Deluxe Corporation (DLX) Earnings Call Transcript & Summary

Okay. Well, welcome, everyone, to today's webinar titled Receivables Modernization, Enhancing Cash with Innovation. This is Brian from Strategic Treasurer, and we're pleased you could join us as we discuss how efficiency and convenience in collecting payments can be achieved through modern technology. But before I introduce today's speakers, I have just a few quick announcements. Zoom offers several different ways for us to interact today. [Operator Instructions] 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 questions, someone from our team will gladly follow up with you. There will also be a few polling questions throughout today'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 John Rubinetti, President, B2B Payments at Deluxe; and Craig Jeffery, Founder and Managing Partner of Strategic Treasurer. Welcome, John and Craig. And I'll now turn the presentation over to you.

Thank you so much, Brian. It's good to be here. Thank you, everyone, for taking some time out of your day to listen to this conversation on treasury and receivables. It's a great dialogue. So thank you for coming. And John, it's good to have you in the studio here live.

Thank you. Yes, I appreciate the invite and didn't have too much traffic coming down to 400 today.

It's great. It's in this world of everything is virtual, it's nice to see people face-to-face. But let's get started on what we're going to cover today. So this is our outline for today, our table of contents. We'll begin with payments complexity. We're going to discuss fairly briefly, how payments can be complex, how organizations need to scale. And yet there's all of these complicating factors, multiple sources and methods that people pay companies. All the different changes, there's issues about compliance and security. So payment complexity is something that many, many organizations are facing. And that is not shrinking or diminishing, it's either growing or growing very rapidly. Next, we'll talk about vendor partnerships. What are some of the benefits? And if we think about that from the beginning of if payments are becoming more complex, receiving payments or making payments but particularly, our focus today is on receiving payments. How do we reduce that complexity systematically? Occupy the mountain pass if we're thinking about strategy. How can we do that? And how can we make things less complicated? And the use and leverage of vendor partnerships can matter. Whether you're a bank looking to service and address needs of your customers or whether you're a corporate trying to manage that, this bears some attention on all of our parts. Then we'll look at modernizing receivables. We call it a way forward. There's more rails that come up, more payment rails that exist, more choices, different options. How do we do something and set our receivables groups up in a way that's sustainable, that allows the organization to grow and adjust and support the needs of our customers. There's quite a bit here and how we think about that from a workflow and an end-to-end or an end-to-end to end-to-end perspective. That means from our organization all the way to the others' organizations starting point. So we're going to be looking at the matters from that standpoint. And then at the end, our key takeaways, we'll summarize some of those key thoughts about looking at all the needs, a comprehensive look. We'll touch on -- consider outside services, and we'll look at vendor partnerships, which we just covered as well as how automation and standardization can really assist an organization. So with that, we're going to jump into receivables challenges. And John, maybe one of the first things you could do is have a really brief introduction on your role. There was some information on the headline there, but just explain your role at Deluxe. And then that will give a big context and then get us started on receivables challenges.

Perfect. Great. Thanks, Craig. Appreciate it. Appreciate the opportunity to be here. So as I said, I'm the President of B2B Payments. So what does that mean? So I own lockbox. I own digital receivables and digital payables at Deluxe. And so been here coming up on 100 days, 98 as of right now. And really excited to have joined the company kind of at this point in the transformation that Barry has really led. Most folks know us as a check company which -- print company, and we are, and it's still a big part of our business, but the future for us is really payments and data. And so a big part of that is kind of what we do from a lockbox perspective and then using that as a pathway into the digital receivables and payables part and looking to kind of really integrate all aspects of that for our customers. So pretty excited about the opportunity. Like what we kind of have from a market share perspective, from a lockbox perspective, which gives us that really good path. So pretty excited about that. Just a quick background. I spent the last 10 years at what I'll call First Data-Fiserv. I was at a joint venture of First Data for the first 5 years at Bank of America Merchant Services. And then the last 5 years at Fiserv after Fiserv bought First Data, and I led our SMB, our mid-market and our partnerships group at Fiserv. Prior to that, I was on the banking side, which is one of the things that really help me in my current job is really understanding the treasury side. So I was at Citizens Bank for 5 years on the -- ran their treasury sales for business banking, commercial enterprise banking on the lower end and the commercial card program there. Prior to Citizens, I was at American Express for almost 12 years on the commercial card side then the B2B payment side. So kind of been around financial services and payments for a long time. And so I feel like all of those experiences kind of bring me to where I am today, and excited to bring that to my customers. So -- but again, I appreciate the opportunity to be here with you and share some thoughts. So we'll start with receivables challenges which, again, I think most people kind of know these. I'll just touch on them. But I think what's important for people to know is the accounts receivable automation market size is pretty darn large. In '23, it was $3.7 billion. It's expected to grow at about a 14% CAGR. So in '27, they expect it to be about $6.5 billion. So a lot of opportunity for us to automate in this space. And everybody knows the #1 thing, which is the top left there, manual processes. This is invoice generation collection, payment processing reconciliation. Those are the things that most mid-market companies and probably some large corporates still do, but most SMB and mid-market companies really, really struggle with this manual process. So that is a target area for us to make sure we provide solutions, but most people need to understand those different aspects of their process and understand how to take them from manual to a digital process. I think the second piece here, inefficiencies in cash flow. This one is interesting. When we surveyed all of our customers, 70% of them said, real-time visibility into cash flow and in forecasting is priority. And because of the manual processes, those inefficiencies in that cash flow management really impact their ability to forecast and understand their liquidity in that. So that's another area that challenges all of our customers today. I think the third one here, lack of integration. This is one -- so many different portals and solutions when you're trying to automate the process that then have to be integrated, right, for the different payment modalities. And this is one that I know you have a favorite quote, and I'm probably going to mess it up here. But if you automate a portion of the process, you're not really solving the total problem, right? So go ahead, you could give me the quote that you like.

