Certain developments in recent years, such as the low interest rate environment created by the financial crisis and the primacy of risk, have caused electronic e-remittance to take a backseat in terms of its immediate importance for many corporate practitioners. Too many treasurers were simply caught up ‘fighting fires’ and ensuring the survival of their company after the crash first hit in 2008 and instigating or overseeing risk programmes has been a constant refrain since then to ensure the stability of a company’s finances in case the worst ever happens again.
As one of the panelists on the second full day of the NACHA Payments Conference 2013 in San Diego, US, Paula J. Rowe, vice president, senior product manager, PNC Bank, said: “When I think of all the things that a corporate treasurer has to worry about, maybe remittance isn’t up there at the top.”
Even when payments and invoices are electronic, it is common for corporates in the US to deliver the remittance data outside the payments system, via fax or email. The rich data that treasurers and counterparties would like to see in many payment messaging standards is not always there.
This is why Rowe encouraged corporate treasurer attendees at NACHA Payments 2013 to get involved with the Remittance Coalition, a group of businesses that advocates greater use of electronic business-to-business (B2B) payments and remittance data. “We absolutely need more volunteers to help move the needle forward in terms of electronic payment adoption in the B2B world,” she said. “We need more corporate participation. We need to hear from them; not the processors, not the bankers, not the operators.”
Remittance Coalition Identifies Lack of Standardisation as Key Obstacle
In December last year, the Remittance Coalition, which was very vocal at the NACHA Payments show this year, surveyed 650 companies in the US about the effectiveness of making and receiving payments and remittance practices in the country. Corporates identified key barriers to adopting electronic e-remittance, the most significant one being the prevalence of non-standard remittance formats and business practices. The lack of standard practices and messaging makes it difficult to readily exchange and automate remittance processing. Other key issues include problems convincing trading partners, particularly smaller businesses, to convert to electronic platforms, and lacking the necessary technology and IT resources.
If a financial supply chain is still largely paper-based, however, then it is inevitably going to be more inefficient, slower and costlier to operate than an electronic one. It also will not be able to feed into cash reporting or visibility procedures as fast as electronic alternatives or to provide data rich messaging that can help speed up procedures or assist partners. It is for these reasons that the topic was much discussed at NACHA Payments 2013.
Treasury Managers Speak Out
Joni Marcy, treasury manager at Mine Safety Appliances Co. (MSA), and also a speaker on the NACHA panel discussing e-remittances, explained that her organisation is actually migrating to a more electronic payment system, but it has been a slow process and the lack of standardisation has not helped.
Currently, about 80% of MSA’s payments are made via cheques. “Our goal is to reach a 60/40 split,” she said. Currently, MSA is not going to its vendors and requesting that they accept account clearing house (ACH) procedures using NACHA’s network in the US instead of cheques, but the company is moving in that direction. MSA is also re-validating the data field mapping of the SAP fields in its enterprise resource planning (ERP) system to the CTX format, in order to ensure that vendors are receiving the codes with proper field values.
Marcy also argued for better electronic e-remittance standards at the trade show, noting that MSA’s vendors find CTX addenda records to be very cumbersome. “Ultimately, it needs to be standardised. It needs to be streamlined,” she said.
Fellow panelist, Robert E. Taylor, a treasurer at transport company, Pitt Ohio, explained that his customers have significant leverage over the payment method used. Electronic e-invoicing is increasing, but it still has a ways to go. “E-invoicing was 82.3% in 2011 and 84.4% in 2012,” he said. “The largest increase was an 8% rise in electronic data interchange (EDI) and that trend will continue in 2013. But just because an invoice is billed electronically, it’s not really paid electronically in most cases.”
Are Cheques Finally Dying Out in the US?
Cheques usage is gradually declining in the US, while ACH and credit card payments have consequently increased in recent years, attendees at the NACHA Payments 2013 show were told. But more ACH payments do not always lead to more electronic e-remittances. “Only 34.4% of our ACH payments have the CTX addenda attachment data,” noted Pitt Ohio’s Taylor. “That has to change.”
Taylor is pushing for readily available standards for creating CTX addenda records. “This needs to be done,” he said. “Somebody needs to take the bull by the horns and make it happen. The banks, the Remittance Coalition – somebody needs to do this and give us a standard, mandatory CTX addenda that passes through the invoice date, the invoice number and the amount. And with that, we can do a lot of straight through processing (STP) and reduce costs.”
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