Deluxe Corporation (DLX) Earnings Call Transcript & Summary

Welcome, everyone, to today's webinar titled Revolutionizing Cash Application: Levers for Efficiency, Liquidity and Control. This is Brian from Strategic Treasurer, and we're pleased you could join us as we discuss how to transform cash application and relieve AR challenges. But before I introduce today's speakers, I have just a few quick announcements. Zoom offers several different ways for us to interact today. If you would like to post comments or questions viewable by all attendees, please use the chat icon in the toolbar. If you would like to ask your question to just the presenters, please use the Q&A icon in the toolbar. You can ask your questions at any time during the presentation, and we'll try to get to as many as we can. But if we don't get to your question, someone from our team will gladly follow up with you. There will also be a few polling questions throughout the day's webinar, where you'll be able to select your response from a list of multiple choices. You will need to click the submit button on the polling questions to have your response recorded. If you are here for CPE credits, you will need to answer at least 3 polls today. And last, please ensure that your Zoom display name includes both your first and last name so we'll know to whom we should send the credits. Our speakers for today are Rick Scholz, Managing Director, Payment Advisory Services at Deluxe; Tom Oberholtzer, Receivables Sales Director at Deluxe; and Craig Jeffery, Founder and Managing Partner of Strategic Treasurer. Welcome, Rick, Tom and Craig. And I'll now turn the presentation over to you.

Good to be with you, Rick and Tom, looking forward to today's discussion.

Same here.

Thank you, everyone, for joining. I know we have a lot to cover, and we really appreciate you spending some time with us today. So what are we going to cover? Today, we got specific key areas for discussion. We'll begin with pain points and other key challenges on this topic as we look at what are the pain point, there is a significant number of challenges that -- that organic stations face. We'll cover topics like forecasting, staff [Audio Gap] is the automation landscape [Audio Gap] to make [Audio Gap] improving accounts receivable activities, growth automation, use to artificial intelligence, machine learning and integration. So this will touch on some of the end to end, or end to end to end to end. So looking at the flow or the chains, the chain of connections between the payables organization and receivables organization. So how can AR really improve? Now look at blockers, what are those items that prevent our organizations from being highly automated? There'll be a couple of case studies that we examine. And I always find it useful to look at practical applications rather than just theory. So theory apply. And then finally, we have 3 takeaways. And I'll -- I'll do the first one, Rick and Tom will do the second and third takeaways, just to give you a recap at the end for how you might apply that in the organization. So with that dispensed, thank you again for joining. We're going to move into our first section. And Rick, why don't you kick us off on the key pain points and cover this section and information from multiple years on the research?

Yes. [Audio Gap] rating these trends because we've been kind of following this for several years. Forecasting, I mean, as you can see on the chart, really forecasting emerged in 2022. I think in a combination of the beginning of the challenges that the economy was having, but also getting over that hangover of COVID where people were starting to get back to the business as usual in a way. Not really surprised that it's left even further in 2023 as the economy continues to deteriorate. I think that's a big factor affecting tables concern around forecasting, where it being a pain point and becoming difficulty and important. I was a little surprised to be, if I asked that the workaround related to collection, the sharp decreases year-over-year. And I'm interested to hear others' opinions on what may have caused that. I have a feeling it's -- people are doing a better job of getting payments in. So the collection aspect becomes less and less of an issue. The reporting and visibility, we hear this not only in the accounts receivable, but as we look at things like faster payments, reporting and visibility has become a very large issue. The ability as payments get more complicated, I think being able to dig into the details even further than you may have before it becomes that much more important in order to post the transactions accurately.

Yes. And Rick, I would also add on that 1 in reporting and visibility, right? As organizations get larger, right, and they buy other organizations and they have multiple ERPs. And now you add that complexity on top of all of the different payment channels that have emerged over the last 15 years. And it is complex to be able to get everything into a single view and really understand everything that's happening within the organization. So not surprising to see that one go up.

Yes. That's -- we kind of anticipated that one more than the others. Craig? Are you on mute again?

Yeah. There we go. [Audio Gap] Things pop up in the way and keep going to hit mute and it keeps popping up another screen. And so you don't want to say that on a webinar because people hear how you're challenged for that. But yes, that brings us to the next area, and Rick, I think you're going to lead us off on this as well. So in addition to the first suite of issues from a survey, here are some of the other huge challenges that AR faces.

