his next bill will be wrong, things of that nature.

Rick Scholz

But anything that they put in place needs to be scalable. I think many years ago, people didn't worry about the scalability. Anything to fix a problem was how they approached things. But I think we've all learned that lesson that if we put in a fix that's not scalable, it's really not helping anybody in the process.

Rick Scholz

So that's, in general, the things that drive people in AR. Treasury, of course, has its whole different set of concerns and things that they're being judged on. So main ones being, of course, working capital and liquidity, which, as we enter into a higher interest rate environment, becomes even more important to most companies.

Rick Scholz

Forecasting. We've seen in surveys, over the past several years, a continued increase in a focus on forecasting and accurately forecasting. And there are ways, I think, that we can talk a little later about making improvements in that area.

Rick Scholz

Again, scalability. Everybody needs to be concerned about scalability. Treasury really takes on a lot of responsibilities for controls. They're typically the ones that are dealing with the various parts of the company that are concerned with compliance and things of that nature.

Rick Scholz

They're going to be called to task to make sure that they have policies and procedures in place. And of course, as I mentioned before, they're the ones, typically, responsible for relationships with banks and vendors but mostly handle that on their own and deal with...

Rick Scholz

My experience has been over the years that most treasury folks meet with the banks, because I worked for banks for most of my career, without bringing other people in, counter to the example I used a little bit earlier.

Rick Scholz

And then, of course, we have AP. Now, of course, treasury, it's important for them to have relationships with both sides because in order for them to do forecasting and manage their liquidity, they need to not only worry about when is the money coming in, how is the money coming in, but how is that money leaving the organization as well?

Rick Scholz

Of course, the AP side, in my opinion, is a little bit easier because if you have a situation, you can delay a payment. There may be implications further down the road, but it's a little bit easier to delay an outbound payment than it is to force someone to pay you earlier.

Rick Scholz

And we'll get into that a little bit more later too. But in AP, they don't have to worry a lot about security as with everybody else, scalability. But anything that AR, in our organization, does is going to potentially have an impact on treasury and AP in someone else's organization.

Rick Scholz

So I like to keep that in mind as well when we get further into the end-to-end to end conversation. Do you want to add anything?

Craig Jeffery

Rick, you said a lot of really good things. One piece at the beginning really stuck in my head. You said,  "Treasury really likes this diagram because treasury's at the center of the cash conversion cycle." And that's true and that's something we can see every time you look at some kind of diagram or process chart, you can tell what the person's bent is because they start with what they know and they put themselves at the center of the heliocentric universes, very different drawing and perspective than people had for many years.

Craig Jeffery

And treasury is going to do that, and that's really a picture or an image in our minds of this end-to-end view. We can't just look at,  "Oh, this affects treasury just in terms of how cash comes in from the AR side."

Craig Jeffery

Or,  "What do we need to fund from the procure to pay side?" There's a lot more relations there. And like you said, if treasury just treats everything as,  "Hey, we just care about liquidity," we're not assisting the other areas.

Craig Jeffery

If the other areas sit there as an island unto themselves, they're having a negative impact somewhere else. And so nobody can act optimalyl without looking across the board. So I thought that was really, really good point you had made and as an image for how we think about these things. 

Rick Scholz

And actually, now that we expand that conversation a little, maybe there are people out there who don't like being at the center of that diagram. But yeah. No, a good point, the interoperability is an issue. So let's talk a little bit about differences in focus.

Rick Scholz

It's too easy to just say it boils down to a timing issue, although that actually is a big piece of it. So treasury needs to be concerned about availability of funds pretty much on a daily basis.

Rick Scholz

So monitoring something over the course of a month isn't really going to help them to do their job on a day-to-day basis. So they need to have that money available and not just sitting...

Rick Scholz

The comment there about not being able to spend float. The money needs to actually be available in order for them to use it. And that puts the pressure, if you will, on the accounts receivable organization and to a certain extent, the billing organization.

Rick Scholz

But let's focus on account receivable for now in turning those payments into cash. So they need to apply them properly, either at a customer, at a minimum, or ideally at an invoice level.

Rick Scholz

They need to get those posted as cash as quickly as possible in order to turn it into cash for treasury to use. Treasury, again, needs to look at this on a day-to-day, if not hourly basis.