Well, yes, it's attributed to anonymous and other people. I do say it a lot. It's, "If you optimize part of the process, you suboptimize the whole."

There you go.

It's like you fixed this part, but now you made other parts less efficient.

That's right. And that's exactly what happens here. You try to solve with one payment type or that. And so you automate that piece, but there's still that lack of integration to bring it all together is something that everybody struggles with. And then the fourth part that I'll cover here is the fragmented customer experience. Again, when you look at this process, it's not just about you as the receiver. It is your customer, too. And customer satisfaction is absolutely critical because all it does, it leads to problems with the payments, then they have inquiries. They have a lack of confidence. And that's something that -- and I'll talk about it later about kind of the shift in the paradigm is it can't just be all about you. You have to take your customer into consideration and create a win-win because you don't want to lose those suppliers. So the fragmented customer experience is something that I think people are paying more attention to because customers have choice and unfortunately, it's easier to leave today. And so that's something you got to really focus on, is that good customer experience.

Yes. Excellent. Thanks for stepping through those. Yes, there's a lot to tie into the role of, let's say, some in charge of accounts receivable as well as treasury, as you were talking through those. I was like there's so much overlap here. Payment and information is disconnected. Well, treasury may care about knowing that the payment came in, that they can use those funds, but there's a cash application side. If you don't do the cash application properly, your records are off and you might not be able to apply everything. On the poor visibility side, that is a challenge for accounts receivable and for treasury. John, you talked about efficiencies in cash flow management for forecasting examples. Treasury is always asking AR, how much you're going to collect this month? When is it coming in? And so they're looking to have good insight into it, and treasury's looking to see that same type of information. Payment delays, of course, is one issue, but not having that visibility to when payments are actually happening is a problem, even if something is going to be late, but you know when it's going to happen is more effective for the organization than this mystery, and then a payment shows up in an unexpected time frame. Knowing ahead helps you to have more of your forecast to be known. I think the other challenge, and this comes through in so many ways. When we look at the top challenges on AR, we see this in our research. You talk about this, John, all the time. There's how do we scale in light of goals for efficiency? That's always one of the top two items. The second item, it can either be one or two, has been more recently been #1, and the issue is concerns about fraud and security. And so we have these -- we have to scale and be efficient and we have to do that in a controlled manner. And some of those things mitigate or militate against one another to address those. And so those are some of the key challenges. And so there's more that we can talk about for sure. But as we discuss this and then move into what does the traditional landscape look like versus a modernized process? And this is a conceptual chart. So we're going to move ahead and look at the traditional landscape here. And please bear in mind, it's simple, and you hear some content for it. But I just wanted to talk through this briefly. I think I'll start off and you may have some things to jump in. Or...

Yes.

Yes. Perfect. So yes, the blue box, if you can see that stylized box around it, it's maybe partner managed. It's your trading partner. They have their ERP system, their payable system. They decide how are you going to send payments in to the company that's receiving them. Is it check? Is it check-in list? Is it ACH? I send an ACH with remittance information, the vendor records. Are they using virtual card? Are they using wire? Are they coming through one process or multiple processes? So they're making all these decisions, and then the receivers like which way is it coming?

Yes.

Do I get a check? Is it being sent to my office? Is it going to a lockbox? ACH, is it coming with no detail?

Data, yes.

Yes. Or emails coming through with some of the data and someone's manual match up. And across all these areas, this is fairly typical. And then as you look at the company managed side, you have -- it's got to be received in all these locations that we talked about in the first box within the purple domain. And then how does it come in? What account is it hitting? What receivable system or admin system is applying it? And those usually associated with different accounts. And then they're posting those so that AR is being relieved properly. And then there's a whole reconciliation process that has to tie in, not just sub-ledger to general ledger, but even on the bank reconciliation side, John.