Yes. So I mean we talked a little bit about the visibility, part of the challenge that we hear from our corporate customers and our partners-come corporate customer is, to Tom's point earlier, about a combination of multi-systems, whether that's through merger or whatever causes that. But also each payment type has its own set of data elements, if you will. So what we see, I'm going to talk a little bit later, being able to normalize those data elements has become very important in automation [Audio Gap]. But visibility continues to be a challenge, especially if you're using multiple banks, things of that nature. I like to talk about the ability to support new billing payment methods. I make a comment. I hope I'm not insulting anybody, I'm going to say it again, but receivables is hard. Payables is easy. I don't mean easier, actually. So really, the payer is in charge, right? He's going to send you a payment no matter how he wants, he or she. You, as a receiver, you need to figure out how to be able to post that transaction. And it becomes complicated depending on how that remittance information is going to come in with that payment, getting the payment is relatively easy. Also, it's what you do with it and how do you actually get it posted. We all know about the challenges in every part of life, in every part of the industry with keeping and finding human resources. So teams tend to be fragmented, get into my end-to-end conversation later. But the teams are fragmented. They may not understand what others within the chain do and what their impact is on those other parts of the process. We're finding team members continues to be challenging and expensive, by the way. So that continues to be a problem. Cash application, which is our main topic for today, if it's slow or inaccurate. We talk about slow, but it also includes [Audio Gap] doing it manually. It's going to be slow, but it also tends to increase the potential for errors. And that actually has impact on the company's finances through increased DSO and the decreased STP creates all sorts of headaches, including down the chain unhappy customers. So I'd like to refer to these unhappy customers as the gift that keeps on giving. If your customer is unhappy because of billing errors or posting errors, if you don't resolve that error before you send them their next bill, it's going to be a compounded issue. So getting that payment applied properly and quickly actually helps improve customer satisfaction down the road.

Yes. And I would also just add related to limited visibility. I think it's not just across payment channels within an organization. And Rick, you touched on this just barely, but I thought I'd put a nail in it, so to speak, right? Because what we find when we talk to corporations, is that, there's really not a lot of great communication, most of the time between the different parts of an organization and how they go about applying cash can be very fragmented and can lead to one person thinking, wow, this process is super easy. When downstream, they have 2 other departments that are spending days trying to figure out how to apply the cash. And so being able to get an organization to communicate internally to understand that end-to-end process is really critical.

The middle 1 on the top, inability to support new billing or payment methods, I think everyone is seeing and hearing so many new payment types, payment -- new payment rails, new methods of rendering payments, and it's like, I think like Rick said, they can choose how they pay. And so how do you support those? That's an ongoing challenge of complexity, right? It's complexity you end up having to deal with. The one on the lower left, this slow cash application. DSO tends to be measured. It's almost always measured at the end of the month. So if you have slow cash application during the month, but you get caught up at the end of the month, your numbers for DSO look pretty good because they're not measuring it on a continual basis, just measured at month end. And so for those of you in accounts receivable, your treasury colleagues who are probably yelling and sending you cash all month, not just at the end of the month [Audio Gap] drain on cash, which means more borrowing or less investing. And so cash application matters, not just at the window dressing stage at the end of the month to the end of the quarter, but all month long. And so this is a perennial challenge where there's a lot of push to get things done at the end of the month so that it looks good, but it's at least as important to have it managed well throughout the entire month. So just a couple of thoughts there to keep in mind. And Tom, unless you think that was a favorite, given favoritism where we've been start, why don't you lead us on the trouble with payments?

