Corporations always want to reduce non-revenue-generating operational costs. Specifically, collections processing is a cost-cutting target. A protracted collections cycle and inherent processing complexity result in weak cash flow and weaker cash flow forecasting for the corporation. While faster collection is the key to optimize working capital, handling cash often becomes an overhead for corporations with thousands of customers making payments in many different modes and through a variety of channels. So, corporations outsource this non-core activity to banks to accelerate cash flow. Corporations look for speed, efficiency and safety from their banking partner in processing collections.

Corporations expect banks to offer a robust technology to manage e-collections, handle the complete lifecycle of post-dated checks, provide correspondent banking arrangements with multiple banks, offer lockbox arrangements, facilitate coordinator-based collections, track dealer payments, enable faster clearing of up-country checks, authorize transactions remotely, automate reconciliation and provide a detailed MIS report. Whew! And that’s not all; corporations also look for credit arrangements from partner banks at a lower interest rate. Solidity also matters - in fact, 58% of the corporate treasurers choose their banking partners based on financial strength.

By offering electronic and paper based collections, banks enjoy better visibility over corporation’s working capital. The collections business enables banks to gain insight into a client’s financial health. So, apart from it being fee based income free of capital implications, banks also get an opportunity to finance their customers at lower risk. This could then also be extended to corporations’ dealers. Certain regional banks and even international banks have started establishing relationships with local players in the African and Asian geographies to extend their market coverage in managing cash.

Banks must offer a collections solution that would enable faster realization of local and up-country checks , pooling of funds in various accounts, virtual account based inward transfers, correspondent banking arrangements for local clearing, coordinator-based check pick-ups in remote locations, maintenance of post dated check inventories, exception handling, ATM based bill payments, pre liquidated collections, better visibility on all transactions for more accurate cash flow forecasts and informed decision making for the corporation.

With optimized collections, banks enjoy better stickiness from corporations while corporations benefit from lowered financing and accounting overhead.