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How Executives Can Increase Their Company’s Financial Efficiency

financial

How Executives Can Increase Their Company’s Financial Efficiency

As the world becomes increasingly interconnected, opportunities for logistic companies expand. While this is good news, it also means competition within the industry is rising. If supply chain businesses want to stand out from competitors, they must increase their financial efficiency.

Many investors and potential business partners use financial efficiency metrics to determine a company’s economic health. Consequently, financially inefficient businesses may miss out on valuable strategic opportunities. Partnerships and investment aside, an efficient company is a more successful one.

Here are seven ways executives can increase their company’s financial efficiency to attain these benefits.

Automate Back-Office Tasks

Most businesses have repetitive, manual tasks that take time away from more valuable work. According to one study, more than 40% of workers spend at least 25% of their time on these tasks. Since these inefficiencies are so common and so impactful, automation can bring considerable rewards.

Many of these inefficiencies are in back-office operations like data entry, scheduling, and approvals. These tasks are also easily automatable through robotic process automation (RPA) solutions. By implementing these tools, companies can free their employees to focus on other, more important work, accomplishing these goals sooner.

RPA is also often faster than humans at these repetitive tasks. As a result, companies will improve the efficiency of these back-office processes as well as the more valuable manual operations.

Increase Fleet Visibility

Another common source of financial inefficiency in logistics companies is a lack of visibility. Fleet operations are prone to disruption, and when businesses can’t predict or see them as they unfold, these disruptions can have far-reaching consequences. In contrast, increasing visibility can help respond to developing situations faster, minimizing delays and costs.

Many companies now track fleets with GPS systems, but businesses can go further, too. Internet of Things (IoT) sensors can monitor and communicate data like location, driving patterns, maintenance info, and product quality in real-time. With this timely information, fleet managers can see issues as they arise, leading to quicker, more effective responses.

Faster reactions lead to better customer service, less disruption, and sometimes avoiding serious delays entirely. Businesses’ financial efficiency will rise as a result.

Address Accounts Receivable

Accounts receivable turnover is one of the most popular metrics for financial efficiency, so businesses should strive to collect debts as quickly as possible. In the delay-heavy and prone-to-disruption world of logistics, that can be complicated. However, a few options can help.

One way to improve this ratio is to provide multiple payment methods for clients. This allows customers to use whatever best suits their needs, leading to quicker reactions from them. Similarly, payments will be faster when customers can use a process they’re already familiar with.

Another way to improve accounts receivable turnover ratios is to employ automation. Automated billing, reminders, and processing services are abundant today and can streamline the process for both companies and their clients. Employing these solutions while providing multiple payment methods will ensure businesses collect outstanding payments as quickly as possible.

Refinance or Consolidate Outstanding Debts

Outstanding debts are another common obstacle to financial efficiency. Having debts is normal for a business, but that doesn’t mean companies shouldn’t continuously reevaluate their loans. Periodically addressing these to see if there’s a way to refinance or consolidate them can help cultivate financial agility.

Many logistics companies may have outstanding vehicle loans, for example. These ongoing payments can easily fade into the background, but refinancing them can save $150 per vehicle per month in some cases. That seemingly small change frees up extra monthly revenue that companies can then put towards something else.

Alternatively, some companies may want to consolidate some of their debts. Doing so can make it easier to manage them and lower interest rates. Businesses may then be able to pay them off sooner.

Improve Cross-Department Communication

One aspect of the business that may fly under the company’s radar is communication between departments. When things get lost in translation moving between teams, it can lead to mistakes or take more time to achieve the desired goal. These mistakes and delays hinder financial efficiency, so improving communication can increase it.

Communication barriers cost $62.4 million annually in lost productivity on average. Consequently, companies should strive to remove barriers to effective collaboration, especially between different departments. Using collaborative software, holding frequent meetings, using instant messaging apps, and similar steps can do that.

When teams can communicate efficiently, confusion-related errors will decrease. Similarly, cross-department projects will have shorter completion times thanks to easier collaboration.