Yes. And this is where kind of you try to figure out where is the manual process? Where do you focus? Where do you try to get some automation and really try to give yourself a better end game there, which is easier reconciliation. I mean that's it. The reconciliation is what kind of gives you the visibility that you really need. So yes, when you now look at kind of the modernized process, if you will, it's utilizing a third party to try to manage that middle piece. That is typically the most manual. That is typically where you have a lot of complexities and a lot of things I talked about on the first slide, which is all of those components of the manual process that most companies are trying to deal with today. By utilizing a third party, we see our statistics are you get a 50% reduction in staff hours to those manual processes by moving to this direction. I can get it first day. But that's what we're seeing across the board. The other piece that we see for some of the solutions we provide are up to about a 95% invoice detail matching. And those are the critical things when you're trying to manage this more effectively is understanding those two things. It's lowering your cost and your manual touches, but really increasing the matching details so that the reconciliation is better. And I think that is what a third party can help the corporate do more efficiently and effectively. And in some other cases, with some mid-market companies, they don't even have the people to do it. So this is -- this has also kind of taken some responsibility off of someone to spend more time focusing on their customers, on their vendor relationships, things like that. So by letting a third party kind of come in here and help automate these things, it allows you to really focus on your customers more and do more things for them. And again, I'll talk about it later, the win-win that you can create. And if you can have more time to focus on that, I think that's where the wins are for customers.

John, as you were talking through this, one of the things -- a couple of things came to mind. One was where we draw that purple line, we drew it around the receivables areas. Well, that could go back all the way to the accounts, of course. But when we talk about scalability, when does it make sense to -- when do you need to simplify things and modernize them? I think that's part of the decision every company has to make. The more you have volatility and variability in that middle section, the easier it is to simplify by going to a party, a counterparty, a bank, a third-party provider who does these functions because you can see check and ACH, virtual card wire, all these payment processes, for example. Checks are slowly decreasing, but they're not going away. ACH is going up, use of virtual cards. So all of those are -- it's an environment of more payment rails, more complexity. And so you either have to manage that complexity on your own or have someone do that for you. And so that's really the decision point. If I get 2 payments in a month, I don't need any of this, right?

No.

I just get it. But as I -- as your organization grows, this matters to both the receiver as well as the sender that we can scale our organizations. This is really some good stuff.

Yes. And what I would say is I think if you're -- what you have to do as the corporate is really take a look at the process. Where are the pains and what are you trying to accomplish? Because not everybody needs that visibility. And that's okay. They just need more automation because they have lack of resources. So those are the levers. There's -- everybody is slightly different. That's why even what we offer, it's not a one size fits all. It has to be kind of customized to see what they need, maybe what you need first and then develop a path. So it happens with a good conversation within your company first and then with the provider to say, "This is what we're trying to solve", not just, "Hey, we just want to automate our AR." That's -- while that would make it a whole lot easier, you still -- you're going to have problems after the fact. So it's really -- it's a 2-part process. It's the identifying by the corporate, and then it's having the right conversation about what you're trying to improve.

All right now. So we've come to our first poll question. And this poll question is double stack. There's two questions within it. We're going to see what everybody is thinking and who's on today. First is how many systems you have for accounts receivable? This may be billing, cash application, multiple ERPs. Select that for the first one, just make one choice. The question two is, are you moving towards rationalization to integrate data and systems? Are you trying to simplify and reduce the number of moving parts? Yes, currently, we plan to, no plans to. Or ensure after you select both of those, hit submit, and we'll be good to go. So I want to mention something as well. We -- if we get 150 -- let's just say, 150 people typing the word Deluxe or DLX in the chat box, we will send all the poll responses, the summary poll responses out to you with the deck that comes out. If you type the word poll, that's okay, too. All of those look good from our standpoint. So go ahead, and we'll see those in there. It's just 150. It's a small percentage of those that are on. So thank you for being on. Thank you for engaging, and I want to make sure you answer the poll question and hit submit. This will be most excellent. And Brian, if you could also pop up the LinkedIn links so that our audience can make sure they follow Deluxe and Strategic Treasurer on LinkedIn.

Yes, please.

Yes. That makes the marketing people happy and they make all these things go. They make all these things go. We need that. John, this is an audience that it looks like at least 60% has multiple ERP systems. Some don't know exactly how many they have, which is a full 60% -- or full 22%, 21% have won. So there's some level of complexity there. The second one I wanted you to comment on, are you moving towards rationalization to integrate data and systems? So yes is 28%; we're planning to, 25%; no plans to, 18%; and unsure is 30%. So pretty even with yes, currently, we plan to.

Yes. I would say if you're not planning to, I'd probably be asking the question as to why. I mean there's a clear savings opportunity there to rationalize it, whether it's rationalizing the [indiscernible] or it's just rationalizing your number of feeds coming in. Whatever it is, that rationalization does need to happen. So I would say if you're not thinking about it, I would just challenge you to say why. Like because that is definitely one of the larger things we hear from customers that, that's for them, they want to shrink it down. Even Deluxe, 5 years ago, we had 50 different systems. Now we're down to 1. We had to rationalize from a cost savings perspective. But then just from an operations perspective and the cost of ongoing operations, which is the thing that people are now starting to realize. Those multiple integration, that's no longer sustainable, and it's a cost strain.

