A/R Automation at WESCO: Key Milestones, Challenges, and Successes

Karen Koenig

Karen Koenig

VP, Customer Financial Services
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Karen Koenig is the Vice President of Customer Financial Services at WESCO and is leading the North American Customer Financial Services and has expertise around Order to Cash, Supply Chain, SAP Implementation and Integration.

Session Summary:

Takeaway 1:
With operations extending 800 branches across 50 countries, the major challenge was to deal with large volume payments in multiple formats, making cash posting inefficient
Key Points
  • Cash Applications were the most significant decouple remittance for electronic payments. And so the electronic payment came into the bank, but the remittance came in via email, and it was tough to match that up.
  • Written formats of the payments were all over the place that had increased complexity.
    Electronic funds were meager and were getting 11% of the EDI in the CTX format.
  • Microsoft on the phone was impossible and couldn’t get organized under the current tools.
  • It was tough to find qualified Cash App candidates, a lot of them in a lot of Cash Apps have been outsourced or automated. So it was tough to find anyone with Cash App knowledge.
Takeaway 2:
Enabling straight-through cash posting with HighRadius AI-based Cash Application Cloud
Key Points
  • With cash application automation, WESCO achieved an 84%+ hit rate across multiple payment formats.
  • Visibility into customer remittance across the organization increased
  • Cash application timeliness was increased
  • Overtime was reduced; hence the team productivity increased.
Takeaway 3:
WESCO’s roadmap to enable seamless working capital management.
Key Points
  • Planning to implement an integrated A/R platform that allows all teams to collaborate in real-time.
  • Expanding cloud-based automation across credit and collection operations.

Karen Koenig:

But let me start here, see if I can. There we go, WESCO. So I’m sure a lot of you haven’t heard what WESCO is. So I just want to give you a high level of our company. We want to build, connect power and protect the world. So we actually are a B2B company, we’re a distributor, we don’t manufacture any products, we just buy and sell, and then provide a lot of value added services in three areas. So electrical and electronic solutions. So we have a lot of contractors, we’re doing electronic, electrical work. We also have a big communications and security business. So Microsoft, a lot of data centers, that’s been on fire in the past year just because of all the technology. And then we have a huge broad utility and broadband company. So we service a lot of power companies, as well as, you know, cable companies, so a B2B. And one of our unique things is we can really sell. I like to say, we can sell anything to anybody. So I think we have over 4 million skews. And we have about 150,000 customers worldwide. So we have a lot of complexity.

So today, I’m going to talk just about our journey. And I wish I was in the shoes of some of our other presenters from Kellogg’s and Ferrero who are kind of through the journey, we’re in the middle of the journey. So maybe I should have gone first. But I’ll talk a little bit about what you know, some of the challenges that we initially identified, how we did some of the vendor selection, kind of our current state and some of the successes that we’re seeing in Cash Applications. And then I’ll talk about the expansion project and how we’re kicking off credit and collections.

So first, what were our challenges in kind of A/R, and the biggest one was in Cash Applications. And the biggest one was what we call decouple remittance for our electronic payments. And so the electronic payment came into the bank. But the remittance came in via email, and it was very hard to match that up, I see some head shaking, right. And we actually had a, when I first came in, we actually had one of our analysts, our Cash App analysts get promoted to the Treasury group. But when he left all that knowledge of how to do that matching left with him, and so we actually had a very big dip in productivity. And we had to kind of, I call it replacing head knowledge. And right then in there, I’m like, okay, we have to find a better way. We did, we were doing a lot of manual rekeying. If we got an Excel sheet of a remittance, you know, we had very proficient keyers, but they were rekeying information that was already electronically received. So you know, the definition of insanity, that that was not great. The good news is we did start to prepare for the change by my by cashapp leader, Tim Murray, and I think he was at the he was at the Houston or was a Dallas, Houston, the Houston conference, the first Radiance on the Road, he did a lot of the change, but he actually started doing some spreadsheet uploads just to help us prepare for the change, which was very helpful. Also, we had multiple writtens formats, and payments formats, you know, all over the place. So that had increased our complexity. And then the big thing was, obviously a We are an Oracle. And the only way that Oracle matched in the Cash App was on invoice number. And as some of our customers moved to ERS or Evaluated Receipt Settlement, they were paying based on PEO packing slip, or a variety of other items in our system couldn’t handle that. So that was all an exceptional process. So we just had, you know, our Cash App just couldn’t keep up.