Rick Scholz

There are certain situations, certain days that treasury's going to be concerned about this intraday, not just... Especially, with all the new payment types, which are faster, puts a little bit more pressure on being able to forecast intraday.

Rick Scholz

Whereas AR is probably just... It's a metric that they're trying to work towards, which makes it more of a snapshot end of month focus. I like this chart though, Craig. I think this really depicts it well, the difference in the focus there.

Rick Scholz

So it'd be nice to say it's just a timing issue. The timing issue is an important one, but we'll get into more detail as we get through this hour in terms of the other impacts. But it's important.

Rick Scholz

I think people don't think about this timing issue enough. I think it's important to put it up here.

Craig Jeffery

Yeah. And taking measurements for DSO, they're easy to measure. DSO is easy to measure in that you're using the financial statements that are regularly prepared, systematically reviewed and maintained for a long period of time.

Craig Jeffery

So this month-end snapshot or the averaging between the first and the last day of the month is very easy to create the measurement. But you can see in that shot where you see the purple line for liquidity dipping below the solid line there, which is an example of what might be level.

Craig Jeffery

And so there's a problem with cash. An example of that, when I was working with treasury, before I moved into treasury, I worked in an area where we made a significant number of payments. And the challenge was the AR group was always hounding to make sure that they got paid.

Craig Jeffery

And we found if I targeted most of the payments for three days before the last day of the month and then the last day of the month, and we shared the information about what was being paid, the amount of pressure that we had was almost nothing.

Craig Jeffery

We moved everything to digital in terms of payments, and all of a sudden they loved us. And it wasn't that we were paying any earlier, it was just we're making sure we were getting in before their cut-off, and we communicated well. Just the communication meant that they could do their forecasting better and that solved one whole set of problems on their end.

Craig Jeffery

But we never really had to pay earlier, we just had to make sure we paid at this time. And that influenced a lot of my understanding of how different areas are measured and this snapshot view. So that was very interesting too.

Craig Jeffery

So it was just the timing of the month. Now, a lot of you are wondering how many poll questions do we have. We have three slides that have poll questions. You'll see how many there are as they come up. Right now, we have a stacked one. 

Craig Jeffery

There's two views in relationships. So there'll be some instructions in the chat box or dialog box that says how you can find it if you're not seeing it. So the first question is, do you have an end-to-end view of your credit and accounts receivable process?

Craig Jeffery

So that's within the order to collect that. Is it a full end-to-end view just within that area? And you can see the different options there. And then the last one in our organization, treasury and AR.

Craig Jeffery

And there's some questions. We have common or shared goals, different goals, competing goals, communicate regularly, et cetera. So answer all that applies. So there should be two sets of questions in that one poll frame. So select those and then go ahead and enter.

Craig Jeffery

And for those that are completed, let's just say 175 people type the word Deluxe in the chat box, we'll send all the results of the poll out. So Deluxe, looks like everyone's spelling it right, or most people are.

Rick Scholz

Most people are. Yeah.

Craig Jeffery

Capital, lowercase, all. That's good. At least we're getting some of the letters together. It'll be great. You can type the word poll too, but Deluxe is-

Rick Scholz

For those shortcut people like me, you could just do DLX.

Craig Jeffery

There you go. Use the stock symbol. Awesome. Well, is everybody-

Rick Scholz

Or the anti- vowel movement that's afoot.

Craig Jeffery

I didn't know that that was afoot, but I'll have to read up on that soon. Yeah. So I'll be really interested to see this as we talk about this end-to-end view and how people look at things within the area or not.

Craig Jeffery

40%. Yeah, interesting. Internal steps for credit, 40%, Rick. 50% for internal steps for AR. And then external steps for the customer is 16%. So that's about one sixth have much more of that end-to-end view there.

Craig Jeffery

What are your comments on the bottom section about treasury and AR?

Rick Scholz

I'm trying to still absorb a little bit here.

Craig Jeffery

Well, don't communicate well is 8%. That's pretty low. That seems pretty decent.

Rick Scholz

I'm encouraged by that. I'm encouraged by the 61% having common or shared goals. I think that's a big improvement over things that I've seen over the past several years. I think that I'm very happy to see that actually.

Rick Scholz

And only 15% with different goals, but 7% with competing goals. It's the competing goals that are the most dangerous. Having different goals is actually okay. I would think I'd rather see a higher number in communicate regularly, but it is what it is.