Yes. Excellent. Thanks, everybody, for answering. I know we've done pretty well. I think we had 120 responses with Deluxe in the box. So next time, we'll have another opportunity to increase our numbers. So let's go back to the next screen on the paradigm shift. John, maybe you can start us off on yours. This is the paradigm of I have to keep adding, receiving sources and I have complex [ CMA ] system. How do we make that shift in the new environment?

Yes. I think when I kind of looked at this slide, I tried to kind of understand where people are today, what they're hearing in the market versus what's really the consideration. And the first thing, desire to offer different forms of payment and having the channel flexibility sounds important. And I think it is. Choice is something that consumers drive. And they're the ones that actually decide where people go. You can't just tell them like, I always use the example of wallets. Everybody came out with they wanted a wallet. But the adoption of it didn't work because people still like their own choice. So choice is important, but I think the paradigm shift is to what I'm calling kind of this mutual win-win kind of scenario with your -- you and your suppliers or your customers, whoever it is. And so you can't just say I want to take card payments and kind of force that out because maybe that doesn't work for some. And you have to kind of think about how do you create that? So if you're going to do card, can you accelerate the payment? Does it make sense for both parties? And understanding that, I think that's the shift. If it was just on the supplier making -- the company making all the decisions, you risk losing customers, you risk losing suppliers. So that's where I think the shift is. And so you can't just be just focused on your process. It's got to be how do you create that, because some are strategic suppliers, some are just suppliers you cannot -- you can't replace. And so I think that's a piece that is changing. And I think all of these kind of have that component to it. The need for liquidity, just trying to get cash in the door faster, that is a zero-sum game. Someone's got to lose. And you don't want that. You don't want that as a company. You want to optimize, you want to be -- but you also want to be a good partner. And I think that's what's shifting because I think people just need to be more conscious of the decisions they make and how it impacts the whole flow. Maybe someone's not ready to make that change for you. And so I think those are the things that I kind of wrap around this paradigm shift, drive for visibility and efficiency. Again, it impacts both sides of the equation. And I think when you have less of a concern, which is the next one here, lack of concern for the process and defects at your partner, that just comes back to you. That's the boomerang. It just always comes back. If you're causing a disruption on your customer or your supplier side, that comes back to you. And so you want to keep credibility with your customers. You want to keep the benefits to be mutually beneficial. And then it helps accelerate this quite honestly when you have that. I've seen us try to implement when the customer says, "This is how we're going to do it. We're just going to kind of force our customers or suppliers to just go this way." It just never works. And inevitably, you damage a relationship that's hard to win back. Once you damage them there, they're hard to really build that credibility back. And so I just think if you're going to approach this process, the shift is really how do you do it together with your partners and to help it make sense for both because if you create a win for them, and sometimes it's their visibility, sometimes it's an easier process for them, that's a good thing. But if it's just your thing, I just don't think it works well.

Yes. Instead of focusing on my individual area or end-to-end within the company, looking at both parties matters. And that ties into your comments, too, about defects come back to haunt us. If I have a great payment process, if I'm paying or receiving, it depends on the area of the company, how you refer to it. But if I'm making a payment and I separate information from the payment and the receiving group or company doesn't know how to apply it, they're not going to just solve the problem, they're going to I can't solve it and then they're going to call you.

They're going to push it back.

They have a defect. You have a defect. We have more cost and inefficiency, that makes the whole process less efficient. So that's why that consideration matters, that from current thinking to this end-to-end view matters so much. I'm going to flip to the next slide and on payment complexity. I'll start here and talk about this. So we had that picture that showed in the middle how third parties, this can be a bank, it can be a third-party provider like Deluxe or there's different ways of solving either components of the process or whole sections of the process. And it is very, very useful to think about how outsourcing can help simplicity. If we take apart the pieces that are moving most radically and isolate those and someone else handles those, they handle the up and down. And we see that in so many industries. If you look at Amazon Web Services, Microsoft Azure, their data center is like, "I need two levels of compute in one minute, 500 the next, [ 2 the next ], 17." I only pay for what I use, whereas before, I had to have 500 units sitting idle, and it's the same way on the -- going to your bank, going to a third party to handle that. And what are some of the issues that multiple payment types present? Well data comes in, in different formats, partial data, missing data, it's disconnected. So I have to reassociate it with it. It comes in physically, it gets lost or delayed. And I don't know if anybody is here from the U.S. Postal Service, but it seems odd that sometimes it's like mail in the same state can take 2 weeks or it can take 3 weeks. Sometimes it comes back 8 weeks later, it didn't get lost. It just got lost for this period of time, like it went to another universe and then came back. And so physical has a challenge, but we usually have to address multiple payment types. And that last thing about the unevenness is that planning and staffing for changes in payment types, payment rails and maybe volatility like how does your month run, that becomes a challenge on the corporate side. So if you go from 1 to 2, it doesn't matter. But if you have significant spikes, that's much harder to staff for internally. So those are some of the issues that multiple payment types, monthly frequency exists. John, do you want to cover the right side? Do you want me to cover that? How...

