Efficient receivables performance management frees up staff to add more value.
Client Story: Power/mation
Power/mation, which helps manufacturers optimize their processes, looked to U.S. Bank to optimize its accounts receivable process.
Power/mation is in the business of optimization. It helps a diverse client base improve and streamline their operations. The leaders of Power/mation know firsthand what automation can do, and they wanted to find a way to bring its power to its own accounting department. They wanted a bank that could evaluate its operation, identify improvement opportunities and, most of all, work with the company to create and implement a holistic solution.
About Power/mation
Power/mation helps clients in more than a dozen industries – from oil, gas, mining and energy to food beverage, medical and packaging, and other – optimize their manufacturing processes. The business, based in St. Paul, Minnesota, has automation specialists, engineers, project managers, designers and a sales force serving clients from office locations in Minnesota, Wisconsin, Illinois and North Dakota. Additionally, it has sales force representation in Iowa, Nebraska and South Dakota.
Power/mation offers safety solutions such as customer hard guard fencing, robotics, panel building and process automation to improve production and overall product quality, as well as industrial internet of things (IIoT) tools to boost and monitor system performance and pneumatic components to help lift, move and press in an automated facility.
To help clients get the most from their manufacturing processes, Power/mation realizes it first needs to get the most out of its employees. And that focus on working smart applies across the organization, including the financial function, where accounting manager Mike Solarz needed a banking partner willing to evaluate his operation and suggest efficiency-enhancing strategies. U.S. Bank, with its Working Capital Engagement review process, was the perfect fit.
- The challenge: Creating a sustainable, automated method of processing large check payments without losing staff.
- The solution: U.S. Bank VantagePoint®, an online receivables management solution
Too much time spent posting cash
Power/mation used to manually apply all its incoming Automated Clearing House (ACH) and check payments, which today numbers about 3,000 items a month, Solarz says. However, as ACH volumes increased and the company had to process those payments using remittance information that came separately, the process became unsustainable. Employees in his department were spending approximately 24 hours a week posting cash to customer accounts, and he thought much of that time could be better spent.
Solarz set a goal of moving to an automated posting process that would free up his department to make a greater contribution to the company. “We’re a team” he says. “We want to help the company as a whole.”
Keys to success
The Power/mation and U.S. Bank teams identified four things that would define a success in this situation:
- Collaborating to modify the VantagePoint solution for customers who send duplicate remittance information
- Including both the IT and Accounting departments in the implementation
- Receiving a single transmission file at the end of each day, which Power/mation uses to post payments the next day – this file ties to the daily banking reports, simplifying the case application and reconciliation processes
- Working closely with the bank to implement a split lockbox capability once Power/mation separated into two separate entities
A bank review of A/R processes
U.S. Bank worked with Solarz and his colleagues to analyze Power/mation’s accounts receivable processes. The review revealed Power/mation could automate, slash the time required to post payments and boost accuracy by using VantagePoint, an integrated receivables platform.
The platform uses business rules and exception queues to integrate incoming lockbox, E-lockbox, ACH, wire and RTP® payments into one interface, providing a consolidated view of received payments and delivering a posting file that achieves a higher percentage of automated cash application.
How VantagePoint makes the accounting team more efficient
When adopting electronic payments, many of Power/mation’s customers have come to rely on email and fax to deliver remittance data. They can’t include remittance data with the ACH payment. VantagePoint Remittance Reassociation captures the remittance information provided separately by those customers and matches it to the corresponding electronic transaction received by the bank. Using VantagePoint, more than 84 percent of payments are matched at the invoice level to customer accounts, Solarz says.
Powerful results
VantagePoint has made a real impact for Power/mation. By upgrading from a manual cash application process to one in which payments are automatically applied to customer accounts, the company has cut the time required to process customers’ payments in half. Furthermore, the percentage of ACH payments that are rejected, requiring manual intervention, has declined by approximately 40 percent. Ultimately, working with U.S. Bank and implementing VantagePoint, Power/mation was able to free up 13 hours of accounting staff time a week.
- 84 percent of payments matched at the invoice level to customer accounts using VantagePoint
- 13 hours of accounting staff time saved per week
- 40 percent decline in ACH payments that get rejected or require intervention
“VantagePoint provided a path to improve the effectiveness of our receivables strategy, introducing automation to streamline traditional cash application processes.”
- Mike Solarz, accounting manager, Power/mation
A seamless transition
The time freed up by the service proved to be a welcome benefit when the company spun off part of its operation into a second standalone business, Power/mation Solutions Group. Instead of having to add at least a half-time employee to handle cash application and other processing for new business, Solarz was able to maintain cash application staff in his department at current levels and have one employee handle processing for both Power/mation Division Inc. and the new entity.
“We were a little apprehensive about transitioning to using VantagePoint for both businesses,” Solarz says. “That was a huge change to the overall company interaction with U.S. Bank, but the VantagePoint solutions really handled the change very smoothly.”
A breath of fresh air
Working with U.S. Bank on the receivables processing challenges at Power/mation has been a “complete breath of fresh air,” Solarz says. “The bank took the time to learn about us, our operations and procedures, and the areas in which we could make improvements. VantagePoint provided a path to improve the effectiveness of our receivables strategy, introducing automation to streamline traditional cash application processes.”
With the time saved by using the solution, the accounting team has broadened its contributions by meeting the needs of the company’s new stand-alone business.
“U.S. Bank listened to us and identified a solution that has worked very well,” Solarz says. “We haven’t had any glitches or hiccups, and the solution proved very flexible when we split our company into two separate businesses.”
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