You’re not alone if your financial institution is in the midst of looking into an integrated receivables (IR) solution to offer your business clients. Everyone is jumping on the bandwagon. According to Aite Group, within the next two years, banks should have their IR solution providers selected and solutions implemented.
Integrated Receivables solutions offer a mountain of benefits
Accounts receivable processes at businesses across all categories and industries have been fragmented for a long time. Payments are received in different formats, there’s the human error factor when processing the payments, it takes time — in short, there’s a better way.
An integrated receivables solution is an automated, centralized platform that drives efficiency by offering a single dashboard for multiple payment types via one centralized platform. Users can access consolidated data and reporting, easily match remittance information with less manual effort and receive a single file with payments data that offers a seamless interface to enterprise resource planning systems.
All of these capabilities are designed to solve the problems of your business clients, to make transactions easier and more streamlined with higher straight-through-processing rates. It will offer your business clients the opportunity to have all of their payments information from a single source. It improves the speed and efficiency of their payments and accounts receivable processes. In short, they not only get paid faster, but it shortens the cash conversion cycle.
But capabilities alone aren’t enough.
Financial institutions must target vertical market industries before inking a contract with a solution provider
Many banks are currently in the decision-making process when it comes to selecting a solution partner. But how do you plan on going to market? What industry verticals will you target? Do you have vertical-specific strategies in place? Not only will the answers to these deeper questions allow you to get the most out of your investment, it will steer you toward the right partner provider.
Let’s take a look at the unique challenges encountered by three different vertical markets: health care, insurance and distribution.
Banks doing business with health care companies need to make sure their solutions are HIPAA compliant. As you evaluate prospective providers it’s important to remember that partnering with a non-HIPPA certified provider will require you to host the platform internally to comply with the mandated health care information safeguards. Going this route can add additional implementation costs and complexity for your IT staff. Does your institution have the dollars, human capital, and bandwidth to sustain this? If not perhaps choose another vertical to target. Otherwise, before committing to a contract be certain your new partner is HIPPA- compliant and can offer the solution in an outsourced environment.
Like health care, the insurance industry is tightly regulated, and the processing of payments is included in that. Binder payments, for example, are subject to regulatory concerns. Insurance companies also are dealing with a level of payment processing complexity because of multiple facets of their business — customers have life, auto, health or home insurance policies, or any combination thereof.
Still more complexity comes into play when you take into account the type of data these companies have on their customers. Because of the sensitive nature of this data, security is a prime concern for the insurance industry.
Insurance carriers must invest in flexible payment and billing technologies if they intend to be competitive in dynamic markets and are always tasked with ongoing modernization of their billing and payment systems. Data is clearly the only natural resource that the insurance industry has available. Offering a customizable IR solution with advanced analytics and reporting positions banks to have a tremendous impact on a range of critical processes.
Distributors deal with intense competition and tight operating margins. It is particularly difficult for this industry to maintain adequate working capital, partly due to challenges around collecting invoice payments on time. Much effort and time is spent on resolving invoice disputes due to missing documentation and matching invoices to proof of delivery. Of companies that have more than average FTEs investigating and processing exceptions or discrepancies, certain distribution and wholesale industries tend to report relatively large numbers of cash application staff employed to resolve discrepancies.
What sort of value prop would appeal to distributors?
A payment re-association service that automatically matches incoming electronic and paper payments to open invoice remittance details from accounts receivables processing systems using artificial intelligence, machine learning and sophisticated algorithms.
Leveraging A.I. means no time consuming “template learning” process that is required by many other AR automation solutions in the market today. Ensuring your future partner is able to deliver on these capabilities (in addition to a comprehensive receivables management platform) will be essential in order to have a compelling value proposition for prospects in this vertical. Customers that have eliminated the costly keying of data have experienced faster reconciliation, less costly posting errors, improved research time, and can manage the operation with less people. Or, your customer’s current staff can be re-deployed to other value-added projects within the organization.
Target industry verticals well before leaping into integrated receivables
No matter what type of vertical, the end in mind is the same. Integrated receivables can streamline your customers’ operations, funneling payments from varied and disparate sources into a single platform, take human error out of the equation, save time and generally solve lots of administrative headaches. But banks that are investing in IR should begin making plans and efforts now to tailor their vertical expertise and build credibility, instead of doing so after the solution is implemented.