Yes. Go ahead, keep going. I think you got it.

Yes. Okay. So the schematic on the right, the chart of like what's going on? ACH is growing, check is declining, wires moving around, all that's meant to show is there's variability over time, which is what we talked about. And so having a third party for many organizations, when you reach a certain level of complexity, this makes sense because now you've isolated that. You've put it on to someone else's back, on someone else's shoulders, and now you're focused on forecasting, you're focused on relationships, you're focused on working capital management, you are achieving your goals for efficiency. And I mentioned some of those drivers that if you're in AP or AR or treasury, those things certainly matter.

Yes. And the way I would summarize this is, again, kind of to your favorite quote, like if you're just trying to automate one piece of this process or one modality, it doesn't work. So looking for a partner that has the ability to bring all the types into one place is pretty critical. And there's not many that are out there that actually do all of that, but they are out there. And that is something that really helps kind of, to your point, if there is all the fluctuation or variances throughout the months or that it doesn't matter. And so that's why the type of partner and the capabilities of the partner matter.

All right. Well, let's move to our second poll question. This is a single question within there. So if we look at the question, it's our focus on the business process is most accurately described as end-to-end. This is internally and with third parties or what we call end-to-end to end-to-end. The second one is end-to-end focused on within our company. And then third is, we have more of a bias towards within a particular function: billing, accounts receivable, treasury. And then the last one is, I'm not sure. So go ahead and select that, hit submit, and then I'll make a note. We need 22 more Deluxe or DLX in the chat box to hit our 150 response number. Brian is diligently counting those up, keeping him busy. We don't want him falling asleep. That's a -- he's counting them, he's using AI to count them. I actually don't know how he counts them, but he puts numbers. So [ I never go back ] and check, so I should do that.

Yes, maybe.

Just to let me just say, "We need 22 more." There's like 190 that came through. But he has to look at like the question-and-answer box, individual chats, the webinar chat, it's like it's kind of in a lot of places.

It is. Sorry if we got you in trouble, Brian.

We're going to audit that as we'll count it. Maybe Zoom can do how many times people type that.

Yes.

That will be enhancement. So I digress. That's my fault. So John, the focus is the full end-to-end. You have a lot of people that love your way of thinking, which is 37%, a little over 1/3. Almost 1 out of -- almost 40% end-to-end internal processes. This is probably the most common in organizations as we focus on internal, 25%; and then within a particular function, 15%; and then 23% unsure. Any thoughts on the audience compared to what you see in the general market?

No, it's funny. That kind of came in exactly how I kind of thought.

Exactly to the exact number?

I don't know about exact, but yes.

But close?

It's close enough to kind of...

I had these exact numbers. I wrote them down on a piece of paper. No.

But it is. And I think it speaks to the needs in the marketplace because some do. They have a bit more complexity and really have to -- they have strategic suppliers that they have to align with, so end-to-end is important. Others, it could be about them. And I always said, keep your customers in mind. But the reality is you may have an easier process. And so just focus on you and get better and do it more efficiently. That's okay. My advice is just to look at it across the board. Understanding it is probably more important than actually putting a specific plan of action either part of it. I think making sure if you're a corporate that you understand the process, who is critical to it, et cetera, and then you can make some decisions. But the unsure, that's okay. I would just encourage you to map it out, map it out, look at it, take a look at it, make sure you understand it because that, to me, is the most critical, understanding it. You can action it after that. But a lot of folks just don't understand it. Like we, when we go in and talk to them, sometimes they're revealing things. They're like, "I didn't even know we did that." And that's a reality. Because sometimes, things just happen, and you hate that expression. That's just how we do things, but that is a reality. And so sometimes, it's a minor tweak and sometimes, it's just understanding that how it works. And so that's what I would encourage you to do.

Yes. That's great. So these are poll questions. We don't have -- like on our surveys, if you're used to our surveys, we put -- we have information, firmographic and demographic information. So some of that, I'm not sure, it might be a banker who sells stuff, may not be sure how they handle it internally. We don't know exactly, but those are -- that was some excellent insight. It seems like it's a group that's pretty attentive to payment processes, so it's good to see.

Yes.

We're going to continue on, and this is -- I'll just advance the slide here to -- I think I may have advanced it too many times.

I think that's it.

That's it?

Yes, I think you got it.

Okay. Yes.