Rick Scholz

But yeah, those low numbers on the bottom, don't communicate very well at 8%, I think is encouraging. In general, I think this is good news, I believe.

Craig Jeffery

Excellent. Well, thanks everyone for responding to our first poll question. We will advance over to this end-to-end view we talked about within credit, within accounts receivable and what's going on. 

Craig Jeffery

So this is a question from one of our surveys. Do you have an end-to-end view of your credit and accounts receivable processes? And so this is what the survey results showed. A little bit different from what we saw from the poll of those that are attending.

Craig Jeffery

Internal steps for credit, a little over a third. About two-thirds for internal steps for AR across the board. And then external steps with customers, 22%. You may remember that was 16% with our audience here.

Craig Jeffery

No, I believe it was lower. I can't remember the percentage, but I'm pretty sure that that-

Rick Scholz

I think it was lower. Yeah.

Craig Jeffery

Yeah, it was lower. So this audience may be a little bit more attuned to what's going on. Rick, as you look at this, you've long been the end-to-end or this comprehensive view. Any additional comments on where companies are in terms of moving to that end-to-end, which we're about two-ninths, two out of nine companies have that end-to-end view currently?

Rick Scholz

And that's consistent, I think. The numbers for the participants here was lower, but the previous surveys that I've seen, roughly, between 20 and 25%.

Rick Scholz

I think there was an uptick maybe around the time of COVID. I don't know that it had anything to do with COVID, because I can't actually think of why that would've happened. Actually, just in conversations with corporate customers and with bankers that deal with corporate customers, I think there is an increase in people who are considering, including customers in the dialogue on the receivable side.

Rick Scholz

I had a corporate customer a few years ago that actually actively worked with their customers when they were making changes. That focus was merely more on the billing side to find out from their customers and their salespeople actually, " What is wrong with our billing and how could we make our bills and our invoices easier for you to understand and process?"

Rick Scholz

And the hope is there that if you can make those changes, then you don't neglect the next step in the process, or the people who post the payment's going to be able to deal with those. And they ultimately did incorporate the accounts receivable or the cash application folks in that process before they finalized it.

Rick Scholz

But they've seen a big uptick in... Or I should say down-tick, if you will, in the number of exceptions that they have to process or the number of disputes that people come back with.

Rick Scholz

So there are examples of success for those companies that do include their customers in that dialogue. So I think, again, this result is pretty flat to what I've seen before, but I think 20 to 25%, if it continues along those lines, is actually, I think, going to bring about a sea change, if you will.

Rick Scholz

And a general improvement, and maybe people will learn from each other just what success, that type of approach has brought to companies.

Craig Jeffery

Yeah. We can certainly go into storeis that show that and expain that. But you mentioned a few concerns. I was wondering if you could talk us through some of these concerns and how those get solved as you move towards this comprehensive solution looking at the entire process. 

Rick Scholz

Yeah. So I have a simple answer and a complex answer, so I'll give you both. So anybody who's been doing this for a long time, think back many years, there was a big drive-on by treasury to get people to stop sending checks and to pay by ACH.

Rick Scholz

And there are all sorts of methods that they use to convince people to do that, discounting, and if you pay me electronically, I'll give you an extra three days to pay and things of that nature.

Rick Scholz

And that was all well and good. It got the payment into the company, but it didn't really necessarily improve the cash position because it actually complicated the process of posting those transactions.

Rick Scholz

So in some cases, it took longer to post transactions because it had gone to electronic. And to be quite honest, I think low interest or no interest rate environment improved the drive there to not necessarily force people to pay you sooner but to pay you smarter.

Rick Scholz

So about five, 10 years ago, there was more of a drive-on to focus on the data, and I know there are all sorts of initiatives. We're not going to get into that today, but initiatives to derive common data elements used for payables and receivables.

Rick Scholz

But there was a focus away from,  "How do I pay into what information you're sending me?" Information is king, again, partly because of interest rates and partly because of AI. But this concern about getting the money in the door but also making it available by being able to post it.

Rick Scholz

And I think a lot of things have changed, behaviors have changed. And I think the focus on,  "I don't need to solve just my problem, I need to solve our problem," has helped there.

Rick Scholz

From an AR perspective, there's a drive on automation, but again, some of that automation actually makes things harder to post. So what many companies are doing is focusing on how they receive information, how they view information, and how they can actually incorporate things like artificial intelligence and just other automation routines to get those transactions posted automatically to the highest level.

