The challenge

GlaxoSmithKline (GSK) and its bank engaged in a thorough white-boarding session to outline GSK’s collections objectives and structured a comprehensive digital solution for distributor collections including:

• Implementation of NACH – electronic direct debit workflow using bank agnostic XML file formats and SWIFT connectivity.
• Fintech solution to provide a mobile-based distributor application allowing distributors to view outstanding invoices/credit notes, thus providing greater visibility and comfort to the distributors in migrating to an online channel.
• MT940 based automated reconciliation.

The solution

Digitisation of collections and migration from paper – historically, GSK has relied on pre-signed blank cheques (PSBC) as the mode of collection from its distributors which comes with a variety of challenges such as:

• Effort in maintaining and managing physical cheque inventory – PSBC had to be collected from distributors and the inventory of cheques had to be tracked, physically stored and maintained.
• Manual input of cheque details – the cheque details had to be manually input into the ERP for accounting the collection; this often led to errors.
• Business disruptions – cheque based collections were much more impacted by business disruptions such as lockdowns. Similarly, the PSBC set-up was impacted by positive pay regulations wherein the distributors had to provide additional details to their banker for cheques of value greater than INR5 lakh.

The digital solution allowed GSK to eliminate all the above challenges thereby adding cost/manpower efficiencies and reducing business disruptions.

Ensuring control over their collections, like PSBC flow, even after migrating to an online channel

• PSBC based collections allowed GSK to ensure collections on due date ensuring no delays in collections or need to follow-up with distributors. Maintaining this control was a key requirement for GSK and they were not willing to move to NEFT/RTGS collections where this control would be completely lost.
• NACH implementation allowed GSK to replicate the PSBC based flow in an electronic format and maintain the control of their collections. This led to strict maintenance of DSOs and better cash flow management.

Easy, automated reconciliation through a pull based electronic collection mode

• In the implemented NACH solution, the details of the collections to be pulled are extracted from the GSK ERP and the NACH file is generated.
• The account statement generated captured the same reference as in the processing file ensuring that GSK can reconcile each transaction automatically.
• The MT940 statement is delivered through SWIFT to their ERP for a seamless reconciliation.

Initiating collections through ERP

• Collections could be initiated digitally through ERP system rather than manually writing cheques and updating these details in the ERP.
• Existing SWIFT based connectivity already in place for processing payments was leveraged to minimise implementation effort for GSK.

Best practice and innovation

Deutsche Bank and GSK worked closely to deliver an innovative product to distributors to ensure adoption of NACH amid a very tough and strong distributor lobby.

The bank introduced GSK to a fintech providing a front-end mobile application to distributors.

Greater visibility gave comfort to distributors to hand over the NACH mandates and enrol onto the programme, and innovative features like early payment discounts on the app, incentivised additional distributors to migrate to this programme.

The mobile app and regular educational seminars led to widespread adoption making GSK a pioneer and clear leader in NACH implementation in the pharma industry.

Key benefits

• Cost savings.
• Headcount savings.
• Process efficiencies.
• Increased automation.
• Improved visibility.
• Errors reduced.
• Manual intervention reduced.
• Exceptional implementation (budget/time).

The solution effectively leveraged a new-age technology platform from the fintech partner to provide visibility/prepayment features to the distributor that were instrumental in distributor adoption. The solution also ensured best practice implementation with automated reconciliation for GSK.