Yes, I think this is -- even to my point earlier, just understanding the process that you have and the process of your payment types. When you look at the physical check type, I think the goal here is reducing the lag time with payment automation. And if you look at a physical check, you look at the multiple times that there's just a lag. And that impacts visibility, forecasting, things like that, okay? Moving to digital. There's good improvement, but there's still a lag time. And that lag time can still be a significant part of the process and something that I think is critical for midsize companies and larger SMBs. That's why the automation is critical. Because even if you improve those lag times, you still have another. And so understanding this process, understanding your process, that's why I think that's important is to kind of just map it out like this and start to see where there's inefficiencies.

Yes, that's a really good point. You talked about lag, which is we've used terms like float, mail float, processing flow, the latency issue, especially with the more physical something is, the more there is a delay, transporting some items somewhere. But there can be other issues that cause delays or lags that matter greatly. So I appreciate your comments on that.

Yes.

All right. So we are ready for a third set of poll questions. Now please understand the distinction here. This may sound like the same poll question as last time, but read carefully or listen carefully because I'll read it. It says do you have an end-to-end view of your credit and accounts receivable process? So now we're focused on credit and accounts receivable. Yes, internal steps for accounts receivable; yes, internal steps for AR; yes, external steps with customers. So you can select any 1 of the yeses, 2 of the yeses, 3 of the yeses or you can select no. So this is credit and accounts receivable process, how broad is your view? Excellent. I'll give everybody a moment. And Brian, if you would go ahead and pop in the LinkedIn quotes, we have enough response, enough DLXs, Deluxes poll, in other words, that were typed in the chat box and in the Q&A. So we're there. But one thing I found no matter what I tell people, like I harp on people to type something in there. Then when I tell them to stop, they're like, "No, I'm still typing it." I know it's just runover, but that's kind of fun. So yes, there's Deluxe without the E. There's some lower case DLX, capital DLX. Whatever is the most is what you're going to have to change the name of the company to next.

Got it. Okay.

That's how this works. A lot of people didn't know that. John, any comments on this, how the breakout is here?

What do you got?

So we got, okay, that's right. On our screen, we don't see all that. I've got my specific viewer, I can see it. So internal steps for AR is 56%. So over half, then we got 4 out of 9 or 44%, yes, internal steps for credit. And so a little more on AR, a little bit less on credit. And then yes, external steps with customer is 30%; no is 25%.

Okay. That's actually encouraging. I mean it sounds like from the responses that the approach that I'm talking about, I think people are getting there. I think we have to work on the nos or help the nos is the way I would say it. But again, I think visibility into your process is so critical. What is the process? Where -- just again, use it back in the napkin to just map it out. Doesn't have to be fancy. But once you can start to understand it, you can start to even put the lag parts in your own process and know where the pain is and where to focus. So it just leads to a better conversation to fix.

Yes, that's excellent, John, when you said get visibility into your process. When we're reviewing areas, it is very interesting to see how management describes the process versus what we observed. And this has been our experience with hundreds of these is that the process as described sounds pretty good. And then you get to the area and someone has changed the process that breaks working capital, that ruins efficiency for all kinds of reasons. I'll tell one -- I mean, there's lots of stories, but it's amazing how someone can do something that helps them avoid some pain, but breaks what they're trying to accomplish. And when John says look at your process, it's look at what is on paper, what's drawn out on the Sarbanes-Oxley flow chart to the 6 page with swimlanes but then look and see what's done.

[indiscernible].

Yes. And oftentimes, there's a lot of introduction of challenges and problems in that environment.

Yes. And again, especially in larger companies, there's a little bit more accountability there and staying within the lanes, we'll call it. But at a midsized company and an upper, we'll call it, upper SMB, they're kind of just trying to get through stuff sometimes. And so while the CFO thinks what the process is and kind of can tell us what the process is, and then when you look in, you're like, "We switched it. Why did you switch it?" Well, because that just helps speed up what they were doing. And so that is exactly what happens out there is that they think it's one way, but it's the actual getting it done has shifted. And so that's why just understanding the process, I think, is so important.

Yes, excellent. So we're going to -- I'll advance to the next slide. This is about strategic advantages. And the next couple of slides we're going to spend a little bit more time on each of them going through it. But I'll cover this one or at least get it started. And John, I know as a partner, you want to jump in on some of these items. What are the strategic advantages? We talked about some of them and saying, "How do we occupy that mountain pass to protect against invasion?" Or whatever the example as I gave. What are the advantages? Well, better cash flow from faster cash application. And some of you may be saying, "Well, that's not true because if I get the cash into my bank account, how does faster cash application get better cash flow because that's disconnected?" And here's what I would say with my treasury hat on is the less you have defects or a smoother process, the less there's going to be a holdup of shipments. The more they want to deal with you as a customer, the faster you can handle issues that may be slowing up returns and more resources can be directed there. And so that's an indirect way of improving cash flow. If you have faster cash application and faster processes with less errors, you get paid faster. Not that someone's going to say, "Hey, my terms are net 30. I'm going to start paying you in 20 days," but all the defects get pushed off and you might have an average payment for any type, there's a problem of 60, 65 days, 70 days. And so just reducing that percentage of defects now changes your DSO. No, nobody is going to pay you right away early to make that happen, but it has an impact on cash flow. And so that's one of the things that sometimes treasury people don't understand because it's not intuitive until you start thinking about the whole process. And improved working capital management is a clean process, allows for faster scalability. Some of those numbers of DSO, DPO, days inventory outstanding, all of those, if we improve working capital management and we improve those, the financial measurements, some of those relate to how fast an organization can function. There's the operational side and then there's the finance side that helps that, and both of those feed one to another. I've got a lot more to say. I did want to give you a chance to jump into. We can go back and forth here as you like.

