Taking a Lead in Payments and Collections Automation
by Prabakhar Iyer, Executive Director & Chief Financial Officer, Ingram Micro India Limited (IMIL)
In addition to its leading role in technology distribution in India, Ingram Micro India Limited (IMIL) aims to remain at the forefront of cash and treasury management practice. To fulfill this objective, IMIL recently embarked on an ambitious project with BNP Paribas to implement a sophisticated, centralised technology platform to automate and streamline payments, collections and cash visibility. By doing so, IMIL can deliver a better service to its customers, including resellers, distributors and retail stores, and forge improved relationships with its suppliers. In this article Prabakhar Iyer, Executive Director & Chief Financial Officer, describes some of the objectives, solutions and outcomes of this innovative project that firmly establishes IMIL as a leader in cash and treasury management efficiency.
At IMIL, we pride ourselves on the extensive, sophisticated, supply chain and distribution infrastructure that we have developed over many years. This has a variety of implications for payments and collections:
We provide IT products through a network of thousands of distributors in India across 37 locations on both ‘cash and carry’ and credit bases. The business is highly working capital-intensive with tight margins and significant competition. In addition to providing a high quality service together with a variety of value-added services, achieving a rapid, efficient collections process is of vital importance. Specifically, we need to realise cash as quickly as possible for working capital purposes, but also to reconcile and post amounts to customer accounts promptly and accurately. This frees up customer credit lines more rapidly, therefore facilitating more business: effectively a ‘win win’ for both IMIL and our customers.
In the past, achieving these objectives has been challenging, with a large proportion of resellers making payment using post-dated cheques, which were collected and managed locally. This created substantial administrative overheads with high operating costs and a variety of risks and exposures. With the increase in trade, and a gradual shift towards sales through large retail stores, an increasing number of customers wanted to make payments electronically.
On the procurement side, we depend on a relatively small number of large international vendors, including HP, Samsung, Microsoft, Apple and Vodafone. To ensure security and consistency of supply, these suppliers need to be paid correctly and on time using cross-border foreign currency payments. In addition, we need to make a very large number of domestic payments to the extensive network of local vendors that support our sophisticated supply chain infrastructure and delivery channels in which we pride ourselves.
Managing payments, including the combination of high-value, low-volume international payments and low-value, high-volume local payments has been challenging for a variety of reasons. For example, when dealing with international supplier payments, the quantity and complexity of import documentation that is required is both challenging and time-consuming. As with collections, local payments have been decentralised in the past, working with local banks. This has resulted in additional administration and infrastructure costs, lack of economies of scale, and difficulties in standardising processes and controls.