Yes, happy to. Thanks, Craig. So a lot of studies have been done in recent years, right, which is where this data comes from. And that first 1 is really critical, that 57% of organizations are still manually applying payments, 57% payments are manually applied. And there's a lot of different reasons for this. And if you think of what both Rick and Craig were talking about with the payers, right, they have so many different ways to pay today. And they may pay 1 way this month and choose a different method next month. And so it becomes very difficult as an organization to -- to do straight-through processing, to have a hands-off approach, as much as every organization wants to do that. So combine the payer's ability to make different choices and the inconsistencies across those different channels with formats and data, and it's really not a surprise that there's still a lot of manual effort that goes in to applying cash today. And it's interesting. I've been doing this a long time, and when we take a look at disruptive behavior, I think everyone thought, "Oh, if we can get everyone to stop writing cheques and move to ACH, everything -- that will be nirvana. We'll have these electronic payments, no one will have to look at them. And it turns out that many of the ACH transactions that companies deal with today actually take more time to reconcile and to apply than paper cheques do. And the reason for that is because 61% of those ACH transactions today still come without remittance data. And I know there's been years of work to try to change that, we now have RTP going on, and that's supposed to now solve this issue. And maybe over time, it will help. But this is still the biggest problem that companies have is getting that data separate from the transaction. And so any technology that can help to limit what actually gets put in front of a human in order to have the decision is really a win for those companies. And having to manually deal with those transactions is very costly. And this $5 minimum cost, I think this was from a survey about 1.5 years, maybe even slightly longer ago. And we know what the cost of employees has done over the past 2 years, it's gone up fairly significantly. And so there are a lot of different reasons why cash application is at the top of mind within AR departments. Even if it may not be reaching the executive level today, which we'll talk about in a little bit. I don't know, Rick, if you have anything to add to that?

Yes. I agree with you. I think the minimum cost for [ exception plussing ] is going to go up and we should have some additional data very soon to confirm that. Interesting -- I'm interested to see -- and I kind of just like to throw whole stories, with the post office now very often telling people to stop mailing cheques, it will be interesting to see the impact that has not only on the 47% of B2B payments via cheque, but also an increase in ACH transactions because I do believe if we look at additional surveys, I think that 61% has actually increased over time. And I'm thinking it's probably approaching near to 78%. And that's all kind of fits in with the whole disconnect between parts of the process. Of course, treasury wants the ACH because it gets the money in faster. Well, if you can't post it, have you really gotten a benefit? And you also probably increased errors. So it will be interesting to see what happens with it. I just got a notice from my bank today. Don't pay by cheque, don't mail cheques.

Did you get that notice in the mail?

Not yet.

The costly line here, so this $5 minimum cost, like that's really cautious. I mean, I would think that the minimum cost is just probably $10, and the defects are really costly, they break a process. So that's a hyper cautious number there, which is I think is when we get rid of those manual processes, we do better. A lot of you who are used to our webinars are probably wondering where is our first poll question. And here it is. And so before you answer immediately, I want to explain this one. This is the first time it's showing up in the poll question. This is -- you can select up to 3. Just select 3 and order them first, second or third. Which areas are of significant importance to the organization? And there's 5 choices. Or maybe there's more, okay? There's 7 choices. So pick your top 3 and rank them 1 to 3 before you hit submit. It's the first time -- this is a new functionality in Zoom webinars. So this requires care and thought to look at what do you think are the most significant -- which areas are most important to your organization and rank them top importance, second importance and third importance. We've never done this before, so we look forward to seeing how that works. We'll give you a moment, and then I'll announce a few things for the chatbox, but don't jump the gun because I said chatbox. Well, let me click submit. Can you select 3? Or does it -- you had to pick all. Okay, there we go. See? We learned. I guess you have to select and you have to put them in the order. You have to put them first, second or third. So you'll have to [ tear ] them. See, we're learning. Yes. So see, we're all learning. This is part of our learning process. So you have to submit first, second or third for every single one, is that correct? Then the submit button is...

We're not allowed to participate.

We're not allowed to participate. We're like trying to train somebody on a system, but we didn't.

That you can't see.

Lee has written something. You can pick 1 and 2, and then list the rest as 3. That could be a choice, okay, and then submit. Now that was really complex. We have learned. Sorry for all the bruising that you took trying to answer this. Everything has to be categorized as 1 to 3. How much you do? One...

We learned that we have some things that we can send to Zoom as enhancements.

Great, then they'll do an update tomorrow like they did yesterday.

Let's not do that 1 again, I like to pronounce. Okay. First time, things are hard, right? It's like a new payment rail. We're learning. Brian Weeks, who is going to put a website, a news website e-mail address, I mean, website address in the chat box. And I'll give you some instructions in it. So if you go to ctmfile.com, it's a news media site, there's a newsletter option. If you click on that, you'll get 1 e-mail a week with summary news information or 2. You guys feeling that out? I know. Nobody don't want to do that, but that would be very encouraging to see that. We'll share more on CTMfile as well. And we're going to go easy on the typing stuff on the poll in the chat box for this. But let's look at the results. I think we broke everybody's mind on this one. Ouch. Okay. So what does this tell us? The first option -- the most selected first option is manual effort reduction. Accuracy is #2 for the first option, and for 1 or 2, it's the most. So looks like the top 3 are the top 3. Any comments on that?