Rick Scholz

I know we're going to talk a little bit about straight-through processing. That's a concept that I think needs some work. There are companies that think straight-through processing is if the money lands in the account, it went through straight through. Not really the case.

Rick Scholz

But the other concern is how many errors do some of these automation routines create and how long does that go on? So if I make a mistake today and I don't correct it quickly, and I know I said this a bit earlier, that problem is going to just compound over time and become a serious customer service issue.

Rick Scholz

But I think a lot of work has been done. There are a lot of solutions out there now using AI, specifically, artificial intelligence, and specifically can actually learn behaviors and post those transactions more accurately and allow that staff to not focus on manually entering things but dealing with the exceptions.

Rick Scholz

There are still going to be exceptions. People are going to short pay, they're going to type in the wrong invoice number, all those silly little things that happen. But I think there are solutions out there that can actually improve and reduce the amount of time spent on the...

Rick Scholz

And we have plenty of examples. When we have time later, I can talk about some stories. I'm all about stories. As anybody who's listened to me before knows, I like my stories. So process can help to a certain degree, and I think collaboration between the two organizations helps towards that process.

Rick Scholz

I think that also one of the potential solutions is coming up with a common set of reporting elements so that we're all looking at the same things, and potentially understanding how it affects each of our organizations to give the same visibility to everybody.

Rick Scholz

Because there are different areas within the company that might be able to help resolve some of those issues, the short pays, the disputes, things of that nature. We tend to always focus on our own, " I got to solve my own problem," and not relying on others who could potentially provide good value in that solution.

Rick Scholz

I've gone on long enough, I think.

Craig Jeffery

There's been some good discussion there on a few of these items. You talked about data, you talked about AI, this idea of, " Hey, if we move things more electronically, people are going to pay sooner and treasuries...

Craig Jeffery

"Sometimes it's like, " We don't want to pay any sooner, and so we don't care about automation as well. "And I don't think that's just a suboptimal view. That's a big consulting word. I think that's a wrong view. Just because you've automated something, doesn't mean you have to pay people earlier.

Craig Jeffery

You can still pay when it's due, but now you have the ability to pass the data and the information sooner. So there's less feedback loops. Let's say, for AR contacting the AP groups, " When are we going to get paid?" "

Craig Jeffery

Oh, we got paid. What is this for? "There's no detail. We went from a check and list that had all the details to maybe it came across through an ACH, and maybe our AR group wasn't set to digitally read it and post from that.

Craig Jeffery

And so the idea of this end-to-end view, what data comes across, ask some of those questions. Who else needs that data? The value transfer may be focused on AR for posting or relieving the receivable, maybe a focus for treasury for what our liquidity is.

Craig Jeffery

But some of the data may go into analytics groups, may go into how you can improve your forecast from the accounts receivable side. There's so many uses for that. It could even feed to a bank reconciliation group in addition to the posting area.

Craig Jeffery

So when you think about this end-to-end view for data and transfers, this really matters. And you do tell a lot of stories and they're good stories, and there's learning there with how we move value, how we move money, how we support not only efficiency but liquidity and visibility to that.

Craig Jeffery

I think those are really, really crucial aspects, Rick. So let's go to our second poll question. Our first one had two, this one has a single one. So that brings us up to three. Accounts receivables systems: How many systems do you use for accounts receivable?

Craig Jeffery

That's everything from billing to cash application, DRP, it could be credit checking as well. Select one of those and hit submit. I think we just were right around 100 people typing the word Deluxe.

Craig Jeffery

So I think we need about 50 more. Brian is rapidly calculating those numbers. I should have said 200, but if you guys would just type Deluxe, we'll get those numbers out to everybody. So that's fun.

Craig Jeffery

So multiple layer systems, Rick, means more complexity, right? If I'm receiving stuff into six different systems, I'm getting that information through a bank through multiple methods of pain.

Craig Jeffery

I've got to post to it. I probably don't want to commingle those through a single account because I've got to post to multiple areas. So it adds some complexity. But that's the environment many, many companies live in, because they've acquired a company who's acquired a company who's acquired a company.

Craig Jeffery

We're always in this, " We're going to rationalize our accounts down, "but it's going to take a long time. Now, there it is. That's perfect.

Rick Scholz

That's encouraging.