And so these were our stats before HighRadius. So our electronic funds, you can see, were very low. And that 11% was I believe all the EDI like the CTX format that we’re getting. But one of the things that that really came to fruition when we were looking at this, so we had all of our remittance was coming into Outlook, you know, in an email, a central email box, and they were actually using automated an auto forward rule to move the remittance into different customer folders. And we actually broke, we ran out of the auto forward rules. So you know, we had Microsoft on the phone, we just couldn’t do it.We just couldn’t, we couldn’t get organized under the current tools. That’s how complex we were. And obviously I talked about our customers shifting to ERS and that also hurt us on the electronic ones. Our credit cards were also another big process where there were issues. And it was interesting because the way the credit card was designed, the credit card feed, actually came in together, but they had separated it to send individual emails. So that one person was looking at the credit card receipts and trying to find those individual emails to match it to. Luckily, Tim was able to go back to the source and consolidate that. And once again, that was possible, you know, he got some, he got a lot of automation in that before HighRadius. But that also helped us but our credit cards were very low. Now checks we didn’t have a lot of issues with because we had a lockbox. And we had, we were using the open scan product. But our biggest fear there is we had a very unique system where we had a six digit invoice number that repeated across multiple branches and customers. So we had built a lot of logic to get a high match rate. And we were really afraid of moving to another product and losing that match rate because of our repeating invoice numbers. But we’ll see how that turned out. To other challenges, it’s just staffing, it was very hard to find qualified Cash App candidates, a lot of them in a lot of Cash Apps have been outsourced or automated. So it was really hard to find anyone with Cash App knowledge. And then one of my favorite sayings is transactions don’t stop. So during our peak holiday periods, think about our month end, we’re on a calendar month end. So you know, Memorial Day, Labor Day, Halloween, Thanksgiving, Christmas, when people wanted to take time off, and we needed to close the books. You know, it was very hard to get that labor to kind of work overtime and to get our books closed. So we had a lot of different challenges. Okay, so what happened in 2016?

And I think we’re going to go with a poll question first. And I’m not sure if Heather’s here to talk about the results. If so, why don’t you take just 30 seconds to look at the poll question. And then we’ll, we can always come back. Maybe Heather’s trying to figure out what to do with the ice. So what’s your top consideration when evaluating an A/R automation vendor? Ability to integrate with your existing systems, ability to support custom business requirements? Customer centricity, will they really partner with you? And their solution suite key capabilities and scale abilities? Okay. So we’ll wait, we’ll wait and bring Heather back to answer that question in a few minutes, then. Okay, this is how you vote. I think everyone’s all used to that.

So here’s what I’ll tell you about why we chose HighRadius, a few things. First of all, when I had gone to a Radiance event, probably four or five years ago, and I think it was there that I heard that Bayer had this HighRadius product on top of 37 ERPs. At Heinz we had about 10 ERPs. And we just recently merged with a company called Anixter, but almost our same size, so we doubled our A/Rs about 2.4 billion. And we have over 15 ERPs in total, I won’t tell you the exact number because it’s crazy, but it’s big. But you know, I will not be alive when we go to one till we get to one ERP system. So to me, this will be the way to go. HighRadius will be able to sit on top of the multiple ERPs. And I’ll be able to give my credit collections and Cash App teams, kind of the best in class technology. Before you know the company figures out, you know, the ERP solution. I think that we chose HighRadius for the Cash App, the last item, the technology to support our EFT and decoupled remittance, and I’ll show you some of our success on the next page. But that was really, you know, one of the key levers, but then that third bullet, just being able to scale then to credit and collections, next, and that’s where our journeys are going next. But you know, they really had the solution. And they’re really the only one, I think you’re the only player that really has solved the EFT solution.

So, good for us. So, you know, just a few things on you know, what happened with the Cash App solution. So the good news is now when a customer sends a remit, it’s not just stuck in a Cash App, it’s not stuck in someone’s email box. It’s not stuck in someone’s drawer, we talk about paper to electronic now it’s visible on one central email box that anyone can look at credit, collections or Cash App. It’s great. The remittances can be matched on multiple fields, not just knowing the standard invoice number. I love Sasha’s comment this morning about ERPs like Oracle being dumb, right? It was built to do invoice number matching and It can’t change, right? It can’t do anything more, even though business has changed to match on something other than invoice. So HighRadius gives us that benefit. We now have visibility across multiple ERPs, I think we have over 10 of our ERPs on Cash Apps. And we’re expanding that and continuing to roll out. And it’s just really helping us, you know, across, we’re getting much more standard in our work, there’s still some work to be done in the ERPs. So we still need to move the cash into an ERP. But the majority of the work is now standardized. That actually helps with, you know, people loading, if we have, if we have anyone leaving or vacations we can kind of, or volume spikes, we can load our people throughout that one product. Obviously, we’re getting much faster and accurate application, Cash Applications. And then once again, I talked about having a Cash App in HighRadius, the building block for credit and collections.

