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Leveraging Paperless Payments Back in 2004 Toyota decided it had to take some action to stem the inexorable paper tide which was swamping its business. All types of paper were involved but the major problem was the paper check, of which the company used many thousands every year in incentive payments to its sales professionals at dealers across the US, involving over $180,000 annually in distribution alone and significant resources in queries and dealing with lost or stolen checks. Toyota needed a solution that would free up its Finance team, reduce payment costs and eliminate check-writing altogether. The author describes the chosen program, based around a customized T oyota Visa Prepaid Card from Citi Prepaid Services, and the benefits it has brought both to the firm and to its sales professionals.

Leveraging Paperless Payments

by Warren Keckeisen, Incentives Administration Director, Toyota Motor Sales U.S.A.

How does a company known globally for progressive, efficient products easily transform an inefficient, straining burden into a streamlined, automated benefit?

That’s just the question we asked ourselves here at Toyota back in 2004. One of the most arduous challenges faced in recent years by Toyota’s Finance and Treasury groups was the sheer burden of paper. It’s surprising that something so simple and basic to business served as a near crippling force to our operation; however, the resources demanded to produce, distribute and manage this paper reached far and wide and had a stranglehold on our processes. This not only forced us to shoulder a hefty burden, but also served as a major distraction away from our core operations.

The situation grew to the point where it became a challenge we simply had to resolve - and quickly - in order for us to keep up with the speed of Toyota’s market growth. Initially it appeared as a daunting task: how do you eliminate a massive amount of paper in a short amount of time and turn a major burden into a significant benefit?

The challenge of paper

While the basic challenge for our group was rooted in all types of paper, the true culprit for us was the paper check. Toyota has thousands of sales professionals at over 1,400 dealers across the United States. These individuals are typically not employees of Toyota, but rather work directly for the dealerships and are agents for our company. Given the lack of direct communication auto manufacturers generally have with these sales professionals and the corresponding issues around establishing direct deposit for them, we traditionally depended on paper checks for payments to this group. For years this approach seemed like the only legitimate payment method on which we could rely. Yet despite its simplicity in concept, the use of paper proved to be incredibly complex, expensive and inefficient.

How do you eliminate a massive amount of paper in a short amount of time and turn a major burden into a significant benefit?

The sheer amount of resources, both personnel and financial, we had to invest in our check process was nothing short of massive. First, we had to produce the checks, which sounds simple in concept, but means purchasing large volumes of paper, ink and envelopes. We also had to establish a dedicated infrastructure of printers, computers and software: all major costs when you are talking about continually producing upwards of 150,000 checks annually. And it’s not as if we could get expanded use from these resources, since they were generally dedicated to supporting our check-writing operation. Aside from this, we needed to find space to house this production operation and to inventory our volumes of paper, ink and envelopes.

On top of it all, we needed personnel to manage the check production process. This was a significant and perpetual constraint on our team, given that we had finite resources.

Next, we had to distribute these checks, which were regularly sent to over 1,400 dealers nationwide. Typically, the checks would be batched for priority shipment, but each package cost upwards of $10 to $12. So the distribution costs alone topped $180,000 annually; and that was just to get the check into the hands of the recipient.

After the check’s arrival, the real issues typically arose. Given that we were continually sending out incentive payments, there was often a significant delay between a sale and payment delivery. Combined with the limited communication channels with these professionals, the recipient did not necessarily know what each specific payment was for. This would force them to contact the regional or national office which would, in turn, research the payment origin and communicate it back to them. On top of that, we would get regular calls from these individuals asking about their balance or questioning the amount of a specific payment or asking when a payment would arrive. This added a continual research exercise for our financial group, looking up and verifying check details for recipients, which further burdened our limited resources.

However, one of the largest resource drains was related to lost or stolen checks. If a recipient lost a check they would contact us to reissue it. This meant we had to cancel the check, which often incurred a fee, and go through the entire production and distribution process once again, further adding costs and demanding resources to complete. So, needless to say, the entire process of dealing with paper checks was a nightmare for us and ultimately impacted our ability to efficiently operate.

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