Changing the CFO’s Perception of AP

By R. Edwin Pearce

Historically, if you asked a CFO to tell you the first thing that popped into their mind when you mention accounts payable (AP) processing, they likely would have responded with some variation of “cost center.” The fact is, as a percentage of revenue, the costs associated with AP processing typically represent a small blip on the radar of most companies. But as companies have tightened their spending as a result of the recent economic downturn, that blip is now a significant opportunity.

More than 75 percent of AP departments report into the CFO, according to various studies. With CFOs keenly interested in cost containment and improved cash management, AP leaders would be well served to find ways to deliver strategic benefits to the organization. Notably, 56 percent of CFOs believe AP represents a more strategic opportunity for improvements than it did two years ago.

One reason CFOs are changing their tune on AP is that they are seeking ways to avoid further layoffs, while weathering the recession. To this end, most are tightening controls over employee spending and placing greater emphasis on measuring and monitoring the company’s financial health.

These types of activities are clearly in the AP department’s wheelhouse.

CFOs are looking past the traditional paper-encumbered stereotype of AP and focusing more closely on the tremendous amount of financial data that flows through AP. From this perspective, they see AP as a means to improving working capital management, reducing supply chain risk, and greatly reducing the incidence of fraud. Most importantly, CFOs recognize that AP can help a company improve its cash position by extending days payables outstanding, avoiding late payments, capturing early-pay and volume discounts, and ensuring that payments and orders are compliant with contracts.

At many companies, AP no longer is merely a back-office transaction function where efficiency and low cost of operations are the only requisites for success; AP processes are being more tightly linked with treasury functions to help maximize working capital management. This is part of an overall move to align core processes across business functions to support corporate strategic initiatives.

While this increased corporate standing is good news for AP departments, they must also be ready for CFOs to more closely assess their performance based on key criteria such as costs, service delivery, error rates, timeliness of responses to inquiries, compliance, and vendor relationships.

This makes it imperative that AP departments continue their automation initiatives. Not only does automation help AP departments improve on-time payment performance, reduce errors, slash costs and enable greater visibility into financial data. But it also delivers the quantifiable data on process performance that CFOs will require as AP evolves into more strategic partner for their organization.

R. Edwin Pearce is executive vice president of sales and corporate development for eGistics, Inc., a provider of e-document solutions. He can be reached at 214-256-4607 or via epearce@egisticsinc.com.

Trends in ACH Dispute Management

Trends in ACH Dispute Management
Thursday, August 12 at 1 p.m. eastern

As ACH volumes have grown, so too have the number of ACH transaction disputes that processors must manage. Expensive to handle, these disputes are subject to a complex mix of rules and regulations, and can lead to hefty charge-offs if improperly managed. Just how big a problem are ACH disputes? This webinar will share the results of an exclusive survey of ACH processors on trends in ACH dispute management, including volumes, costs, levels of automation, future plans and more. Attendees will be able to benchmark their operations, gain actionable insights from our panelists, and learn what some processors are doing to automate their ACH dispute processing.

To register, e-mail Dave Nitchman of IAPP-TAWPI at dnitchman@tawpi.org.

Panelists:
Rossana Salaris, principal, Radix Consulting
Amer Khan, senior vice president, product and sales support, eGistics

Moderator:
Mark Brousseau, facilitator, IAPP-TAWPI Payments and Receivables Council

Same-day ACH settlement highlights need for better dispute management tools

By Ed Pearce (epearce@egisticsinc.com)

Last week's announcement by the Federal Reserve Board of posting rules for a new same-day automated clearing house (ACH) service brought the topic front and center. Everyone from industry analysts and bloggers to trade publications and associations have expounded the pros and cons of same-day settlement. But virtually unmentioned in the all the hubbub is the potential for more ACH disputes as a result of accelerated settlement -- a scenario most banks are ill-prepared to manage.

Starting next month, the Federal Reserve Banks will be offering a same-day settlement service for certain ACH debit payments through its FedACH service. FedACH customers may opt-in to the service by completing a participation agreement. The service will be limited to transactions arising from consumer checks converted to ACH and consumer debit transfers initiated over the Internet and phone. Same-day forward debit transfers will post to a financial institution's Federal Reserve account at 5 p.m. eastern time, while same-day return debit transfers will post at 5:30 p.m.