So current state, just some of the key features and solutions. We talked about the automated processing, so we were able to get, you know, check capture. So we were able to replicate what we were doing in our lockbox and via open scan, which was great. And once again, we don’t have to go out and look at our bank anymore to get the remittance, it’s all in the system. The email remittance capture has been huge for the EFT payments. And then the last thing I didn’t really talk about this, but there’s also the benefit of going out to web portals, if it was more self service remittance. Now we’re going out and getting that web portal and having it ready for the payment to come in instead of kind of doing it reactively, we’re doing that more proactively. So that’s great. The second piece here is something that we really weren’t thinking about. But it’s more the artificial intelligence. So now we go from having a dumb system, as Sashi said to having some AI. And this is where the system at if we don’t have a remit, so we haven’t, we haven’t don’t have a check image, we don’t have an email, we don’t have a web portal, the system can predict whether or not they can find in the the system can find a set of invoices that will match that cash amount. And we’ve actually picked up about a 5% matching rate from this feature alone. So it’s really incredible. So once again, how do we get up to that, I don’t know that we’ll ever get to 100%. But this feature has given us a nice bump of 5% matching. And someone also talked about when you do move to collections, if you get a promise to pay from a customer. So they say hey, we’re gonna pay you this amount on this day. And you log that promise to pay, that promise to pay will come into the Cash App and be a remittance source, if you want it to be once again, after you look for the actual remittance, the email, the image, the portal, we can actually use that feature too. And then finally, just making sure we can see our customers a little bit better. Actually, it was great when we were actually first started with a Cash Application, we could see where we put a rule that you couldn’t apply a payment, unless it was kind of within a parent grouping, or a customer grouping within our function. So we saw a lot of payments with exceptions. And we could see that the payer was the same. But it actually helped us clean up some of our master data. So we could actually see that a customer may have had the same payer number, we had different customer names. And in order to get that payment to match automatically, we had to clean up our master data. So that was probably another 5% of getting a match rate. You know the system actually, we could actually see those payers and actually help us clean up our parent groupings.

So what’s our success rate? Once again, we were at 11% with our electronic funds, and now we’re at 84% credit cards also up in the 80%. And the good news is we kept our check percentage. Remember, we were a little bit concerned about checks because we had that repeating invoice number, we actually gained a little bit of match rate at 96%. So you know, we couldn’t be happier with the Cash App and it’s really given us a lot of visibility. There’s still that change management side. We still have a lot of people that like to key, you know, they want to key versus trying to link the payment. So if something doesn’t manually match, you know, we still want people to we still have a lot of people who like the key. We’re trying to use that change management to get them to link the remittance to the payment. So that the linkage is there for anyone else to see. But for the most part, we’ve really had a lot of success with Cash App.

Okay, so now we’re moving into the next phase, which is kicking off our credit and collections. And right now we’re just finishing up the design phase. So we went through a, I think we started in June, and we did a set of collections workshops, and then a set of credit workshops, working on our design, and we want to, you know, we see such a great, you know, great success in Cash Application, I can’t wait to get to the future and see continued success.

So these are some of the benefits that we are seeing as we’re doing our design, we haven’t realized them yet. So I, I can’t give you all the great stats that Kellogg’s or Ferrero gave you, but these are some of the things we’re seeing during our design phase. So one of our biggest things that we want to see is to have that visibility of our customer across our ERPs. So I said we have over 15 ERPS, if we had a concentration of A/R and two ERPs, and not know that our consolidated exposure is that great, you know, we could have a big loss. Now knock on wood, knock on plastic up here, we have been pretty lucky. But about two or three years ago, we did have a large contractor in Canada, where we had a kind of separate exposure. Was a longtime contractor, and they suddenly closed their doors. And then when we added up the exposure, it was quite big, right? It was still medium size in each company. But when they went under and we had to kind of write it off it was much larger. So we really want to. We can’t wait to get that visibility across all our ERPs.

