Are Banks Aligned to Corporate Receivables and Payments Needs?

When we think about business banking relationships, some of the first things that come to mind are things like lockboxes, disbursement accounts, and positive pay arrangements. But what about things that help operationally with receivables and payments processes? Are they in the mix? That was one of the questions we wanted to explore in a collaborative survey pilot between Blue Hill Research and Direct Insite.

Direct Insite and Blue Hill Research will be releasing the full results soon, but wanted to give you a sneak preview here a little bit early.

We began the pilot with a handful of main questions that looked to the goals practitioners have for AR, what challenges they face, what they feel they’re doing well now, and what choices they’re making to help improve things moving forward. The goal was to lay the foundation for future research, looking to uncover some areas to dig into further and to take a first pass at understanding the alignment between what responding companies were sharing about their businesses and what responding banks believed about their clients.

The results to date have been pretty interesting.


What Do AR Professionals Want?

When we looked at the objectives companies have set for their AR operations, three choices rose to the top: (1) lowering DSO, (2) reducing receivables processing time, and (3) increasing customer adoption of electronic invoicing. To me, this told a story of inefficient payables processes on the AP side of the fence. Here’s why I say that. Lowering DSO means completing the cycle from invoice to application faster. If
DSO was high mainly due to late or missed payments (which absolutely do exist and show up as a very real challenge), that would point to large issues in the credit review process. Since only one-in-five respondents said that was a priority, it leads me to think there’s something bigger at play.

A push to increase electronic invoicing is our first hint at what’s going on. If it’s not about customers’ ability to pay, it may be about their ability to pay on-time. How would we address that from the AR side? We’d want to tee them up with a more efficient way of receiving invoices – that’s moving from paper to electronic, in some form. We can’t dictate what capture or approval workflow solutions they use (though some AR solutions exist to provide them with similar functionality), but we can help them move to a format that can be transmitted, shared, and (hopefully) reviewed more quickly. Assuming customers have both the ability and desire to pay on time, that’s a great first step.

The next piece of the puzzle looks at our internal processes: ways to reduce receivables processing time.
It’s a question of doing things efficiently on the AR side of the equation to facilitate faster payments and to get them processed and into the system (and the bank account) as quickly as possible when to do arrive. For folks who have transitioned to larger volumes of electronic payments, this means finding a better way to handle the decoupling of remittance information. By that, I mean simply that paper checks would come alongside remittance details in the same envelope, while with electronic payments, deposits are made and information about those transactions is usually sent via a secondary channel like email. Again, there are products and services that aim to help make this reconciliation easier – and it’s something on a good number of companies’ improvement roadmaps.

What Do Banks Think?

So far, we’ve only looked at the study from one perspective. If I stopped here, my title and introduction would be very misleading. Taking a look at that same question from the bank perspective, we see some good news: responding banks are pretty well aligned with their clients when it comes to understanding their goals and objectives. They think DSO and receivables processing are at the top of the list – and they’re right. They were a bit more likely to view credit review as a focus area, and a bit less likely to see electronic invoices as a key priority. Since this as a pilot study, I wouldn’t read all too much into those differences just yet. That said, they do give us something to keep in mind moving forward, to see if those results play out when the questions are posed to a wider audience.

Another area where there is good alignment is in assessing the relative priority of different projects in the financial operations arena. Both corporates and banks put AR projects at the top of their lists, claiming their spots ahead of AP and procurement initiatives. Corporate respondents, on average, ranked AR Payments #1 and AR Invoicing or Billing #2, with a small separation between the two. Banks, while also having those two choices at the top, swapped the priority, expecting Invoicing to be the highest. Here again, there’s a lot to be positive about, as both sides are very much on the same page when it comes to what’s important.

What’s Next?

So, if banks have a good understanding of client objectives and also are on the same page when it comes to how they prioritize improvement efforts, they’re a natural choice as a partner for those initiatives. Right? That’s another question we were very much interested in. Specifically, we asked who end-users would prefer to work with when pursuing these improvements. Would they prefer to stick with internal IT resources? To work with their ERP provider, or a third-party software company? Perhaps they would choose their own bank – or are they frustrated enough to change to a new banking relationship to achieve their goals?

For more information on the study, contact Jim McShea of Direct Insite at