As a result of the faster settlement, banks undoubtedly will see more consumers coming into their branches complaining of unauthorized transactions. The limitations of traditional in-house ACH systems and the strict time constraints and complex processing requirements imposed by NACHA rules and Regulation E already have led to sharp increases in operations expenses and higher charge-offs associated with ACH disputes. A new influx of consumer disputes will require financial institutions to implement a more centralized, more streamlined approach to dispute management.

Several features will be critical:

• Real-time distributed data access to any authorized user, anywhere
• Intuitive search capabilities
• The ability to annotate comments to disputed transactions
• The ability to export data
• Expanded search capabilities
• Filtering capabilities to block and restrict access to certain transactions
• Unlimited data storage

It may be some time before same-day ACH settlement achieves critical mass. But the next generation of consumers will demand it. This means that banks must begin adapting their ACH infrastructure today or risk even higher operations costs, as well as falling behind the competition. And this includes deploying sophisticated solutions to manage the inevitable spike in ACH disputes.

Putting the kibosh on the soaring software maintenance and upgrade costs

By Randy Davis (rdavis@egisticsinc.com)

Finextra reports that in a recent speech to the Committee for Economic Development in Australia (CEDA), CBA Chief Information Officer Michael Harte lambasted legacy technology vendors for their slow embrace of cloud-based computing and their apparent preference for solutions that lock-in users to a "never-ending spiral" of costly maintenance and upgrades.

"We're saying that we will never buy another data center. We will never buy another rack or server or storage device or network device again," Harte said. "I will never let any organization that I work for get locked into proprietary hardware or software again. I'll never tell my teams in the business that it will be weeks to get them hardware provision. I'll never pay upfront for any infrastructure and certainly would never pay for any, or rent any, infrastructure that I would never use."

Harte concluded: "I will never implement an internal solution for a common problem that I could procure on subscription across the Web."

With increasing demand for cloud-based solutions, combined with a general reluctance to pay hefty upfront capital costs, Harte's comments would seem to reflect growing dissatisfaction with the traditional licensed software model -- and its “never-ending spiral” of ongoing expenses.

Are you as fed-up as Harte?

The state of storage

Randy Davis (rdavis@egisticsinc.com) of eGistics, Inc. (www.egisticsinc.com) finds several interesting trends in The 2010 State of Storage Report from Networking Computing.

1. The top planned storage project for 2010 is improved allocation
2. Forty-seven percent of respondents say insufficient storage resources for mission-critical applications is their No. 1 concern
3. Storage area network (SAN) vendors are responding to demands for lower-cost storage
4. Storage virtualization is growing
5. Thin provisioning is catching on
6. There is a significant increase in interest in cloud-based storage

How do these trends reflect your storage strategy?

A welcome cloud during the economic recovery

By Ed Pearce (epearce@egisticsinc.com)

In spite of hopeful signs that the economy is on the mend, the 2010 State of Storage report from Network Computing finds that the fallout from the recession has left IT execs without the resources necessary to store the rising volume of information required to support their business applications.

Nearly half (47 percent) of the respondents to the survey say they have insufficient storage resources for their mission-critical applications, while 30 percent say they have insufficient tools for storage management. Another 30 percent of respondents say they have insufficient storage resources for departmental/individual use. Nineteen percent say they lack staff for their storage requirements.

And -- regardless of economic "green shoots" -- the situation isn't likely to change any time soon: 34 percent of respondents say they have an insufficient storage budget to meet their business demands.

Against this backdrop, it's little wonder that survey respondents are showing increased interest in cloud storage services (34 percent in 2010 versus 19 percent in the 2009 State of Storage report).

With a hosted variable cost storage model, if your business struggles, and your volumes drop, your operations costs will be aligned with your usage, and you won’t pay for a “just-in-case” capital investment. The variable cost model also eliminates the need for capital investment (software licenses and hardware) or maintenance contracts; customers typically are charged a one-time load fee to archive documents. And when an array fills up, or a server must be replaced, it’s your service provider’s problem. Using a thin-client interface, there may not even be software to install, manage or maintain. In addition, variably priced storage solutions can facilitate more effective operations by providing scalability that would be very cost prohibitive in a traditional, licensed in-house system.

CBA Chief Information Officer Michael Harte spoke for many users when he recently told the Committee for Economic Development in Australia that, "I will never implement an internal solution for a common problem that I could procure on subscription across the Web."