Credit agencies. So right now we’re using multiple credit agencies. And we’re actually going out there and retrieving credit reports, we added up what we’re doing right now we’re pulling over 35,000 credit reports a year across all of our businesses. So when that integration with our credit agencies is part of HighRadius, that will kind of reduce all that manual work, we’ll still have to do some of the evaluation. But that low level task of going to get the data will be already done. Obviously, we’re going to work on our credit scoring models, and decisioning to make sure that some of those routine decisions can be made automatically, or at least be presented as a recommendation, once again, leaving the low level or easy decisions to the automation and allowing our team to then spend more time on the on the riskier items. And then another big thing we have is our blocked orders. Because some of our ERPs have a lot of different accounts across our multiple branch structure, our credit limits are kind of at the account level versus the parent. And so that hurts us if we don’t have the right credit limit kind of at the individual account level. So we have almost 100,000 blocked orders per month. So we’re going to be putting in some automated decision making to actually reduce the number of blocked orders. And I’ve got a two minute morning. So I think I can. I think I can finish up here because I have one more slide.

And so the benefits of the collections cloud so I talked about Cash Apps, talked about credit, and I’ll finish up with collections. Obviously you’ve heard this from Kellogg’s and Ferrero, but you know, getting that prioritize work list. When we showed a demo to our senior VP, you know, one of his comments was, wow, we’re going to give our collectors such a nice tool. So instead of, you know, kind of an Oracle, where there is some work list, but it’s just not as visual, we’re going `to give a really nice work list. And we’ll be able to actually track collector productivity. Now this could be you know, it’s like big brother’s watching. But we’re going to be able to really see how many, how many calls per day, how many contacts per day, we talked about. Someone else talked about the accuracy, the promised pays. So we’re really looking forward to that. We also did a nice segregation of our accounts, and 70% of our accounts are considered low dollar under $50,000. So you know, we were not quite like a CPG company where if you add up Walmart, Target and Costco, you kind of get to maybe 70 or 80%. We still have 30% of our accounts, you know, larger dollars, but that bottom layer of smaller accounts, we’re really going to be able to automate that and do some get some productivity there. We’re looking to automate some of our top customer payment portals to get that promise to pay status. We’re getting 400,000 invoices per month, through some of those top portals. Ariba, Coupa, We’ll also be able to integrate our outlook emails. So one of the things in collections is, if you’re sending all your correspondence through a central email box, when that response from the customer comes back, it’ll automatically link to that customer. So no further does someone have to say, Okay, here’s my email, I’ve got a copy and paste that into Oracle, or the ERP, that that email is going to automatically link. And then obviously, the last one, just some artificial intelligence to help us with predictive payment behavior.

So to wrap up, I’ve talked about our success in Cash Applications. And I’ve just talked a little bit about, you know, what we found during our design phase for credit and collections. And I’ll entertain any questions then.

Audience Member:

Hi, Aidan. For the Cash Apps module. You had mentioned you still have and it’s a change management, people keying, right? But does then keying that instead of linking it? Do you run the risk then of that, maybe that AI, not recognizing that payment, the next time it comes in? Is that the risk?

Karen Koenig:

That could be a risk, they could also have a fat finger. And then it’s also the lack of visibility? If someone goes back to say, Where did you get that? It’s not there.

Audience Member:

Okay. So you really want that linkage for future payments to come in and engage.

Karen Koenig:

Right. Or someone to kind of say, hey, this isn’t working, why is it not linking? Right? And so you almost have to have someone almost working the mailbox to say, Okay, well, what, what happened to it? Is it a PDF? Is there something wrong? And I think some of the work with the customer value manager actually helps us with, you know, getting our percentages, making sure our percentages are maintained and then increased.

Audience Member:

Thank you.

Karen Koenig:

Okay. And actually, it was interesting. Early on our Cash App, people were still going back to the individual mailboxes to do the searching versus using the HighRadius mailbox, with much better search, because it was like, well, this is what I always did to search. So.

Audience Member:

Hi, I have two questions, Karen. One is, how are you doing the aggregations of your customers now without the tool?

Karen Koenig:

Go ahead and ask the second question, though.