Well, I'm not surprised because it's consistent with what we hear and what we've seen in other polls. So that's always encouraging. Surprised that accuracy isn't -- well, it's really kind of a byproduct. So accuracy being 1 of the top for 1 and 2, makes sense. But the manual effort reduction actually feeds in to accuracy in my mind. So I'll go with that.

Okay. I think we broke the process with this new polling method, it's like -- so you can be the -- I remember when multiple choice came out on Zoom calls and it broke it. So I apologize for that. I know people were having some challenges. So really appreciate that. We're going to go ahead and share the results of all the polls no matter what, but I will ask for -- I will ask for some stuff next time we do a poll question for you to put it in the chat box. But Tom, why don't we go to you again? What are the areas of impact that automation can have a real significant role to play?

Yes. I think that as right as solutions begin to be deployed that have more functionality than they've had in the past, we're seeing a number of things happen, right? When 1 of the key ones based on the poll if the poll was accurate and we could read it correctly, was right, the reduction or elimination of manual efforts, that was #1 in the poll that we just took and the unattended processes. And this takes on a wide range of things, right? It does today use artificial intelligence, and it uses machine learning and it helps us to let the software that we're using be able to determine how to best apply a payment without having to present it to someone. And this is becoming more and more sophisticated every year. And becoming more and more accurate every year, which leads to the second 1 there on the right, the improved accuracy and speed. And that also results in some financial insights and being able to do a better job. I mean, if you take a look at some of the technology that's out there today, you get some proactive insights based upon how your work is being processed. You can more easily see that your ACH transactions are increasing while other payment channels may be decreasing. You can see the percent of exceptions that you have on a regular basis. All of these things that were very difficult to get before are becoming much more easily attainable with some of these new solutions that are out there, right? The ability to do better cash flow predictions and be able to write improve DSO, obviously, cost reduction, error reduction, staff redeployment, those all come with the other parts of it. And I'd also like to say sometimes automation comes in little ways that you may not consider or be thinking of. And so if you're -- if you are either well into this journey within the AR department or you're just beginning it, don't lose sight of some of the things you may be doing today that you could be doing better. So I'll just mention lockbox as an example. You may have the ability to improve what you're doing in lockbox and decrease the number of exceptions you're receiving as an organization. And I would encourage you to go to your existing vendors, whether it's for lockbox or other payment channels, and have conversations with them and ask them to take a look at how your work is being processed today. And are there more automated ways that it could be done. So as you get more visibility into the data through new tools that are available today, this all does transfer into customer satisfaction, which really -- I mean, the goal of an organization is how do I provide a quality product at a fair price, be able to have people pay me on time, in a manner that I can accept those payments, be able to apply those payments and keep my customers happy and pay my employees and keep my shareholders happy, if I have them, right? So all of those things, through automation, are getting better. And -- but it is a progression, which you know we're going to -- Rick, you're going to talk about how we progress through all of this.

Yes. I am. When you talked about the financial side, I just wanted to add 1 thing is, not only can you see with some automation, especially artificial intelligence, kind of how the payment trends are happening, cheques versus ACH, for example. It also gives you insight into which of your customers may be historically paying late. Or employees taking deductions that aren't authorized, that kind of stuff. So those financial insights can be very beneficial to actually improve financial health other than just looking at how are people paying.

Yes, Rick, you're on a roll. Why don't you continue?