Craig Jeffery

Rick, about one in six have a single system, two to three, about half. And then we've got 24, about a quarter are four, five, six or more and not applicable. Maybe it's a bank or maybe other ones.

Craig Jeffery

So we're in good shape there. Any comments on that? But before we do that, we do have enough people typing the word Deluxe. We're over 150 in the different channels that it comes in. So thank you for sending those in. We're glad you like data.

Craig Jeffery

We love data, and Rick loves stories the most. Rick, any thoughts on the...

Rick Scholz

But I've never met a piece of data or a survey response that I didn't like. May not like what it says, but I like it. I'm actually quite surprised because if you think about what we're saying it covers here, more than half of the respondents say it's one, two, or three, is really just alarming to me, positively so.

Rick Scholz

You mentioned about mergers and acquisitions. I've run into companies that use multiple systems, six or more systems, and not because of mergers and acquisitions, but because they allow their business units to do things on their own, which we all know that that's not a sustainable situation.

Rick Scholz

Deluxe has gone through a major consolidation because of all of our acquisitions many years ago, and we finally did that incorporation. So for whatever the reason is, it really isn't sustainable to continue to use multiple systems if you can...

Rick Scholz

And I understand there's budget issues and priority issues, but it's really not a sustainable thing. So I'm actually very encouraged to see these results. Because if you think about four or five is really not a terrible number considering everything we're saying that we're trying to cover as used for AOR.

Rick Scholz

So yeah, I'm quite intrigued by these.

Craig Jeffery

Excellent. Thanks everybody for responding to the poll questions. This is a complex chart in some ways, Rick. I'd like you to demystify or give us a guide through this. Why do we have flowchart that wraps back and forth, back and forth all the way down to the end?

Rick Scholz

Because how it happens, right? Actually, I think the design is appropriate for what we're talking about. I will say that this is really worst-case scenario more than anything, is if you think about it, you could really go right from,  "When will we get the money?"

Rick Scholz

to payment. Does that happen often? I hope it happens more often than we sometimes think it does. But this really is a very complicated process. So if you think about it, the customer places the order.

Rick Scholz

Sales or someone that is going to confirm that order eventually, because depending on what business you're in, it may not happen quickly. The order will be fulfilled and the shipment will be made in typical fashion.

Rick Scholz

Once that shipment is started, the invoice is generated. Then treasury is trying to figure out when is that money coming in because it's a combination, it's not just this one order, of course. So trying to juggle how much money and what day will all this money come in.

Rick Scholz

So they have all their forecasting models and things like that, so they're taking input. So back to the comment earlier about how important data, the same data is used by everybody. It's used a little differently though. So that's how much and when.

Rick Scholz

And then AR is, of course, concerned about when will we get the money. But they're also a little concerned about,  "Will I be able to post the money?" Because depending on how it comes in, that would be easier or harder.

Rick Scholz

And then this middle section where we run into something that happens more often than we like, but there's a dispute. Now, the dispute could be there's something wrong with the goods or somebody is taking an unauthorized deduction.

Rick Scholz

It could be just about anything. So a dispute isn't necessarily, " The goods were damaged, "or" It's not what I ordered, "or things like that. That's just one of many reasons for these disputes.

Rick Scholz

But then AR, plus others within the organization, are typically involved in this dispute resolution, depending on what the dispute is all about. Hopefully, the information on the payment, whether it's disputed or not, is what is expected.

Rick Scholz

That's a big problem when we talk about AR, " When will we get the money? But will I be able to post it? "Once the payment is in, AR is trying to post those payments, which is the, " What is this for?"

Rick Scholz

We find this is an awkward step because the customer may include what's needed to post those transactions. They may use a PO instead of an invoice number.

Rick Scholz

They may use their own number that of course the company has no idea what those numbers are for. So the most complicated part of AR's job is this cash application and posting it accurately and easily, and then the confirmation.

Rick Scholz

The successful cash application, hopefully, goes through the first time, but it may actually then go back through that dispute loop. So this is a complicated chart, but it could actually include multiple loops there at the bottom portion.

Rick Scholz

But this really pretty much depicts the life of treasury and AR, somewhat simplified, amazingly enough.

Craig Jeffery

It is. Why are we showing it back and forth, back and forth? Well, it's limitation on the screen. How wide can we place this large linear process that recycles a bit? So if we could go four times as wide, we could make it long.