Audience Member:

Yeah. And a lot of companies aren’t still doing that. And the company I last worked for, Huntsman Chemical company, didn’t do it. And I went to D&B, and paid a fee and said, here’s all the accounts and all these different SAP systems. Tell me who we have. So I think it’s a good way to kind of quick step you into least knowing and ending visibility, because many in the company didn’t really understand that. And that’s a really important thing in credit.
And then the other question I had is, we talked a little bit about how we get the culture, I think cloud adoption is there and you know, there’s a lot of walls that have come down, but I still think there’s this hesitancy about adopting automated solutions, and I suspect WESCO’s gone through a little bit of maneuvering through that water. And I’d like to hear your feedback because I suspect there’s still a lot of other executives that are struggling.

Karen Koenig:

Well, thanks. So on on the way we’re grouping our parents The good news is in our Oracle system, we were starting an ERP journey to replace Oracle and we actually did invest a little bit in in some master data governance and using D&B to use to get our duns number and to start grouping our customers by duns but that’s in one of our ERPs and so as we roll we are trying to then use D&B to help us to cleanse the initial data. And like for one of our ERPs I think they matched. I think the stat was they were able to match 50% of our customer base, but it was 80% of our sales. So to me automatically, if I can match 80% of my sales to a parent. That’s good, that’s gonna get me a great start. And then I’m going to work on you know, data is a journey you’ll never have clean data. So data is a journey so we’ll have to just work on the you know, cleansing the rest of the 20% but I think this tool will also help us cleanse just like my example in CashAapp when a payer is paying you. It’s going to tell you who the customer is, right? On change management. Just this is my big thing and I don’t know that we could ever get as good as we need to be. But you know, some of it is we, actually, I think you’ll lose people on this journey, you’re gonna lose. You know, we had someone in Cash App, who was one of our lead EFT people. And he was, you know, he was always like this in meetings, you know, he did not, he just did not want to change. And I think within a week of going live, he had found another job and left, he went to another company in Pittsburgh that had Oracle Cash App. That’s what he wanted to do. He wanted to go key in Oracle, right? But in a way, it was good for us, because we knew he wasn’t ready for the change. And he was, you know, kind of being negative in meetings. So I think the good thing is, if you do have losses, and it hurts, right, because we lost some productivity, right, during the transition, but then the good news is, his productivity loss was replaced by system productivity. And, you know, now I have that, and it’s, I’m never gonna be that dependent on one person again, right? So I don’t know the answer to change management, I met the gentleman up here, we were just talking about it. So, I don’t know that we can ever have enough change management resources. So I’m still looking, I was talking to a couple of people today, how am I going to get people ready for the change for credit and collections. So, I don’t have a better answer. But I guess the thing is, you will lose some people. But some of those losses might be good. I see another shaking of a head, Right?

So Alright, one more question

Audience Member:

Karen, can you hear me?

Karen Koenig:


Audience Member:

Thank you for the wonderful presentation. very insightful. Thank you. My question is very simple in terms of post implementation. What kind of analytics are you getting? And what kind of insights it is providing you? I’m in the journey of implementing this. So yeah, it will be helpful for me to envision upfront what incremental analytics I can get out. Thank you.

Karen Koenig:

So what kind of analysis are we getting? So with Cash App, we’re just getting a better understanding of our hit rates, not only at a header level, but a line level. So you know, we never had that line level experience, right? Because remember it in Oracle, it could really only match on the invoice level, it was never matching at a line level. So we’re getting better, much better understanding of line level hit rates, which is a little bit different, right? You know, because the payment can come in, but maybe nine out of 10 invoices, right? So you know, and then we’re also getting transaction count and dollars. So that’s actually really helpful. And that’s where our customer value manager can really, you know, use that data, and then benchmark it against what he’s seeing across other companies, and tell us where we can then start to improve. And then in credit and collections, you know, obviously we haven’t implemented but we’re really looking for that analytics of collector productivity. You know, what is a collector doing? Is a collector getting stuck and kind of working on maybe low value invoices and not getting the coverage, right? We’re really anxious to get promised the payments right now we’re not collecting promised payments. So it gets back to if we can get that promise to pay at least that gives us the will these items are, are set to pay. And I think the other thing we’re looking for there is, I think some of our industrial customers, if we get the invoice, right; and we send them the invoice, there’s not a cash flow issue, they’re going to pay it. So are we spending time kind of collecting on an account that’s going to pay us anyway? So that whole predictive modeling, if they’re going to predict that they’re going to pay us? Let’s stop, let’s stop that extra touch and go over to someone who is the real troublemaker. So I think that’s also going to help us so I don’t have any real examples, but those are the benefits that I’m seeing during the design.


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