With the economic recovery still gaining strength, the trend for 2010 will be the more efficient use of existing IT resources. That should make hosted solutions a welcome cloud during the turnaround.

Compliance and Outsourcing

By Mark Brousseau

While new compliance, security and privacy regulations are likely to take a bigger bite out of operations budgets this year, most organizations believe they can meet the stricter rules without having to outsource their payments and document processing. Just 20 percent of respondents to a recent TAWPI Question of the Week said new compliance, security and privacy regulations would force their organization to consider outsourcing. Sixty-five percent of respondents said the tougher regulations wouldn't force them to consider, and 15 percent of respondents said they weren't sure.

The time and cost associated with meeting compliance, security and privacy regulations continues to rise -- giving pause to any company entrusted with sensitive data that must be stored and shared.

"Regulatory compliance is very expensive and extremely time-consuming," says R. Edwin Pearce (epearce@egisticsinc.com), executive vice president of sales and corporate development for eGistics, Inc. "Companies have two choices for meeting regulatory demands for privacy and security: assume the full expense of the resources and time associated with meeting each regulation, or work with an outsource provider that can spread the costs of meeting the regulations across its customer base."

Pearce also believes that organizations should ask themselves whether it makes sense to go through the cost and trouble of becoming compliant, when there are outsource providers that already are.

"Companies don't necessarily have to absorb the full capital burden of meeting various certification and compliancy tests," Pearce explains. "For example, organizations that store images and data for multiple years may have to meet PCI, SAS 70 and HIPAA regulations. Rather than engineer a data center environment that meets all of these requirements -- including policy and procedural standards -- it may make better sense for the organization to partner with a compliant outsource provider."

"The result is faster compliance, at a significantly lower cost," Pearce adds.

With new regulations on the horizon, this is a decision more organizations will have to make.

What do you think?

Growing Data Center Challenges

Posted by Mark Brousseau

Data center managers could be facing even more pressure. R. Edwin Pearce (epearce@egisticsinc.com), executive vice president of sales and corporate development for eGistics, Inc. (www.egisticsinc.com), explains:

Just when data center and IT managers assumed things couldn’t get any worse, along comes a report from Gartner predicting that the critical issues facing data centers – namely, technology, space and energy challenges – will worsen in 2010. Coupled with the tremendous cost pressures brought on by the economic downturn, the Gartner report should provide a heightened sense of urgency for data center and IT managers looking for pragmatic ways in which to deal with their operations issues.

In its report, Gartner provides several tips for helping reduce data center costs:

• Eliminate those systems that are underutilized or old
• Consolidate multiple sites
• Better manage energy and facilities costs
• Better manage people costs
• Delay the procurement of new assets

To be sure, these are all sound strategies. But savvy data center managers already have implemented (or at least considered) these strategies in response to the economic downturn. In other words, most data centers may have already squeezed as much savings as possible from their infrastructure.

Responding to the data center challenges that Gartner predicts requires a different approach.

Hosted Archive and Delivery
A better strategy is to leverage a hosted image and data archive to address today’s today data center challenges. Able to support images and data from any source, in virtually any format, a hosted archive provides authorized users with access to business information, anytime and anywhere via the Internet. Further, hosted archive solutions can integrate easily into an organization’s existing operations and IT environment, underlying a heterogeneous applications infrastructure.

Assuming companies partner with a provider that leverages redundant Tier 1 state-of-the-art facilities using national communications firms, hosted solutions offer other benefits compared to in-house:

Totally Variable Expense – Hosted archive solutions require no capital investment; customers typically are charged a one-time load fee to add documents. And when an array fills up, or a server must be replaced, it’s the hosted archive vendor’s problem.

Improved Compliance and Security – No one can argue the alphabet soup of stiffer regulatory requirements to control information. Leveraging a hosted redundant archive solution allows companies to offload much of this burden on their vendor. To address the compliance and security issues a vendor must use facilities that are SAS-70 I and II certified, HIPAA compliant, provide audit trails on all activity, and puts stringent controls on access.

Solution Flexibility –Hosted archive solutions vendors already are adept in providing services for multiple applications, processes and document types, and with distributed environments. Most vendors also have the ability to deliver tailored solutions that an internal IT department may not have the expertise to develop. Similarly, hosted solutions can be rapidly installed, and applications quickly added.