Reorganize Inventory

Inventory turnover is another aspect of financial efficiency to address. The longer items sit in warehouses or distribution centers, the less agile a company is. While logistics businesses may not be directly involved in the sales side of this issue, they can take steps to improve inventory inefficiencies.

Like fleets themselves, most inefficiencies in this area come from a lack of visibility. When organizations don’t know exactly where every item is at all times, it can take time to retrieve the correct one. Similarly, this lack of transparency can lead to confusion and errors that require correction down the road, leading to delays.

According to one survey, 34% of businesses have shipped items late because they sold out-of-stock items. Warehouse management systems, IoT tracking, and RFID tags can all help keep better track of inventory levels, avoiding mistakes like this. Logistics businesses can then pass these benefits along to their partners, creating positive ripple effects.

Train Employees More Thoroughly

One risk factor that can affect financial efficiency in any department in any business is human error. Even small mistakes can lead to considerable disruptions over time as more employees make them. Many may suggest automation as an answer, but that isn’t applicable in every circumstance and isn’t always necessary.

The solution to this problem is to put more emphasis on employee training. Organizations should look for common mistakes and, as trends emerge, emphasize these points in training. Periodic refresher courses over high-value or complicated processes can help too.

When workers better understand how to perform their jobs correctly, they’ll also work faster. More thorough training will boost confidence, leading to less second-guessing and higher efficiency.

Financial Efficiency Is Critical for Any Logistics Business

As the logistics market grows increasingly crowded, businesses must improve their financial efficiency to stay competitive. Higher efficiency will lower operating costs, attract investors, and open new strategic opportunities. These seven steps can help any business increase its financial efficiency. Companies can then become as agile and profitable as possible.

payments

Why the Players That Focus on Both Sides Will Win the B2B Payments Market

Remote work initiatives have created a strong tailwind for digitizing business payments, with companies rushing to move away from checks and onto card and ACH payments. This huge market–roughly 10 times the size of the consumer payment market–is ripe for change. Over the past decade, a decent amount of investment has gone into this area. Everyone is getting into the game: banks, card providers, and fintech providers, for example. It’s very early days, with paper checks still the predominant form of payment in the US. Who will win the market? Ultimately, it will be the players that can best address the needs of both buyers and suppliers.

I’ve spent time on both sides. Before coming to Nvoicepay, which helps automate the payment process on the accounts payable side, I was with Billtrust, which automates accounts receivable. Their founder and CEO, Flint Lane, was a big believer in the need to solve for both sides of the equation. That was my first introduction to the concept. Now, having sold into both accounts receivable and accounts payable, I’m a firm believer as well.

Two Sides of the Coin

There are two sides to every payment—creation and receipt. When it comes to consumer payments, both sides are straightforward, especially with today’s technology. But in the world of business payments, process complexity adds friction between them. Accounts payable’s goal is to manage cash flow by hanging on to money as long as possible. That puts them at odds with accounts receivable, who wants to get paid as quickly as possible. Digitizing transactions doesn’t efficiently address the complexity or friction between the sender’s and receiver’s processes. And the lack of consideration can worsen the issue.

For example, funds sent by accounts payable may hit their vendor’s bank faster with card or ACH payments, but a complicated payment application process can lose the receivable department precious time anyway. Without a way to streamline the process from beginning to end, simply switching to electronic means in a few places may not offer the time savings that businesses hope to achieve.

What’s the Solution?

Portals work well for larger companies that can dictate the terms of doing business to their smaller customers. But their customers may not be happy having their own interests dictated to them. And if you don’t have that kind of authority, chances are your portal will go unused because you’ve created a one-off process for your customers, making life harder for their accounts receivable people.

Electronic means can help accounts payable make payments at the last minute, and they’d prefer paying by card over ACH because they can make money on card rebates. But convincing suppliers to accept card is often a challenge because the accompanying fees can get expensive very quickly. Meanwhile, enabling suppliers for ACH translates to AP managing large amounts of sensitive bank account data.