So yes, we wanted to -- just a reminder, automation is not new, okay? Automation, we sometimes don't even think about this. If you think about many years ago, I was around, I don't know how many of you were. Many years ago, everybody processed everything in-house, and that was the way things were done. And in the '50s, lockbox was invented. And that was really 1 of the first steps. Outsourcing was really like the first step of automation. So me as a company, I automate it by getting somebody else to do it for me. But if you think about things that happened in that environment, things like Micro-MaTch, checking payments up against a stockpile, they all used artificial intelligence. We just didn't call it artificial intelligence at the time. But that's exactly what was happening. The machine was actually smart enough to detect these things. So artificial intelligence has been around a lot longer than we like to think. And then the next step was getting transmission of receivables data rather than getting boxes of paperback or envelopes of paper, which some people still do. I don't understand that. But that was the next step in the automation progression. What we've seen in the last several years has been the use of AI and machine learning for things other than just cash application, right? Cash application was the big piece of it. But focusing on deductions has been very helpful to the cash application especially, but also for credit and collection processes. And machine learning, just to level set for you guys, so when we talk about artificial intelligence and machine learning, artificial intelligence, if you will, is kind of out of the box, right? Although it's not really a box. But -- so artificial intelligence is the starting point, but the real value comes when that -- those systems can actually learn themselves without somebody providing additional knowledge to them and learn from actions that various people take in the process. So in the cash application, for example, if I have an exception and I tell the system how to handle that exception and say, always do this, the machine learns that won't ask it again. But then may take it 1 step further and say, no, this other customer has a similar situation, we should process this the same way. So the machine learning is really where the additional value typically shows up. And about a year -- a couple of years ago, we started seeing bots used in cash application and other AR functions. No matter, it was very helpful at first. It's gotten a little confusing lately. The bots were especially important if you are getting your remittance data from a separate system. So the person paying you to send you to their system to pick up receivables there. The bots automated that process. Well, that becomes harder now because so many of those systems are actually using multifactor. But the bots are actually getting smarter now. So they are working on getting bots to be able to handle multifactor depending on which type of multifactor is used. So I think there'll be some advancement, even on the [Audio Gap].

I also think that -- I mean, technology is going to change every year, right? Things are going to get better, some things are going to be different. We're going to see new technology in coming years, some of which we have no idea even what it's going to look like. So right, as an encouragement to those in AR departments, I would just say, don't wait. If you're waiting for the right time to buy technology to help, there's never going to be a perfect time to do that. And so you just -- you need to get started.

Excellent. So we will move on to our next poll question. And think you can see that it's double...

That's a simpler way.

That was the simple one. We've got 2 single choice questions. How many systems do you have for AR? And then are you moving towards rationalization or reducing [Audio Gap] integrate data and systems like moving towards a more simplistic structure. So go ahead and enter those and hit submit, and then I've got some instructions for the chat box, which is different from normal. So hold back on that. Part of that was -- there's a fact check, lockbox is being said, to be invented in 1947. It's a little bit earlier. And then Rick, there was a question about the USPS dispersion. I'm sorry?

I was answering it now, might as well answer it verbally. So thanks for the question, David. We've seen reports in various news outlets that -- and I believe it's the Postmaster General making these statements also, but local postmasters recommending that people not send cheques in the mail. I don't know if it's -- if it's directed at consumers or they don't make -- they don't say it specifically, but we've seen reports saying that. And I'll be honest with you, we have seen a reduction in the amount of mail that comes through lockbox operations and things of that nature. So how successful, I don't know that, that's the reason for the reduction. But I think as they get to more people, I think the reduction will probably come mostly from consumers because they'll probably be the ones most concerned. But the notice I got from my bank this morning was that the post offices informed them that mail could take between 14 and 20 days. And the whole point was, be careful, you may cut off where your utility payment, things of that nature. So I hope that answers.

Yes, it does. So -- and I know I've seen the notice, don't stick cheques in the standing DO boxes. I don't know about -- not in the postal system at all. So I don't know where that's comes from.

Well, somebody also recommended to me, sorry, that you not use the window ones, which I can understand in a way, but it makes it hard for people who process those payments, right? Because you'll kind of lose that high-speed process capability. Anyway, sorry.

No, that's good. So instructions in the chat box, if we could -- if you have -- there's 2 words that you can type in there, CTM file today or Deluxe. Deluxe is here. If you have -- if you have signed up for the newsletter, it's a weekly newsletter, single e-mail on ctmfile.com, type the word CTM file. If you wrote it today, and you write CTM file, that would be awesome. If not, go ahead and write Deluxe, which is just a good way. We'd love to see 150 people type 1 of those 2 in there. So there we go. If you do both, you're going to like both. But -- on the current systems, just from the sake of time, looks like we're -- majority have multiple systems on AR. So this is a group that is heading towards complexity. We plan to a quarter, no plans to onshore a quarter. So good information. We'll include this in the deck that goes out. The more complex things are, the more other automation is needed. Rick, we going throw it back to you on improving AR.

