When the new CFO of a global manufacturing company with more than $1 billion in annual sales took over the reins, one of the first things he did was implement a formal initiative to reduce costs, evaluate payment process efficiency and improve working capital. One area of opportunity was the company’s large volume of paper disbursements. Treasury recognized that with a paper check volume of more than 50,000 payments per year valued at nearly $200 million in spend, electronifying could yield significant savings.
In order to transition to electronic payments, the company turned to Fifth Third Bank, to find an effective solution. Taking an intellectually curious approach, the bank evaluated the current state of the company’s payment processes. The first recommendation was to migrate to an in-house ACH solution. Fifth Third also advocated a comprehensive payables solution that included a commercial card program.
Once in place, the card program was responsible for $20 million in spend, while reducing check expenses by nearly $40,000. Further benefits included an extension of Days Payable Outstanding (DPO) to 40 days and an improvement of working capital, freeing up nearly $80,000. Using a payment settlement network to facilitate the migration from paper to electronic payments and invoicing, Fifth Third was able to help Treasury speed payments and collect electronic remittance data seamlessly, while further reducing check expenses by $85,000. These, along with other steps, have led to a total value to the company of nearly half a million dollars.
As a result of the outstanding accomplishments achieved through the collaboration with Fifth Third, the company is now looking to expand this solution to other divisions. And this early success has been highly beneficial to the new CFO, who has engineered a significant win for the senior management team.
Individual results may vary.