Many organizations end up “dabbling” in electronic payments because of these enablement challenges. That leaves them managing four different payment workflows–card, ACH, wire, and a whole lot of checks. This is the problem that payment automation providers solve by taking on the supplier enablement process, maximizing card rebates, and simplifying AP workflows.

As much as both sides might agree that digital payments are the future, they’re stuck between a rock and a hard place without automation.

Paving the Way

Fintech businesses like Nvoicepay and Billtrust are bringing automation to payables and receivables separately, and that’s a big step forward. I believe the next generation of solutions will bring both worlds together on a flexible, dynamic platform where both parties to a transaction can choose from a range of options that best meet their needs at any given time.

From an accounts receivable perspective, funds need to be accompanied by enhanced digital remittance information. They could offer buyers incentives in dynamic discounts in exchange for speedy payment and a streamlined cash application process through the platform.

On the buying side, easy access to supply chain financing could allow them to take advantage of such discounts while at the same time extending payment terms. The buying organization takes its two percent discount and gives half a percent to the financing organization, paying the invoice within the discount window. Then the buying organization pays the financing organization in 30 days. Payables manages cash, gets part of the discount and a rebate if they pay by card.

Bringing it All Together

The key to creating these win-win outcomes is including the presence of a technology platform that uses data to offer convenience and choice, allowing organizations to meet whatever their needs happen to be at any given time. For example, if your cash position is good, you may not offer discounts or offer them more selectively. If you work with many small suppliers with tight margins, consider taking the card option off the table.

These are not new ideas, but they haven’t yet been addressed effectively with technology. Historically we’ve tried to do this through EDI (Electronic Data Interchange), a computer-to-computer communication standard developed in the 1960s. It’s always been very clunky, and it is unwieldy for the volume and velocity of data in the supply chain today. However, a majority of organizations still use it for lack of anything better.

Nacha and the Real-Time Payments Network add remittance data to ACH payments, but that’s not a complete answer. There still needs to be some technology put in place to incorporate the data into payment workflows.

Suppose you look at fintech innovation in the consumer payments market as a leading indicator. In that case, it’s been less about new payment products and more about using technology to send and receive money seamlessly, regardless of which electronic network is used.

In B2B payments, fintechs changed the game by thinking about payments as a business process rather than a collection of products, and built software solutions to automate those workflows. With remote work providing an additional incentive, many more organizations are adoping electronic forms of payment. That, in turn, makes data more available to continue developing digital platforms. Whoever gets there first has a good chance of becoming the leading player, but you won’t get there at all if you don’t build for both sides of the equation.

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Derek Halpern is Senior Vice President of Sales for Nvoicepay, a FLEETCOR Company. He has over 20 years of technology sales and leadership experience, including 16 years in the fintech and payments space. 

synthetic fraud

SentiLink Shares What Businesses Should Know About Synthetic Fraud in Exclusive Q&A

In the following Q&A, we learn all things synthetic fraud, from risk mitigation to what businesses can do now to effectively combat this new challenge for global businesses.

What is synthetic fraud and how does it differ from fraud?

Synthetic fraud is a type of fraud where a falsified or manipulated identity is used to open consumer and business financial services accounts. It’s very different from ID theft because there’s no victim that comes forward to claim their identity has been stolen. As a result, synthetic identities go undetected for years. So, not only does synthetic fraud cost banks and lenders billions of dollars a year in losses, but these identities facilitate all sorts of criminal activities.

How is Sentilink revealing the risks of synthetic fraud (Through a report, through research, through other means)?

SentiLink offers several solutions that credit unions prevent synthetic fraud.

Synthetic Scores: SentiLink’s Synthetic Scores product indicates the likelihood that an identity is synthetic. Synthetic Scores are made available to clients via API or a user-friendly Dashboard.

