A worldwide advertising agency with billions in annual income found itself unable to respond to daily fluctuations in global markets – including those that directly affected its clients – because accounts receivable and payments data were transmitted in varying formats that took days to reconcile.
For example, the agency's clients included firms listed in the Big Three automakers. As news reports concerning possible bankruptcies became more frequent and strident, it was crucial to know whether their clients were up-to-date in their payments, or even if they would continue to be clients.
It was obvious that continuing to work for certain clients without automated account reconciliation was unacceptable. The agency, knowing of BlumShapiro's reputation for providing solutions for data and information technology issues, contacted us with a request that we standardize and automate its data entry and retrieval systems.
BlumShapiro assembled a team which immediately went to work to determine if a standard data exchange format exists that could accommodate the remittance data required to perform an automated reconciliation (AR). The agency dealt with numerous banks – many of them industry giants – and feared that it would be an impossible feat to get all banks to provide data using a standard format.
The BlumShapiro team researched the formats used in the banks that worked with the agency and further contacted our colleagues in the banking industry to gain an overview of their capabilities and limitations. Our in-depth efforts with the banks ultimately determined that the standard format for reporting lockbox transactions – essentially using banks as clearinghouses for accounts receivable – could be customized for our client.
Having determined the parameters and capabilities of formats currently in use, we then identified software vendors that could work with tools our client already owned to provide the automated functionality. This led to the installation of a web application and reporting database for end users to monitor inbound files, infrequent reconciliation problems requiring human intervention and for sending AR aging reports to the controller.
A combination of business skills, perseverance and technical competence led to a solution that could not have been achieved with technology alone. Communication of the business objectives with all involved in the project allowed for flexibility and out-of-the-box thinking.
The new format enables the client to reduce the time for payment reconciliation from five days to one – with some payments covering as many as 150 invoices – and an astounding 95% of payment issues resolved with no human intervention.
The ability to reconcile electronic payments on the same day the payment is received by the bank means that our client can continue to invest in campaigns and work without enormous financial exposure. The finance team now focuses on more strategic and value-added activities instead of chasing after remittance details.
The project champion, the CIO for the North American division, is enormously pleased with the success of combined efforts, and he now is credited with leading a major technology driven innovation to success. BlumShapiro stands ready to assist the agency in further initiatives as their need arises.