Dealers face process related challenges and rarely have a payment intent problem

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I was reading a case study where FreePay improved the cash conversion cycle of the company by fifty percent. But no mention about why it happens. It proves that it is not that the dealers (in this case) who do not want to pay. It is just that the process is more about ‘drudgery’. Please explain. I would discuss it in the following way… the dealers who do not intend to pay early and only at the last moment when the credit cycle ends will not pay no matter if you do it manually or come up with a system like yours. So what’s in it that your system does that facilitates them to pay. There are dealers who are laggards, willfully making late payments habitually. How do you make them pay?
In our experience, the dealers and distributors rarely have a payment intent problem. On the contrary, they face some genuine process related challenges, which delay the payment cycle. These challenges often arise because both, suppliers and buyers rely on manual process for accounts receivable (AR) and payables (AP) functions, which can lead to simple invoice presentment obstacles where the dealer did not receive the invoice or it was filtered in spam folder. However, there are also some complex pieces to AR and AP jigsaw. For instance, payment reconciliation, which requires matching payments via multiple channels to transactions, has become more complicated than ever as businesses are now dealing with huge volumes, numerous data sources, and increased participants in each transaction. In addition, the arduous deductions, discrepancy, and dispute resolution system set in place by many organizations upholds payments until the issue is resolved and leads to delayed payments. Other common causes include dealer and distributor networks waiting for credit notes from the company to apply to current invoices, time taken for payment clearance on cheques, and incorrect amount on cheque, among others.

At this juncture, our Freepay solution addresses all these complexities in real time and offers instant view into data, including invoices, statements, payment status, credit notes, etc via mobile apps (android, iOS) or the web. It also allows immediate resolution of deductions, discrepancies, and disputes and application of instant credit notes to any invoice of choice at any time. Through electronic payment mechanisms like ACH, NEFT/RTGS, UPI, the payments are also transferred faster. Further, it enables all payment modes for customers with zero manual interventions and real time reconciliation back to clients ERPs. In addition to this, the clients can also inject early payment discounts for their customers, late payment penalties, stop new orders until overdue amount is cleared, and email and SMS remainders for collections.

To make the dealers adopt such a solution which is like an enforcement of ideal accounting practices, is challenging. How are you making it possible?
Over the years, we have witnessed that if there is enough value for the dealers, they are very keen to get onboard. And a significant chunk of this value creation is driven by the customer (dealer/distributor) satisfaction piece. For instance, some dealers might not be tech savvy and may not be able to grasp the functionality of the platform. In such cases we ensure that we jointly address the concern along with our client’s sales and distribution teams. We have also set in place a dedicated operations support team and an entire suite of training assets, such as e-learning videos and in-app help, among others. We provide round the clock customer support with pre-agreed SLAs in addition to specific training sessions.

This approach has helped us to onboard more than 15,000 dealer and distributors for more than 30 large corporates on FreePay (app / web) and automate their back-office operations. In addition to streamlining their AP processes, FreePay is also reducing their man-hours, lowering costs, and increasing real time status of various payables and receivables.

Today, more than 90% of our customers’ dealers and distributors are adopting Global PayEX’s ecosystem, which is growing ~ 40% Q-o-Q. As we see it, COVID-19 has accelerated this trend due to urgent need for digital ‘access from anywhere’ requirements for both our client’s and their customers, which in this case are dealer/ distributors.

What challenges are you facing with dealers who are hesitant in subscribing to such solutions?
In general, there are only a handful of dealers, who are hesitant to subscribe to our solutions. But for those select few, we have created the early adopter success stories model, which helps them understand the benefits of the solutions. We have also created educational videos to handhold new dealers and distributors during their interaction with the platform. Further, dedicated operations support team addresses any challenges they might be facing while using the platform.

Through all these efforts, our aim is to create an ecosystem that works for businesses as well as their dealer and distributor network. Once a majority of dealers have been absorbed into the system, organizations can then choose to put specific actions in place, such as avoiding accepting non-Freepay Payments from their dealers. Considering this, the trust and relationship that our clients’ sales teams build with their dealer and distributors community also proves helpful during onboarding.

How does your solution help during month / Quarter / Annual year closing?
Ans. We strive for end-to-end automation of AR reconciliation, which enables our clients’ AR and credit teams to focus on the core closing activities, instead of worrying about the non-reconciled items and unapplied receipt treatment. The focus towards the end of the quarter is on how much incremental revenue the clients can book. Amidst this, Freepay enables real time reconciliation and credit unlocking, which helps in freeing up credit placing new orders. This improves the revenue cycle by at least one-two days. With Freepay, there is an entire range of analytical dashboards available with audit trails. This allows real time computation and trend analysis on all key AR metrics such as DSOs, unapplied cash receipts, cash forecasting etc. In addition to this, it also saves a significant time on transaction audits.

What is the legal framework that you have with your clients in terms of the uptime required during critical time periods when the account closing happens? What if your cloud based solution is down and the filings (of your clients) go late to the regulatory authorities, resulting in penalties for them? What’s your take?  - Please discuss such happenings, if any and how did the matter got resolved
We are a presentment, workflow, reconciliation system and not an accounting system. The account system is the ERP or the accounting system of the client like SAP, Oracle Fusion, Tally etc. There have been no instances of our systems being down. Our cloud first architecture with inbuilt redundancy and scaling capabilities ensure this. We have also integrated with several banks to get the payment MIS on behalf of customers. If due to any reason the API does not work, we can fall back on email inputs that arrives from the banks.

Your views on cloud is expensive. Is it a myth ? Please discuss
As our solutions are cloud native, we offer our clients two models – SaaS and private cloud infrastructure, where we host the application on the client’s server. Contrary to the common view, cloud solutions are significantly economical than other alternatives owing to the infrastructure costs, which are lower on cloud as compared to provision servers and Machines. We have seen an excellent adoption of our cloud platform in India across industries, such as FMCG, CPG, Manufacturing, Pharma, Healthcare and Auto. It is rare that any prospect or customer has requested us for a non-cloud option.

It’s usually said that the entrance of Jio burgeoned the internet penetration level in India. Players like you –  What will you change, as more and more AR, AP automation players enter the market?
The tides of payment business are shifting and as we look to the next decade of evolution, these changes will be led by technology-driven innovation and new waves of customer trends, organizational structures, and employee work patterns, among others. To continue to unlock opportunity and drive value for customers, we are connecting the different parts of the digital payment ecosystem together in the right way. This encompasses both their tech ecosystem, banking and their physical ‘extranet’. As I see it, this is a raw space with not many players offering end-to-end working capital optimization capabilities to enable the larger ecosystem. While there may be new businesses emerging rapidly, the industry needs a comprehensive product portfolio, such as the one boasted by Global PayEX to enable automation, financing, analytics, and reconciliation.

If you have an interesting article / experience / case study to share, please get in touch with us at [email protected]

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