Manifest – Manifest is the identity data leveraged by the machine learning algorithm that generates SentiLink’s Synthetic Scores. This dataset includes information from the credit bureau, utility records, the death master file, as well as phone and email data.  SentiLink enriches this identity data and makes it available in the Manifest product via API and the Dashboard. Clients can incorporate Manifest in their proprietary models or utilize the data to investigate individual cases via the Dashboard.

eCBSV – For the first time ever, it’s possible to validate Social Security numbers with the Social Security Administration’s database of SSNs in real-time using eCBSV. With applicant consent, financial institutions can send their applicants’ names, dates of birth, and SSNs to SentiLink via API and receive a match or no-match response within milliseconds. This service enables lenders who have historically required SSA-89 forms, such as mortgage lenders, to shave days off the loan origination process.

Why is synthetic fraud more of a risk to credit unions rather than to other establishments? 

To be clear, synthetic fraud is a risk to all financial institutions. But, some credit unions may think that the membership requirements to join are a deterrent to synthetic fraud. But, we’ve seen that fraudsters are able to become members and get loans from credit unions.

What could credit unions be doing that would help them lessen the risk of synthetic fraud?

There are several things credit unions can do:

Education is the first step. The Federal Reserve wrote 3 white papers on synthetic fraud that are very informative.

Pay special attention to the Social Security number of applicants applying. If the SSN was issued in a state where the applicant doesn’t have address history, this is a potential red flag. If the SSN was issued in a year that’s different than the date of birth, this is a potential red flag. It doesn’t necessarily mean a synthetic identity is being used to apply, but these are scenarios that potentially warrant additional verification. Validating the SSN using an SSA-89 form or eCBSV is a smart approach.

Labeling losses according to the type of fraud is also important. Knowing whether a loss was due to ID theft, synthetic fraud, and other types of fraud will enable a credit union to measure losses due to each type of fraud and learn how to recognize similar identities when they apply.

What are the 7 synthetic identities and how does it work/identify?

Perhaps I should clarify the statement, “1 in 7 synthetic identities has a credit line from a credit union.” SentiLink has tagged over 100,000 synthetic identities. We have a subset of these identities where we can see what financial institutions gave these fake consumers a loan. Our analysis showed that 1 in 7 of these synthetic identities had a loan from a credit union. The point we were trying to make is that credit unions are at risk for synthetic fraud just like other banks, fintechs, and lenders.

What do you mean by “tradeline from a credit union with balances 2/5X higher?

We looked at the loan size that credit unions issued to these synthetic identities and compared them to the loan size that they gave to non-synthetic identities and found that the balances issued to synthetic identities were significantly higher. So, the credit unions lost a lot more money when issuing loans to synthetic identities. This is another reason why credit unions should work to identify synthetic identities before they become members, so they don’t experience these losses.

What are the risks to a credit union in regard to synthetic fraud?

The risks are losses and compliance. As mentioned above, synthetic identities cause significant losses to financial institutions. But, there is also the regulatory requirement to Know Your Customer. KYC solutions can’t detect synthetic identities, and as regulators become more aware of this issue, their expectations around what constitutes appropriate KYC measures is likely to change. If credit unions are issuing loans to synthetic identities, they aren’t conducting appropriate due diligence to know their customer. Their ability to comply with KYC requirements will suffer if they don’t address synthetic fraud.

What are the warning signs that credit unions should pay attention to?

Certainly, upticks in losses can be a sign of increased synthetic fraud. But, also things like the same address being used frequently to apply for loans can be a sign that a group of fraudsters is attacking a credit union.

What do you see as the future of credit unions in relation to this type of fraud?

Synthetic fraud is going to be an issue for credit unions for the foreseeable future. Unlike id theft where fraudsters steal an identity and have to quickly take out a loan, take the money and move on, synthetic identities can be used over and over again for a very long period of time. And, synthetic identities are easy to create so it’s something credit unions are going to have to learn about in order to detect and stop them from impacting their business.

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Sarah Hoisington is head of Marketing at SentiLink, a fraud protection tech firm helping financial institutions and government agencies.

expense

New Survey Reveals Impact of COVID and Remote Work on Employees

Organizations have made significant changes to enable working from home – but what has it meant for employees, and specifically their expense claims?

New data released by AppZen, the leading AI solution for modern finance teams, reveals how the pandemic and remote work have impacted company expense reports.

