The challenge
Over the years, Stanley Black & Decker (SBD) has developed a wide network of local dealers in India to distribute its broad range of industrial tools and household hardware across the country. However, with a growing network of over 550 active dealers, its accounts receivables (AR) teams struggled to manage the large volume of invoices and payments.
Prior to June 2019, SBD’s treasury workflows were highly manual. Its AR teams spent a significant amount of time making calls and emailing dealers to inform them of new product incentives, follow up on payments, reconciling them against paper invoices using excel spreadsheets. In addition, with dealers paying via a combination of cheques and cash as well as electronic transfers across banks in India, SBD also faced challenges in reconciling its cash flows across the various channels and bank file formats, resulting in delays in collecting payments that lengthened its days sales outstanding (DSO) and impacted overall working capital efficiencies.
To improve its sales collection cycle, SBD needed a compelling solution to encourage its dealers to make payments earlier, while automating SBD’s AR processes to optimise overall liquidity. The company also planned to roll out a more systematic incentive programme via a digital platform to provide its dealers with attractive offers to sell SBD products, and replace its existing offline-based incentive scheme.
The solution
SBD collaborated with J.P. Morgan to implement a comprehensive cash management solution, leveraging a fintech provider, Freepay, to digitise invoice presentment to SBD’s dealers while automating its collections and reconciliation processes at the back end.
The solution leverages a web portal and a mobile application where SBD’s network of dealers can now directly view invoices digitally, select and make payments through a range of electronic channels including direct debits via a national automated clearing house (NACH) and bank wires.
To drive adoption, SBD and the fintech company held joint workshops to train and educate dealers on the use of the online platforms, while the bank facilitated the onboarding and set up for electronic payments. By rolling out its digital incentive scheme on the tool itself, dealers can directly view and apply a range of attractive cash and credit offers available to them when making early payments.
The use of electronic payment channels also allows SBD to automate and streamline the reconciliation process. Direct debit via NACH allows the bank to pull funds directly from dealers’ bank accounts to settle the respective invoices while those paying through bank transfer are assigned a unique virtual reference number (VRN) to pay to. The process enables SBD to easily identify and automatically match payments against invoices, while obtaining granularity of the reconciliation reporting at the invoice level.
All funds are eventually credited to SBD’s bank account to improve cash visibility. By further connecting through application programming interface (API) technology, SBD now receives a single bank statement reporting that captures dealer payments made across different channels, directly on its own internal treasury platform in real time.
Best practice and innovation
SBD is among one of the first industrial manufacturing companies in India to adopt fintech and emerging technologies to digitise the end-to-end domestic collections and reconciliation process, in a market that still relies heavily on manual paper-based cash processes.
Key benefits
- Fifty percent improvement in the cash conversion cycle.
- Unlocked approximately US$1.1m in working capital.
- Estimated 1,566 working hours saved per annum.
- Reduced operational risk.
- Using data analytics to improve working capital management and cash forecasting.
- Improved dealer relationships.
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