Scalability – The performance of in-house archives deteriorates with high volumes and the addition of applications. But there are hosted solutions that archive tens of billions of documents – growing by hundreds of millions per month – with no negative impact. What’s more, the ability to scale hosted archive load rates depending on needs opens unprecedented opportunities for companies who need scalability and availability during times of peak demand, but also need to keep their costs low.

Guaranteed Performance – By virtue of their redundancy and automatic failover, most hosted solutions providers will offer service level agreements (SLAs) guaranteeing 99.999 percent availability – or just 26 minutes of downtime per year. That’s piece of mind.

This all adds up to a comprehensive solution that can help organizations meet worsening data center challenges, while laying a solid foundation that can improve corporate agility and enhance service.

What do you think? Post your comments below.

Cost Reduction Driving Solutions Sales

By Mark Brousseau

The current economy is creating additional impetus for expense reduction and service improvement, says Bob Lund (rlund@egisticsinc.com), chairman and CEO of Dallas-based eGistics, Inc., and vice chairman of the TAWPI Board of Directors.

“Every solution that you are going to install has to have a cost reduction element associated with it,” Lund told me. “Increasing functionality without improving productivity isn’t going to get you there.”

What do you think? Post your comment below.

Service in the Sky

Posted by Mark Brousseau

Below is a link to an interesting article in the November 10 issue of Newsweek about cloud computing.


http://www.newsweek.com/id/166818

What is your organization's approach to cloud computing? Post your comments below.

Healthcare Payments Still Hot

By Mark Brousseau

Without question, healthcare payments processing was one of the hottest topics in financial services in 2007, with tremendous buzz, loads of product tire kicking, and more technology implementations by lockbox providers. This year promises to be no different.

Bill Gamble (bgamble@egisticsinc.com), healthcare strategic account executive for Dallas-based eGistics, Inc., believes there are two major trends to watch for this year in healthcare payments: continued adoption of automated explanation of benefits (EOB) processing solutions, and an increase in Health Savings Accounts (HSAs).

As banks become more adept at selling the benefits of automated EOB processing services, Gamble expects more of their lockbox clients to adopt the technology. “You also will see current competitors in the market target each others accounts with cheaper fees and better service,” Gamble told me. “I also expect some of these banks and service organizations to go after the 55 percent of healthcare accounts that don’t currently use bank or third-party lockbox services.”

Meantime, Gamble sees an increase in HSAs as more companies put a greater burden on employees to cover their healthcare expenses. As banks chase HSA deposits, Gamble expects a new market to rise to handle the increasing number of payments coming from these accounts. For instance, there could be a need for a service to convert paper enrollments to 834 format for payors, as well as a need to convert that information into the format banks require to set up a new account.

Underlying both of these trends, Gamble said, will be the need to archive images of healthcare documents for verification, research and customer support.

What do you think? E-mail me at m_brousseau@msn.com.

Get Off The Paper Trail

By Mark Brousseau

The mortgage industry is inundated with paper: original signed applications, title forms, personal identification, appraisals, and more. Managing all of these documents through the traditional steps of organizing, photocopying, faxing and filing is costly, inefficient and unnecessary. That’s according to eGistics Vice President David Whitehead (dwhitehead@egisticsinc.com).

“Lenders would be much more productive if they didn’t have to spend so much time shuffling papers, searching for loan files on someone’s desk, or carrying paper from one department to another,” Whitehead told me. Statistically speaking, industry studies show that employees spend an hour-and-a-half to two hours per day shuffling papers. Whitehead noted that, “Reducing this paper handling time by a half hour or more could have a significant impact on a lender’s bottom line. Lenders can become more productive, service their customers better, and save big money.”

Whitehead said there are four steps to getting off the paper trail:

1. Capture documents immediately at the point of entry
2. Capture any kind of documentation
3. Capture these documents without having to manually index
4. Make the documents immediately available in electronic format throughout the organization

Whitehead warns that Step 4 is critical.

“Most of the useful work on a mortgage document is done within the 48 hours of its life,” Whitehead said. “So an organization has to ensure that their mortgage document aren’t just imaged, but available to be extracted in a way that is straightforward and intuitive for users. Otherwise, the siloing of information adds to the challenges of effectively managing the overall customer relationship.”

Once they get off the paper trail and move to electronic document management, Whitehead said lenders can achieve lower operating costs, greater collaboration, reduced cycle times, improved customer service, and better support for governance, risk and compliance initiatives.

Has your lending organization implemented electronic document management? E-mail me at m_brousseau@msn.com.