Yes. No. And again, one of the things I like here is that comprehensive end-to-end view. I mean that, to me, is so important for these midsized companies and even large corporates because having a comprehensive view of it, making sure they understand the impacts on each side, that is what allows you to get to where you just described. And so if you're just chasing cash flow or working capital, I think you sometimes lose sight of the comprehensive end-to-end. If you focus on the comprehensive end-to-end, you get the benefits of the other two.

Yes. Excellent. The next point on their continuous improvement that fosters innovation and support scaling. And I just want to point that out is, I'm not making fun of Martha Stewart. I think she does a great job on a number of things, but you watch her and she's like, "I made my own greeting cards," and she didn't start with like paper. She started with trees. She started [ motioning up, "I'm motioning up ] with a hammer." I don't even know if she actually did it. So I'm just saying it's like she makes things from like really from scratch. And there's like a car and it's like, okay, that's great. Some people can do that and build it on their own. Same thing with business processes, maybe that's your area of expertise, but probably not. And so having vendor partnerships were either part of the process or the whole process can allow you to focus on other parts of your business. And the ones that make money on doing that, that, that is their bread and butter, that is their focus, that is their green cards. They are pouring money in to make that more efficient because when they make that efficient, they spread it out over all of their customers. I mean that's the business you're in. And so that's a way of supporting, scaling and improving efficiency. And I think that's one of those goals. When you look at partnering and you look at advisory services when you look across the board, how do we have partnerships or by technology or services that will, by design, increase in value over time? I think that's an important thing.

I completely agree, being a former consultant myself. There's so much benefit from having someone else look at your process. Again, people don't mean to be, but they're biased. And it's okay. It's -- they're passionate, that's what they do. They think they do it the best way. And we're not saying you're not. We're just saying, let us look at it and take that fresh -- everybody said the fresh set of eyes. Fresh set of eyes are good in this particular case because we're looking at it from that end-to-end view. We're looking at trying to uncover the areas that we can help. And so utilizing that third party, that is the benefit of having that conversation, whether it's advisory services in the treasury space to help them focus, same thing. And I think we're -- we want to do that for our customers as well because that's how you benefit and add value. And I think that's important, and that's what a true -- I love the way we wrote it here, true vendor partnership. I kind of hate the term vendor. But when you put partnership, that's what you want to be. You want to have a partnership with -- and they want them invested in what you do. You want them to help you. And you want them to create that win-win, and that's a partnership.

Yes. The last bullet here, I'll just spend just a few moments on enhanced efficiency and speed from fewer defects. Fewer defect leads to a better process. And one of the things that happens in organizations, if you go through, you watch a process, and you find, oh, here's a problem. What do you do? You try to find the root cause. And so like it's kind of like if you have a cabin or a summer home and you go back and say, "Oh, here's a flying squirrel. It's probably the only one that's here." It's like, no, you hunt around, you pull up a floorboard and you're like, "Oh, here's a whole nest of its babies right here." And you're like, "Okay." So the defects point to the source, and you can certainly see that. And so the idea of how do we keep driving efficiency by having fewer defects, that's probably the number one. Defects are so inefficient. They create inefficiency with your trading partners across the organization. They're the most costly thing that can happen. They impact cash flow. They can get everybody on board from AP to AR to treasury.

Yes. And my kind of favorite term is the customer experience. Defects, less defects, better customer experience. That's got to be the goal. And that's why it is so important to kind of focus on fewer defects because that's a better experience that you want to be delivering.

All right. So now modernized receivables. Setting up before we get to our final thoughts and summarizing some things. I'll start here. What does it mean to modernize receivables from an approach perspective? What do I do? Some of these we've already talked about. Assess the current processes. This means looking at them. You can look and see the flowcharts, how people describe them. But look at them, find the issues where you might find those surprising causes of errors and issues. Where is it creating problems, where the -- what's creating the latency problem and analyze the cash flow? What's impacting cash flow? Because if you're an AP or AR, treasury will be very supportive if you can link it to the cash flow. And so that's a key area. And then as you go through, what are your objectives? I just need to -- I need to be able to scale greatly and efficiently. I need controls. And so when you lay those out, that will help you prioritize your needs, calibrate them in a way that is appropriate for your organization, not just what other organizations have done that you might have worked at. So what's appropriate for you? Choosing the right technology, and I would also say the right partner that ties into 7 a bit is what's right for your organization? There's almost always going to be some type of automation, whether it's something you run yourself, whether you use a bank, whether you use another third party, find out what's the right tech for where your needs are and where you're going. If you're accelerating into more change, that should be a clue, you want to accelerate more rapidly towards a partnership. But that right technology, it has to be integrated or you can't optimize the whole process. Do you have any comments on that, John?