Yes, I'll try and step it up because I see the clock is ticking. So we talked to customers about this all the time. What are their plans? So interesting that almost 1/4 of people in recent polls have said that they plan to spend more. I will tell you just anecdotally in conversations that we've had with our customers and our FI partners' customers, I'm hearing numbers greater than that. So maybe it just happens that we're talking to people who were really focused on this, [Audio Gap] seeing numbers you know that, I would suggest lean more towards the 40% to 50% now. Automating Remittance Association, Tom talked about the level of disassociation, if you will. These numbers are getting bigger and more challenging, and the remittent details that come with an ACH transaction are actually growing, right? So people are paying more invoices, which just increases their complexity. The efficiency, cycle time and cost is kind of fitting with the results of our whole, if we can read them properly with the 1, 2, 3. But this is interesting to me that improved cash flow, I actually would have expected to be higher on the list to help move electronic processing of the list. Cost savings, though, is understandable, in the current economic environment, as costs increased from the human resources and other resources. I can see why that's important. But I would have expected improvement of cash flow to actually be a little bit higher percentage.

And I would just add that related to the cost savings, traditionally, integrated receivables and payment reassociation and invoice matching tools have been difficult to implement and have really been only taken advantage of by the larger or largest of organizations because of the time and money that it takes to do that. I think the good news is that we're starting to see that change. And we're starting to see that technology become more available to the middle market. And I think that's going to dramatically help to improve these numbers as we move forward.

Great. Rick, why don't you explain this diagram, the from and the to state for integrating both data and processes or data within that process?

Yes. So this is based on a lot of research that we've done individually and through surveys and things. But we find that a lot of companies have the situation on the left, of course. Disparate systems comes from history, if you will, either through acquisitions or decisions that were made years ago. And systems that have kind of been kept through the years. A lot of companies -- and they actually use this terminology very often, this detective work, right? So it's -- I get in a payment, I don't how to reply it. I sometimes have to call the person who sent the payment, for more information, we do a lot of research on our own, trying to apply that cash accurately. But that's the time that's spent on this. In some cases, and we'll talk about and hopefully, we have time to go through those case studies, but the time savings can be quite substantial if you -- to automate someone. But moving towards an integrated suite, we have calculations that we use to figure out the cost savings, depending on what industry and things of that nature. But just not having to access multiple systems can provide some great cost savings and efficiency. Of course, we've been talking about artificial intelligence, which is really almost the nirvana of cash application. We've seen terrific improvements in cash application rates. And this is really an important point. By automating things, and not only are you improving customer service that we've talked about before, this came out of a specific situation that I worked with a corporate on it. It allows the ARR team to focus on the value-added, not only value-added from a customer service perspective, but they feel like they're producing better results for their company, right? So they feel like they're helping the company grow and increase revenue and things of that nature. And an extension of that, that we didn't anticipate, they're happier. The folks that are working in cash receivable department are happier. They feel like they're providing more value to the company, and it's not that mundane. Oh my goodness, I have to go to work today and figure out how to apply these transactions. So we do see a lot of companies actually trying to make this transition to improve all sorts of things.

Yes. Excellent. Now a quick overview of generative AI and deep learning, Tom and Rick.

Yes. So we just kind of talked about the difference between AI. So big thing right now is generative AI. I won't really kind of talk too much about that, but I wanted to talk a little bit about kind of the extensions, if you will, of these AI and learning. And that is, there are some emerging networks. So from all fronts, trying to digitize the data associated with payments on both sides, really on accounts payable and the accounts receivable because they do impact each other. And these [Audio Gap] are establishing, there's a worker who's working on establishing electronic remittance standards, so that I as a payer, send to you information and you as a receiver know what it means, right? That's a big problem today. But there are also some private routing networks. There's work being done so that to take paper out of the equation, if you will. So if I send a check and it's part of a network, it converts to electronic, and the receiver then doesn't have to process the paper and gets the data it needs to do the posting. So there are some private and some public networks that are being created there. The biggest advantage, generative AI in the payment space, the big 3 focuses are fraud detection. Fraud is becoming a much bigger issue. We all know that, I think. Many people think of fraud on the payables side and don't really think through the potential for fraud on the receivables side. There have been situations where people are stealing a cheque, making the payment to make sure that the payment goes through and then they know that it's a valid account number. So the accounts receivable folks are actually getting hit with some fraud accounts. But it also allows for payment optimization. Thinking about faster payments and which network the sender and the receiver work for. There are some -- there are some programs underway to figure out those optimizing payments and optimizing the data that comes with them. Big 1 for companies of all sizes and banks, in particular, is the advancement in self-service. If you've ever gone somewhere when there's a chatbot, and it doesn't fit with the 12 things that it looks for, you go into this endless loop and you ultimately have to talk to a person. One of the big things about generative AI is it taps multiple sources of data. So there should -- you should start to see improvements in the self-service through many of the websites and places that you go to look things up.