CEO Anant Kale provides insights into the findings and how companies should take note when it comes to how to handle employee expenses moving forward.

Why did AppZen do the survey and what were the primary findings?

We surveyed 1,000 workers of companies with at least 250 employees, to gain insight into how companies have adapted new expense policies and how those changes have impacted employees.

AppZen’s research shows the drastic shift from office to home working and the importance of clearly stated policies. 17% worked remotely prior to COVID, spiking to 83% during the pandemic.

We also found 75% of employees submitted work from home expenses during the pandemic versus 69% of employees who submitted expenses pre-COVID.

The findings also shed light on the importance of clear policies. 83% of employees who received an updated policy said their employer fairly compensates them for work from home-related expenses compared to only 29% of employees at companies where the policy was not updated due to COVID.

What are employees submitting expenses for?

Our findings show claims for internet usage at home rose 6% and 46% of companies are reimbursing their employees for internet during COVID.

While the pandemic has led to different kinds of expenses for workers, only 29% of employees feel they are fairly compensated for these new types of work from home expenses – such as childcare. And what’s more, only 26% say they feel uncomfortable about actually claiming these types of expenses.

How do gender and position play a role in expense reports and company reimbursements?

AppZen’s data shows differences among executives and non-executives in the expense report process and a gender divide.

Women are less likely (59%) than men (80%) to feel fairly reimbursed for work from home-related expenses.

Perhaps not surprisingly, the C-suite and company executives are more likely to have company credit cards and expense accounts while the majority of employees are reimbursed for work-related expenses paid for with their own money.

The COVID lockdown had a disproportionate effect on the shift to work from home on specific jobs and roles. 42% of business owners/business partners and 37% of sales managers worked from home prior to the COVID lockdown.

What can companies learn from this survey?

Our research has highlighted some of the challenges faced by organizations during the COVID pandemic. Most have resulted from a lack of action or, to be more precise, a lack of proactive steps to adapt to the changing situation. Here are 3 recommendations for organizations; to re-engage with their workforce, and to build a modern, repeatable structure for managing expenses and change moving forward.

Embrace work from home expenses

Expense types have changed. Employees are not claiming classic travel and entertainment (T&E) expenses – but are claiming new types of work from home-related expenses. These include one-off items such as office chairs, external monitors, and desks; subscription costs such as internet usage; and COVID-specific items like hand-sanitizer and face masks.

Organizations need to adapt their expense policies quickly to embrace this changing environment. The new policies need to be clear, fair and configured in a software system that can apply them the second they are activated.

Ongoing review and adaptation of policies 

Crises come and go but what we have learned from COVID is that the ability to adapt and roll out new policies quickly and dynamically is the cornerstone of resiliency.

Best practice organizations will utilize their AI-enabled expense management platforms to automatically identify trends and changes in expense behavior – but all enterprises should create adaptive policy frameworks to ensure policies receive regular reviews.

With new policies in place, the organization should proactively communicate the changes and why the changes have been made. The first time such as significant change is made, the communication should be as visible and personal as possible – webinars or video meetings are Ideal in this situation.

But communication should not stop after the initial flurry of activity. Reinforcement of the new policy rules and regulations is an essential tool for ensuring maximum understanding and compliance.

Listen to employee concerns

We see several unexpected nuances in the research. From a perception that senior executives are getting preferential treatment, to women feeling less well compensated for work from home expenses, these nuances can only be truly understood by talking to staff.

CFOs understand the cost of perpetuating harmful industry and societal practices. This can cost the company valuable employees and put the company at risk of blowback. Through analytics and rapid adaptability, finance leaders are equipped to change these practices and therefore the overall health of the business.

In addition, organizations should create a regular cadence for feedback from staff. This ongoing dialogue should be at least quarterly and involve both the finance team and leaders from within the business. By actively eliciting details of employee concerns, the organization can continually develop and refine policies that fairly compensate employees for out-of-pocket expenses.

