âWe decided to outsource our collection activities to Infosys because it has extensive skills and can respond 'on- dem
CASE STUDY Staples Brazil Fixes On The Future After Freeing Working Capital Infosys helps office supplies company reduce unapplied cash by 90% with optimized financial processes
A burgeoning customer base and order book is worthless if the resulting revenue remains ensnared in fiscal complexity. Invoices must be matched with payments. Payments applied to clients. And outstanding debts collected. With its business growing rapidly, Staples Brazil was struggling to keep up with these everyday yet critical accounts receivables processes. For Derk Visser, Head of Finance, Staples High Growth Markets, it was crunch time. “We had payments hitting our bank accounts and didn’t know what customer or invoice they related to. Until these sums had been correctly applied, we were unable to use this capital to invest in growing our business.”
Growing pains
Taking stock
Staples Brazil had already expanded rapidly in the nine years it had operated in Brazil. The company, which has 300 employees, supplies products to 65,000 customers in every state from its São Paulo warehouse.
With a large amount of working capital trapped in fiscal obscurity, Staples Brazil took steps in early 2011 to get its accounts receivables operation back on track.
These customers span individual consumers making single online purchases and SMEs placing regular orders by telephone to multi-national corporations with global office supply contracts with Staples.
Company: Staples Brazil Industry: Office products and services HQ: São Paulo, Brazil Sales: US$27 billion (Staples Group)
90% reduction in unapplied cash “Payment and collection methods vary for each of these customer groups, which makes it harder to identify whether invoices have been settled or not,” adds Visser. The country’s complex fiscal regulations had compounded the company’s accounts receivables challenges. As Visser explains: “We operate in every Brazilian state, which means we must comply with 27 sets of rules and update our processes when legislation changes.”
“We needed a partner that could help transform our processes and quickly address our cash application issues,” comments Visser. “Infosys was the best candidate.” A key priority for the Infosys team was to understand and map Staples Brazil’s existing processes while helping the company reduce its unapplied cash backlog. Staples Brazil had a nine-strong accounts receivable team that was responsible for collecting and applying cash. Cristiane Bueno, Finance Supervisor at Staples Brazil, commented: “Processes were inconsistent and often relied on the knowledge of a specific individual – if they were not in the office, we couldn’t make any progress. Collection in particular was overlooked due to the lack of a dedicated team. As a result, over half of the customers in the collection portfolio had never been contacted about their outstanding payments.”
Control, clarity and consistency To standardize and streamline cash application and collection, Infosys designed and implemented 20 new accounts receivables processes, which started to deliver results from October 2011. From how to apply cash receipts against outstanding invoices to when to blacklist a non-paying customer, the new processes bring consistency, clarity and control to Staples Brazil’s accounts receivables operation. “Infosys didn’t just design the new processes, they made sure they actually worked,” comments Visser. “They provided us with access to skilled professionals and an analytical toolbox.” Infosys also changed the structure of the accounts receivables team to plug the collection gap. This resulted in Infosys providing two additional members of staff to supplement Staple’s existing five-strong team. With its customer base continuing to grow in volume and diversity, in October 2011 Staples Brazil realized it needed to commit
more resources to cash collection. As a result, the team is now seven-strong, with six collectors from Infosys.
25% reduction in collection portfolio “We decided to outsource our collection activities to Infosys because it has extensive skills and can respond ‘ondemand’, which give us greater flexibility and velocity,” comments Visser.
Fewer debts, more working capital The operational improvements and additional resources provided by Infosys have dramatically improved cash collection and application at Staples Brazil. As of November 2013, unapplied cash was 8.68% of the amount registered in April 2011, while uncollected cash had reduced to 37.05% of the amount registered in April 2011. “The quality of our receivables has improved remarkably. We have freed up significant working capital, which can be used to invest in new go-to-market
strategies that address the changing needs of our customers,” explains Visser. Cash application timeliness, which relates to the volume of payments applied within 24 hours of receipt, now stands at 99 per cent** compared with 96.7 per cent in September 2011. And outstanding debts are no longer being overlooked. As Bueno confirms: “Ninety five per cent of customers in the collection portfolio have been contacted, which means we are now aware of any payment disputes and can document this to share with the team.” ** Based on September 2012
The staples for ongoing success To enable the company to monitor the quality of its cash application and collection activities going forward, Infosys has developed a new performance framework for Staples Brazil.
95% of customers in debt contacted
“We can now track the volume of contacts that collectors have to make per customer to clear one invoice,” comments Bueno. “This helps us set daily targets for our collectors as well as identify if specific customers are requiring additional effort and continuous improvement opportunities.” With the accounts receivables team becoming increasingly reliant on IT systems, the performance framework also tracks the volume of updates required to the company’s customer relationship management (CRM) platform. As part of the Infosys improvement programme, Staples Brazil’s CRM platform is now being integrated with a new Oracle Basic Collections module. Implemented in August 2012, the module will further streamline the cash application and collection process. It is estimated that Staples Brazil could save up to two minutes per collection call with a customer. Such efficiency gains will be critical for the company as it continues to expand. As Visser confirms: “We plan to grow rapidly over the next couple of years and it’s important that our processes are as streamlined as possible, especially in the back office. I see a role for Infosys in helping us remain efficient despite our growth.”
“We had payments hitting our bank accounts and didn’t know what customer or invoice they related to. Until these sums had been correctly applied, we were unable to use this capital to invest in growing our business.” Derk Visser,
Head of Finance, Staples High Growth Markets
“The quality of our receivables has improved remarkably. We have freed up significant working capital, which can be used to invest in new go-to-market strategies that address the changing needs of our customers.” Derk Visser,
Head of Finance, Staples High Growth Markets
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