Craig Jeffery

But a couple things to note, as you're looking at this, you see the colors, you see customers, this orange or goldenrod color, you can see that at the bottom. Those are the activities there. And you can see the company in the blue. But also, notice in the company, you've got sales, fulfillment, treasury, accounting and finance and AR.

Craig Jeffery

So if we widen this list out and we put a broader swim lane for customer, a broader swim lane for company, we could have subsets of swim lanes for AR, for treasury, for accounting and finance for fulfillment.

Craig Jeffery

We could put all those together. And that shows how many areas are involved in the cash conversion process. And when there's something that breaks the process where there's an issue or an exception, we call those defects, right?

Craig Jeffery

Someone has to go to another area to fix. You invoiced wrong, you sent the information improperly, you didn't include data so nobody could have posted it. Now they've contacted you by phone or by email, asked you for details on it.

Craig Jeffery

All of those represent broken processes or defects. Those all make it very difficult to scale. It certainly ruins efficiency. And so I would love to do this in a micro size, but nobody could read it.

Craig Jeffery

A complete set of swim lanes across the back and forth and some of the loops just so you can see it because when you review this and when you consider how many of those swim lanes are happening, how many cycle backs occur, it really makes sense to look at the overall process.

Craig Jeffery

Because when we look within a section, we break the overall process by,  "We're flinging stuff down because I'm not the one getting the calls. They're calling someone else." " What did you pay for? "Or whatever else is going on.

Craig Jeffery

So I really appreciate you stepping through all of that, Rick. And we wish we could have a screen that was seven times as wide.

Rick Scholz 

And there are probably organizations that even aren't depicted here as well. So it gets even worse.

Craig Jeffery

Awesome. So now we have a macro view and a detail view. And this is simplified. Sometimes I refer to the fallacy of the line and if you draw two pictures, you got two rectangles and you got a line through it.

Craig Jeffery

It could be me and the store, and I go to the store, and there's a line, and so I just walk across the street. And then we have another picture that looks the same, but it's me and the moon and I've got an arrow. And it's like,  "Well, getting to the moon is not just walking across the street.

Craig Jeffery

It requires, whatever, talking to Elon Musk or working for years and years to get those things in order." But it still shows a simple context. So the macro view is this simplified, going to the store.

Craig Jeffery

But the detailed view, that's where there's a lot of challenges. So maybe you could step us through that and help us understand what moon we're going to or if we're going to the store?

Rick Scholz

I like that analogy. Yeah. Wouldn't it be nice if we could just stick with the macro view? And that would make life so much easier. But even the detailed view, some of the things that we've listed here within those details, there's probably four or five other arrows that would be alongside this arrow.

Rick Scholz

This is really focusing on payment type, if you will. And I think you made the comment earlier, Craig, about you used to send me a check. Now you send me an electronic payment, check and list. I think back to several years ago where people were converting front...

Rick Scholz

I don't think people realized that in many cases getting a check payment, the outsource provider, whether it was a bank or a third party who was processing those lockbox payments, was probably doing data capture for you.

Rick Scholz

So that was a nice easy process that people got used to. Those postings went pretty smoothly. And then disrupting that by making them electronic payments where the data was either disassociated or came in a format that you couldn't read, actually was a step back.

Rick Scholz

But checks, as much as we keep saying check is dead, it's not. It's still dying, but it's not dead. Check, especially in the small business world, is still the most common payment type. And there are all sorts of issues with processing checks.

Rick Scholz

RTP adds an extra level of complexity. We talked earlier about treasury needing to forecast on a more frequent basis, even intraday. Well, real-time payment ups the ante there.

Rick Scholz

And now it becomes a continuous thing during the day, if you will, for treasury to figure out their position. Once we figure out all the issues about getting the RTP data in closer to real-time then it may be in some institutions.

Rick Scholz

Check and list is still a problem. It's just a hard thing to post ACH with no detail or with detail by disassociation. There are all sorts of challenges there. Virtual cards present a whole different layer of problems, especially if someone mails that virtual card to a lockbox, which creates all sorts of disasters.

Rick Scholz

So this is talking about the details around making a payment. We could probably add many, many things to this, but the day in the life of processing inbound payments, you almost have to, these days, look for a solution that incorporates artificial intelligence, but specifically even machine learning so that the intelligence actually continues to get smarter in order to deal with all these things.

