Best Corporate and Social Responsibility Initiative Winner: Amway India Enterprises
Published: Jan 2016
Photo of Deborah Mur, Citi and Bikash Mukherjee, Amway India Enterprises.
K. V. Hariharan
Chief Financial Officer
Established in 1995, Amway India offers Indian citizens an unparalleled opportunity to own and operate their own business, selling more than 140 high quality consumer products.
in partnership with
Taking paper out of supplier finance
Amway India is a great example of a company which embraces its corporate and social responsibility. The company’s contribution to society or social well-being is core to its ethos and beliefs and this solution reinforces these ethics. Working with its bank, Citi, the company has established a paperless supplier finance programme with no requirements for specific transaction documents or frequent invoice audits. The essence of the solution is in the removal of paper and, with the company’s aggressive growth targets, the solution can only result in even less paper in the future.
The challenge:
Despite its exponential growth in India, the company’s payments and reconciliation processes have remained largely manual, which consumed considerable manpower.
Key objectives of the solution were to:
Extend Amway India’s DPO from 15 days to 60 days without incurring any additional costs.
Increase interest income on cash surplus in a low interest rate environment.
Reduce administrative costs associated with manual payments and reconciliation processes.
Reduce paper handling and invoice processing costs.
Establish an audit trail with enhanced security and transaction-level controls for AP.
Strengthen relationships with key suppliers by way of early payments at market rates.
Contribution to society or social well-being is core to the ethos and beliefs of Amway and the commitment to social responsibility in India were initiated as long back as 1996. Today, Amway Opportunity Foundation (AOF), the CSR arm of Amway India, a registered non-profit organisation, runs on the support provided by more than 500 employees, 2,000 indirect employees and more than 15 lakh distributors, as AOF volunteers. The objective behind the establishment of AOF was to act as the community engagement arm of Amway India Enterprises to fulfil its mission and implement various projects for the betterment of Indian community, through an independent autonomous body distinct from the commercial operations of Amway.
The solution:
This is a paperless supplier finance programme with no requirement for specific transaction documents or frequent invoice audits.
As K. V. Hariharan, Chief Financial Office explains, “Amway India Private Enterprise Private Limited aimed to extend its current days payable outstanding (DPO) from 15 to 60 days, and optimise working capital efficiency through the credit-based solution offered by Citi. We implemented the solution in July 2015 and the virtual card supplier financing programme is a win-win for both Amway India and our vendors.”
Best practice and innovation:
With an estimated annual procurement spend of US$20m through the Citi Virtual Card Account (VCA) solution, this has significantly improved working capital efficiency and overall return on investment for Amway India’s procurement process.
As a scalable and sustainable process implemented in an aggressive timeline of four months, the solution has been instrumental in extending Amway’s DPO by 45 days, and increasing its profit before tax (PBT) by an estimated US$425,000 in the first year and reaping annual savings of INR 25m.
Combining robust payment security, enhanced data through the set-up of internal controls and approval workflows, the solution has improved compliance, efficiency and visibility of Amway India’s sourcing and purchasing processes.
Currently, 12 vendors are enrolled in the VCA programme. The number of participating vendors is expected to increase to 30 with the gradual rollout of the scheme.
Key benefits:
Extended days payable outstanding to 45 days reaping savings of INR 25m per annum.
Process efficiencies.
Risks mitigated.
1,000 man hours saved per annum.
Reduced manual effort.
Paper removed.
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