Microsoft was showing some new customer service technology at Money20/20 a couple of weeks ago that they're coming out with. And it's some pretty amazing things that this software can now do.

Yes. I think it will greatly reduce frustration, not just for us as consumers. In business, we often have to go places and try and self-serve because nobody wants to answer a phone anymore.

Great. Maybe you could take a couple of blockers. Tom, we can cover, and maybe Rick, can cover 1 just to make up a little bit of time.

Yes. I would say the new top blocker or the management initiatives and priorities, although it's always been, I think, a challenge, it's really become -- the main challenge now is trying to get these sorts of initiatives above the line within an organization so they can be funded and so they can have resources assigned to them. And I think that's just going to continue to be a challenge. And I think it's important that organizations work not only internally, but work with your partners, your vendors, your banks to be able to build strong use cases and business cases that you can take to your executive management to be able to show why these things are important.

Yes. The IT always shows up as a high item. And I think that's because -- there was a lot of focus over the past several years on getting to upgrading systems and things of that nature that got neglected for many years. So I think that's where that comes from. But that's always -- that's been an issue for years. And we have some ideas around these. I think rather than keep going through them, we can talk on the next slide, we talk about how to get around some of these things. So what's outside the corporate priorities, if you will? And it also feeds into -- you're competing for resources as well. And what we find a good amount of success with companies that actually collaborate with other departments within the company and try and figure out -- we already have some common ground, especially within the accounts receivable, I won't use the chain comment, but I do it anyway. If you collaborate with other people in accounts receivable who're responsible for different concepts of the transactions, you can often come up with a benefit to that you can share, and it helps to get your project, if you will, moved up. And specifically about the IT situation, there are providers that can help you with the tech lift. So picking a good partner that can actually maybe take on some of that technical work that your resources are stretched and don't have time to do, we find that -- that has actually helped advance some projects. And the last point I want to make is about communication. We see this quite a bit, where automation projects don't -- aren't quite as successful as we think they might have been or should have been. And it's a breakdown of communication. And specifically, there's 2 directions communicating with the leadership in your company so that they fully understand what the benefit could be. But then also once a project is approved and is underway, communicating with the people who are affected, often people worried about their jobs. And any time there's an automation or a change in the way we process things, people are worried about losing their jobs. So communicating so that they understand why it's being done and where possible, how it could impact or affect what they do for the company. It makes things a lot more successful, getting buy in from the top and from the bottom really helps.

All right. That brings us to our last poll question. And Tom and Rick, if you could decide whether you're going to do case study 1 or case study 2. And that comes up because we need to drop 1.

Well, let's do 1.

Okay. all right. So there's 2 poll questions, select 1 choice. Do you measure your straight-through processing through auto assign? That means that the cash is assigned to a company. And the second 1 is do you measure straight-through processing? Auto apply, which means it's assigned to an individual invoice. Here's the 3 invoices that are paid versus identifying the company on the top. Go ahead. Do you measure those -- do you measure that up at least a monthly basis your efficiency and throughput. I'll let you do that. For those -- after you select those and submitted those, I'll link you to the chat box. You can follow Deluxe on LinkedIn and Strategic Treasurer on LinkedIn, following those links on the side, feel free to click those. And then follow on LinkedIn. It's a good way to stay in touch, hear what's going on. As everyone wraps up on the measurement side, we'll go ahead and look at those answers if there's been enough responses. And yes, 25% new, 43% in shore and 38% onshore on the straight-through processing for auto apply. So pretty good information there to see. We'll share that with everybody. Just so you can see how that is.

That's interesting. It's something that we think about often. We had a situation where we did -- [ not an emotion ] study in the company. And they told us that [Technical Difficulty] for AC was 100%. Anybody says 100%, you know that can't possibly be. So when we went through -- they considered it as straight-through because the money was in the account. But there's straight-through processing from a cash application perspective, it was like in the 20% range. Everything was pretty much posted manually. So it all depends on how you calculate it. So I'm glad we asked that question. Thanks for everybody's honesty.