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For more information, recommendations, and a look at the full report, visit: https://www.appzen.com/blog/four-ways-for-finance-teams-to-avoid-employee-disengagement-during-covid/

invoice automation

3 Reasons You’re Still Manually Entering Invoices (Even with Invoice Automation)

The Accounts Payable process continues to require too much manual handling, even after decades of automation efforts. Even the best invoice automation efforts range from 70-90% data extraction accuracy, which leaves overstretched AP teams with a lot of manual data entry.

Why is this the case? There are a few limitations of invoice ingestion technology that inhibit its ability to extract information. Below are a few reasons why you still need to manually enter invoices.

Reason #1 – Invoices need to be in a structured format to be read accurately

Invoice automation can ingest 70-90% of invoices if they come in a standard layout, or are already digitized. However, according to Levvel Research, enterprises on average still receive 22% of their invoices in paper format, which can arrive folded, wrinkled, or get warped when manually scanned, making them difficult for invoice automation systems to read.

Even if the invoices are already digitized, they may not be in a consistent, structured layout that is suitable for general-purpose OCR – particularly invoices from smaller contractors such as catering services, janitorial services, or small businesses. Most AP teams will need to double-check these invoices after ingestion, or manually enter them into their system.

Reason #2 – Invoice automation uses general-purpose OCR technology

Most invoice automation uses general-purpose Optical Character Recognition (OCR) tools to read PDFs and images. These tools are designed to read text in any situation – a novel, a letter of complaint, or a newspaper article.

Just like people who are jacks of all trades but masters of none, technologies intended for general use face trade-offs compared to purpose-built tools. For example, because general-purpose OCRs aren’t trained to specifically read and understand financial documents, it often misreads a British pound symbol (£) with the number 6, or a dollar sign ($) with an S.

It also can’t factor contextual clues into its work. If an invoice is scanned upside-down, general-purpose OCR cannot understand or extract any information because it’s only familiar with a certain layout. Similarly, it would have trouble with wrinkled, creased, or unevenly lit documents. And just as a student can easily recognize an unfamiliar street address from another country, so too can context help a contextually-aware system identify the important attributes of an invoice it’s never seen before, like supplier and recipient, prices, quantities, descriptions, and so on.

OCR technologies specifically tailored and trained on finance use cases, paired with context-aware AI will offer much higher accuracy rates, making it possible to dramatically reduce the fraction of invoices that can’t be automatically read and entered.

Reason #3 – There’s still a lot of manual data entry

Although reducing manual invoice entry from 100 to 30%, 20%, or even 10% is fantastic, for an AP team with a high volume of invoices, 10-30% manual processing is still a large amount of work that drives up processing costs and time.

Depending on the form of the invoice, there can be dozens of different data points that need to be input into the accounting system. This doesn’t just cost the time and resource of the manual entry itself. It also introduces a lot of room for typos, errors, or missing information that slow downstream processing. Maybe someone mistypes an invoice number using the letter “O” instead of a “0” – but with this simple mistake, a unique invoice is created in the system, and now won’t be flagged as a duplicate. This risk is multiplied when there are several people involved in the process, increasing the processing time and delaying vendor payments – even with the most capable and efficient accounts payable teams.

This can increase the time it takes for invoices to be paid out, straining existing vendor relationships. According to a 2019 benchmarking study by IOFM, even many companies with significant invoice automation struggle with this: 53% of them paid at least 10% of their invoices late – very likely the very invoices that required manual processing.

The future of invoice automation

If the invoice process was fully automated, AP teams could drastically shorten their payment cycles and take advantage of early payment discounts for even better ROI. For a large enterprise, this would result in enormous savings. For example, imagine a company that processes $250M in invoices annually, of which 3% is eligible for a 2% early payment discount. Early payment would result in $2.2M annual savings.

Notwithstanding decades of progress and widespread adoption of automation technologies, it’s clear that invoice ingestion still has significant potential for improvement that can deliver huge business value from the automation itself and from unlocking benefits of a faster processing time.

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Josephine McCann is a Product Marketing Manager at AppZen, the leading AI-driven platform for modern finance teams.