Rick Scholz

There are several solutions out there that you don't even need to tell it what to do. It will know what to do with each of these payment types. It just makes life easier and also amps up the accuracy issue.

Rick Scholz

One of the things we worry about from a cash application perspective is accuracy and speed, right? So speed, if you automated the speed, you get the speed, but the accuracy only comes if you're doing it smartly and you need to use tools that actually know how to process these transactions.

Rick Scholz

But again, the complication is much greater than it appears just on this list. It's almost infinite.

Craig Jeffery

The treasury likes to say,  "Cash is king." Sometimes we say it's the whole royal family, but if you focus just on moving money and you don't include the information that's necessary, let's say, you're an AP or you're transferring stuff and the other group doesn't know what to do to post it.

Craig Jeffery

Now, you create this ripple effect. Cash may be king, but there's a lot of other people in the kingdom that need information, they need data, they need to be able to operate effectively or you can't relate well.

Craig Jeffery

And so I just appreciated how you talk through and step through that.

Rick Scholz

And the last thing I just wanted to add there, sorry, is this is why it's so important to include the customer in the dialogue. They're the ones who are going to be impacted most. If you make a mistake, it impacts them the most.

Rick Scholz

So working with your customers to figure out a way that they can help you because they're ultimately helping themselves. And that's, I think, the biggest value including the customer in any automation dialogue. Sorry.

Craig Jeffery

No, no, that's great. So that brings us to our third poll slide with two poll questions. For those of you who are keeping track as well as for those who aren't, this is a total of five different questions. These are two stacked, they're single choice.

Craig Jeffery

So the first one is, do you measure your straight-through processing to auto-assign? In other words, it gets the money to the individual client. The second question is, do you measure your straight-through processing to auto-apply?

Craig Jeffery

That is the cash is not just applied to the customer but to the individual invoice. So assigned and applied, assigned to the customer or applied down to the individual's customer invoice.

Craig Jeffery

Do you measure that? So we're just trying to see how many measure different elements of straight-through processing. I'm really, really looking forward to seeing how this comes out. And so we do like being able to stack up some questions, Rick.

Craig Jeffery

So we have five questions we're asking. We just love the data. It's good to see. I know a lot of people really want to get the data from this large audience, so it's really helpful. All right. The auto-assign 36%, 21%.

Craig Jeffery

So really about three to two yes to no. Unsure is a pretty high percentage. Maybe that's homework for people to do on that. When we get down to the next level to auto-apply, it looks like there's a little bit of a fall-off there.

Craig Jeffery

That same percentage is yes. A little bit higher. No, they're not applying it to the individual, they're not measuring the application of those funds down to the individual invoice level. Yeah, good information.

Rick Scholz

Yeah, that's good to see. I expected the number to be decent on the auto-assign because many companies that I've talked to, that's their,  "As long as I can apply it to the customer and I don't have a whole credit limit issue and things of that nature."

Rick Scholz

It does resolve some potential down-the-road customer service issues. So it's important. But you really do need to apply it at the invoice level in order to accurately reflect that particular customer's position with you.

Craig Jeffery

Perfect. All right. So this gets back, Rick, to optimizing the whole. This is really a core theme from our discussion, and from many of our times talking. So why don't you start us off? There might be a few things I want to pop in at the end, but why don't you take it away?

Rick Scholz

Sure. I do have to admit as we've been talking, and as I look at this slide now, I think there are two things missing from the parties that can help. One is not going to be surprising, is customers.

Rick Scholz

Didn't think of that until after we had our conversation here. And the other one is other internal colleagues, and I'll talk about this in a little more detail when we do the wrap-up. But I think tapping into other resources within the company, even if they have nothing to do with treasury or accounts receivable, but working with other leaders within the organization that may have projects that may have some expertise that you can tap into, I think we tend not to look internally enough.

Rick Scholz

I find the banks that I've worked for, we didn't do a good job of it in many cases. So it's just something I would mention. Also, don't forget to tap into your colleagues because they may have some good ideas and some good answers, but of course, this is a fairly comprehensive list.

Rick Scholz

Of course, your bankers are a good source of information. I think a lot of companies, especially smaller companies, tend to go to their bankers first. I know when I had a small business, the first person I would ever call was the banker because that's what they were there for.