All right. Rick, why don't you take us through the first case study?

Yes. So the first case study is really interesting to me. I spent a lot of time on this, studying this. So the company was growing very quickly, most predominantly through acquisition, and they had a lot of challenges, of course. Any kind of distributor is going to have kind of a spaghetti factory of payments that come in. So they actually had -- their hit rate, interestingly enough, because of heavier lockbox provider process was pretty high. We very often see this backwards. But their paper-based transactions had a pretty high rate because the bank was actually capturing data from the remittance information that came in with the payment. So then, of course, they pull in that transmission and automatically update. They did receive posting files for ACH and EDI [Technical Difficulty] all challenged with EDI. And if you don't get a junk out, right? So if the data is coming in properly formatted or missing some information or just wrong, the transmission is going to have all that wrong information. So they had a very low hit rate on ACH. They also had a lot of that remittance information coming separately in paper, very often in the mail. So I always find this interesting, they were getting ACH payments, but the remittance details were coming days later in the mail or dropped off at the company's offices. So you look at their volumes there. Well, they implemented very good solution that included AI and machine learning. They did this through their bank because there was a known relationship and the bank had a lot of their data already. Because these tools typically rely on payment information, remittance details [Audio Gap] because the bank already had most of those transactional records and it was a trusted source, they actually chose this solution through their bank partner. The bank actually did a really good job of explaining the solution and implementing it and working very closely with the company over time. But you see here some of the great results. So they reduced -- and actually, I think it's more than 80% at this point, the amount of time spent on cash application. They were doing it, 2 people were doing it, shared responsibilities. On average, it took each of them half a day to do this. And post the last time I checked with them, they were basically getting it done in about 20 minutes per day. And their volumes have actually grown since we put this together. But the strength of processing ranges between 86% and 95%, depending on the day and the time of the month or things of that nature. And it's mostly because they've changed some of their processes. But even the 86% is quite a big improvement over [Technical Difficulty] that they had before because most of their transaction now coming in electronically. Their interesting staff story here is, it just so happened, they did not want to lay off people. One of the people that was working on cash app actually retired. And the other person is now working on customer service and doing cash app for 20 minutes every day. And it's actually -- this is the story where the employees become much happier because what they're doing is more pleasing and not so mundane throughout the time. So this is a great success story. Case study 2 is pretty similar. You can read it when you get the PowerPoint. But it's a similar good news story.

[Audio Gap] I'll start this off, and then Rick can [Audio Gap] the pain points. We began today's webinar [Audio Gap] some of the pain points. And if you understand that, that will be -- that's an essential foundation, understand where the improvements can come from, and you can see those identified. Just as refreshers, those pain points include forecasting. So it's the liquidity planning, both working capital and [Audio Gap] measurement but also from a liquidity standpoint, particularly for all our friends in Treasury, and there's elements about efficiency and scalability [Technical Difficulty] oftentimes go hand in hand. I'll turn it over to Rick for the [indiscernible].

Yes, here we go. So we've talked about this, but really important to partner. And that partnering is between not only internally but other areas within the accounts receivable process, but also with payers. We see great success when accounts receivable organizations actually partner with their largest payers and come to a mutual agreement on how best to make that pain. So that's why [Audio Gap] talking about end-to-end through end-to-end, not only how does it work within your own organization, but how can you partner with the people who are paying especially the [indiscernible] payers.

Yes. And automation tools today really have come a long way, and they -- and as we saw on that [Technical Difficulty] 100 study, where you can provide some amazing results today. And all I would say is that if you're struggling getting things approved, if you're having trouble getting buy-in within the organization, find ways to do something, right? It's critical as right as you take a look at where the inefficiencies in your processes are. Even if you can take little bites, take little bites. And I would say, strive for progress over perfection.

Thank you both so much. And thank you Deluxe. Thank you [indiscernible] for listening. I'll turn it back over to Brian Weeks, who has a few important announcements as well as a link for a podcast.

Well, thank you, everyone, for joining us today. The CTP credits, today's webinar slides and a recording of today's webinar will be sent to you within 5 business days. And for more on strategic moves for AR, be sure to listen to the Treasury Update podcast Episode 266 with Deluxe by clicking the link in the chatbox. Thank you, and we hope you have a good rest of the day.