3M Supercharged its Accounts Receivable and Improved DSO by 4 Days with FreePay

The Objective

To automate the weekly direct debit from its distributors through ACH while eliminating manual errors and bringing in transparency.

The Background

Founded in Minnesota, US conglomerate 3M is one of the largest innovative product manufacturers in the world. 3M has a vast and complex customer base, including large institutional customers and smaller channel partners. The diversity in customers required 3M to innovate its revenue collection mechanism to improve its working capital efficiency.

The Numbers

0Days

Reduction in Daily Sales Outstanding (DSO)

Reduction in Reconciliation Time

The Numbers

0Days

Reduction in Days Sales Outstanding (DSO)

Reduction in Reconciliation Time

The Challenge

3M relied heavily on manual processes to reconcile their receivables. A large, shared services team was employed to complete their financial accounting and application processes. It took an average of 4 hours and several elapsed reconciliation days to process remittances and apply the payments, bringing down working capital efficiency.

01 Manual Deferment and Early Pull Request Mechanism

To request deferments or early pull on their invoices, the distributors had to send an email request to the shared services center that managed all the credit-related activities. These emails did not receive a response in time and led to incorrect pulls.

02 No Visibility to the Distributors of their Weekly Dues

Distributors did not have a live view of all outstanding obligations & credit notes; hence, they couldn’t plan their cash flow well.

03 Manual Coordination with Other Departments

Deferments and disputes first landed in the accounts team; they had to manually follow up with the business team to resolve the same; the TAT was over a week in a few cases.

04 Manual Reconciliation

The shared services and the finance team had to account for the successful debits and manually reconcile the invoices. They also had to account for the bounced transactions and provide reasons. This activity consumed two days after the debit date and got especially taxing during month/quarter/year ends. The two-day delay meant that credit lines were not opened for two days after receiving the payment, leading to a massive loss of reordering opportunities.

05 Poor Distributor Experience

The entire user experience of not accepting the deferment requests and disputes due to the delayed manual processes of 3M and pulling amounts higher than anticipated led to a negative user experience for the CPs. Customers and corporations also incurred substantial fees from their banks for bounces.

Our Solution

3M selected Global PayEX's EIPP (Electronic Invoice Presentment and Payment) solution - FreePay, to solve its accounts receivable management challenges.

01 Portal for Customers and Automated Reconciliation

Customers now have FreePay to view invoices & credit notes. They can pay, dispute, and request deferment anytime from any place, 24*7. They have complete clarity on the status of their request, and their payments are automatically reconciled back into the ERP, leading to zero TAT and delays in clearing credit lines.

02 Digital Deferment Request Mechanism

Distributors can see the auto-pull debit dates under each invoice and request a deferment. The process is now more transparent, with a real-time view of the request, increasing customer satisfaction due to an improved user experience.

03 Live MIS Across Business Functions

Finance and business teams have live dashboards across hierarchies. They can now view the outstanding payments made by their respective customers in real-time. Actionable dashboards are available across sales and account hierarchies for approvals and dispute resolution based on the line of business, region, amount, etc.

The Results

FreePay increased the success rate of weekly debits within the first four cycles and reduced reconciliation time significantly for 3M. It also substantially lowered the cost of running the shared service center for this activity. By deploying FreePay, 3M could simplify and improve their accounts receivable processes and set up a platform to expand and onboard other non-direct debit customers due to the superior customer experience offered.

3M India has successfully deployed Global PayEX’s FreePay solution to improve the efficiency in our collection and account receivable management. FreePay digitized our invoice presentment, automated payment processing and took care of our end-to-end customer account reconciliation. Our dealers have appreciated the solution for its completeness, ease of use and transparency in doing business.

Ranjan Choudhury , Credit Risk Manager - Asia Global Credit Risk Management COE

, Treasury 3M – India