Rick Scholz

So bankers, other providers, it's hard. Providers and fintechs partners could be the same thing in some situations and not in others. There are all sorts of advisors and consultants out there.

Rick Scholz

I'll let you go into the more detailed discussion there. But all these are important once you add customer and internal resources, I think. Those are the overlooked ones in my mind.

Craig Jeffery

Yeah, those are good. There's so much in here that we could spend a lot of time on all the parties, and I appreciate you noticing that we didn't have customers on there, which is quite interesting. So we could continue to expand this slide.

Craig Jeffery

But Deluxe is obviously a provider. Strategic Treasurer is a connectivity consultant, a process consultant as well. So we're coming from those angles as well. But this idea of you're making changes or you want to make changes to a process to move it to a much more, let's say, modern footing that reflects newer formats, newer methods of receiving funds and information, feeding those into systems that can reconcile, that can post and relieve data, can also support some of the analytics that Rick talked about. And

Craig Jeffery

so those need to be looked at as well. And I think the idea too is what you need in an organization to keep something running that staffing level, you may be appropriately staffed for that. Many organizations don't have the resources to make all those changes on their own because bringing in new technology, looking through the different processes, sometimes it's very helpful to have other resources come in to help look at those, identify where changes need to be made, help to make those changes.

Craig Jeffery

And then they become much easier to adopt for an organization. Because most organizations staff themselves for more static activity with a small bit of project work. And I think that's important, is when we think about how do we optimize the whole getting those views that are beyond just our area and making sure we're moving forward to the end-to-end to end-to-end all our customers?

Rick Scholz

I think one of the biggest values that many of these parties can provide is what went wrong in other situations so they can advise missteps that they've seen. But what I would say is in looking for solutions and tapping into these parties, I would recommend...

Rick Scholz

We talked about data, everybody needs the data and they may use it differently. But I think focusing on that in these conversations can be very helpful. Identifying how different parts of the company use the same data elements differently, but also then thinking about advanced analytics and the ability to...

Rick Scholz

So I talked about forecasting and a de-emphasizing of DSO and more focus on specific customers. Looking at the payment behaviors of specific customers over a period of time can help you identify potential problems before they happen.

Rick Scholz

So that's just one of my final advices that I just thought of.

Craig Jeffery

That's great. Yeah. So some of the final thoughts, I'll start us off, and maybe you could do two-thirds of the work here, Rick. So concerns and KPIs. There are different priorities, there can be different measurements and standards, key performance indicators, different goals, pressure on different points.

Craig Jeffery

Be aware that that's a reality and then work towards resolving these by considering the entire process. So it ends up being a balancing out of things. It's not only treasury's goals or KPIs, it's not only accounts receivable or credit or AP or the procurement group.

Craig Jeffery

But work towards resolving these as we look at the entire process so that it's balanced and measurable.

Rick Scholz

Yeah. So I know I harp on this end-to-end, to end-to-end, to end-to-end, to end-to-end, but I do believe it's important and can provide great value. I think I saw an interesting survey result that on the AP side identified one of the top three pain points being invoicing problems.

Rick Scholz

And I truly believe that the bulk of those invoicing problems are because there's something broken in the accounts receivable chain of the counterparty. Anyway. But the companies that actually collaborate within the organization to come up with these solutions and share their pain, I think it starts with the sharing of the pain.

Rick Scholz

And once you understand and once you have an intervention, if you will, and understand each other's pains, it makes it easier to come up with some solutions that will help everyone. Maybe not everyone, but at least the group that you're working within.

Rick Scholz

And then you're not alone. We just talked about looking for help from outside sources or inside sources. That's an important thing. I think we've seen great successes where people have reached out to other people that they know within the company and said,  "I know you had a similar situation.

Rick Scholz

The details might've been different, but how did you get approval for this project? What did your business case look like?" Even something simple like that, getting help from within the organization. But there are all sorts of people, all sorts of organizations out there that you can tap into for their expertise.

Rick Scholz

Yeah, just don't try to fix it yourself.

Craig Jeffery

Excellent. Thanks, Rick. Thanks everybody for listening, paying attention. We'll flip it back over to Brian, and there's a few quick announcements and some resources for you. Thanks so much for joining.

Rick Scholz

Yeah, thanks.

Brian Weeks

Thank you, Rick. Thank you, Craig. And thank you everyone for joining us today.