This is a solution for a FMCG company in the electronic collection space involving cheques and the move to direct debit. In the last five months, more than 100 distributors have been successfully migrated and nearly 150 distributors are in the process of being migrated.
Photo of Kaushik Shaparia, Deutsche Bank and Francois Gumy, Mondelēz India Foods Pvt Ltd.
Mondelēz India Foods Pvt Ltd (formerly Cadbury India Ltd) is part of Mondelēz International, a world leader in biscuits, chocolate, gum, candy and powdered beverages. The company in India operates in four categories – chocolate, beverages, biscuits and candy and is chocolate category leader. Cadbury Dairy Milk, Cadbury Dairy Milk Silk, Cadbury Celebrations, Cadbury Bournville, Cadbury 5 Star, Cadbury Perk, Cadbury Fuse, Cadbury Gems are some of the company’s chocolate brands in India. The company’s beverage portfolio consists of Bournvita and Tang. Cadbury Oreo and Bournvita Biscuit is a part of its biscuit portfolio and Halls and Choclairs Gold make up its candy portfolio.
Headquartered in Mumbai, Mondelēz India Foods Pvt Ltd has sales offices in New Delhi, Mumbai, Kolkata and Chennai and manufacturing facilities at Maharashtra, Madhya Pradesh, Himachal Pradesh and Andhra Pradesh.
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Fast moving collections for a fast moving business
As a corporate in the fast-moving consumer goods (FMCG) segment, Mondelēz is required to collect a large volume of payments from its distributors, primarily in the form of pre-signed cheques. These cheques are held in inventory by the bank and then, on the due date, sent to the clearing house for presentation.
This method posed numerous challenges and process complications for both Mondelēz and the banks it worked with.
Mondelēz therefore decided that the best course of action was to move to an electronic mode of collection in a phased manner. Its main objective was to drive consistency in the collection process to ensure that file formats exchanged with the bank and MIS received from the bank are standard across cheques and direct debit.
To meet its objectives, Mondelēz teamed up with Deutsche Bank to develop electronic solutions for streamlining collections and import payments.
On the collections side, Mondelēz leveraged a unique solution which allowed them to initiate the migration of collection from cheques (paper-based collection) to direct debit. To do this, Mondelēz generates a single collection file that it shares with the bank which uses its application to separate the cheque and direct debit payments before being sent to the clearing house.
The application used by the bank stores the mapper which identifies the distributors who have given the direct debit mandate to Mondelēz. Each mandate is assigned a unique reference number by the clearing house, which is relayed back to Mondelēz in a consolidated MIS with the complete details of the transactions. Reconciliation is automated as each transaction is tracked by a unique reference number on an end-to-end basis.
To conclude the process, an SMS notification is sent to each distributor capturing details of the amount to be debited and the date of ACH debit is sent to ensure that the accounts are adequately funded. In the last five months, more than 150 distributors have been successfully migrated and nearly 150 distributors are in the process of being migrated.
Best practice and innovation
This is a truly first-rate example of how paper-based forms of payment can be efficiently and effectively moved onto electronic platforms. As a result, Mondelēz has met its objectives and achieved end-to-end visibility over its transactions and standardised many processes driving further efficiency.
“It is a great feeling for me and my team to be recognised by a prestigious organisation for driving the ‘Best Solution in India’. As a company we are always looking at ways to do things in a simpler and more efficient way and winning an award means that we are doing best in class work.”
The solution has also helped Mondelēz forge a better relationship with its distributors, as they now have visibility and do not have to be chased to restock cheques.
An immediate notification of cancelled mandates also allows Mondelēz to take immediate corrective action and reduce risks pertaining to outstanding stock with distributors versus realising cases of stopped cheques only when submitted for clearing.
Key learning point
Being a fairly new solution, it takes time for the partners to start to feel comfortable with the solution. There are apprehensions in the beginning. But once they experience the solution, and know how efficient and safe it is, the acceptability level goes up tremendously. We have seen acceptance levels going up over time. So be patient and keep at it.