Yes. And I think first of all, there's still one way to do it, right? And so in those conversations with the partner, it's their approach to it. If you start feeling like you're being kind of told this is the way, this is the way, that's not a great partner. You want a partner that's going to be asking you the right questions and understanding what you said because they have a product suite of solutions, and they should be customizing that for your needs. And so that's where you want to be getting to. So I agree 3 and 7 are together, but kind of having that approach from your partner, it is really important in this because you're right, not everybody needs the whole kit and caboodle, right? Not everybody needs. So understanding where the pain is and how they can fix that and then choosing the right technology, those are important decisions, but it has to be kind of what I'll call a consultative process.

Yes. And then 4 on this particular chart, this is not meant to be comprehensive or exhaustive, but develop a phased implementation plan. There's an implementation requires a change management plan, which we talk about in 5, to some extent, in terms of communication. What's going on? But this phase implementation plan is, you may have a perfectly designed plan, but as soon as it hits reality, your pilot will help you identify a lot of kinks right away. And then it's like, okay, you work those out. Then when you do the full rollout, you're like at the Ivory period, 99 44/100s as opposed to maybe the 80% if you were really awesome on the front end. And so that's a key element for success. I spoke with one of your colleagues on a podcast about the change management in these rollouts. And so that's -- that will be a plug for everybody to listen to that as well.

Yes, listen to Susan.

Yes, it was great. And then train and engage stakeholders. Who are the stakeholders? There's employees, and stakeholders could be your vendor, your customer, whichever side you're on, train them. What are we doing? How is it different? What should you look for? Here's how you communicate, especially as you onboard, seems important. And John, I've hogged most of the bullets here. I know you have a number of things to say. I could talk on all of these, but you want to jump in and fill in any of the areas? Or a...

Yes. The only thing I would say to any company thinking about doing this, thinking about going through the process, thinking about working, it's a change management process too internally, right? And I know I said there's a 50% reduction in staff time. Well, that means people get worried about their jobs. And again, the goal here is not to eliminate it. The goal is to get them to focus on more important things, maybe more important parts of the process. And so that's important that you communicate that to your organization. When you're training and engaging them, making sure they understand what you're trying to do, what are the goals but also what you're going to need them for. That's a big piece. I always worry about the people affected by this.

Yes. So on monitor and optimize, there's a lot that can be measured with receivables, certainly with payables and treasury. So measuring the performance and continuous improvement, if you're measuring it and you're trying to find ways that are creating problems, look for defects, look for ways of automating pieces that are manual, look for ways of eliminating steps that may not be needed. And so when we think about measuring performance, there's the efficiency of the task and then there's the efficiency of liquidity. And there are some elements of risk as well. But if we think about those two things, those are the areas that maybe AR emphasizes and maybe treasury emphasizes. Both should care about both. Obviously, there's going to be a focus on one and the other. But monitoring that, giving some visibility will help with the optimization. And then leveraging vendor partnerships. We talked about the word vendor and partner. There's a sense of are you in it together? Are your activities, motivations align? Like if both are, if the partner is gaining more profitability by being more efficient and able to grow and scale, they're going to get more business. And if the business is, "Hey, I'm getting a better product, it's increasing value over time," this is excellent. And if everyone has to innovate on their own, that tends to be much more difficult than saying, "Hey, these are -- here's a fintech. Here's a bank. Here's somebody who's focused on this area." This is their reason for being -- they're focusing on that and that oftentimes becomes the area to depend upon. All right. We are at final thoughts. I'll cover the first two quickly. Like the first one is consider all the needs, that's the comprehensive look end-to-end to end-to-end. We've covered that well. And the second is consider outsourcing for if you're an organization has a fair bit of complexity, significant payment rails, payment changes and using that as a way to reduce what your exposures are.

Yes. And I would say vendor partnership, as I said before, I think, number one, make sure you understand your partner's financial stability. That's important. You want them to be with you for a long time. I think, two, what's their commitment to investing in their solutions and technology? There's so many things changing so rapidly in this industry. Where are they putting their money, quality of service and then level of relationship? I think those four things are absolutely critical when looking at vendors to partner with. And then last one, automating and standardizing. Again, this is where you focus on reducing your defects. You don't optimize part of the process. You really try to understand your process and work to make it, in my opinion again, a win-win. When it's a win-win, I think you have a better relationship with your customers. They have a better experience, and it truly is a win-win. It's not really a cliche.

That's great. Thank you so much, John. I think we have a section, we'll want to make a video short called less defects, better customer experience. That was a winner. Thank you, everybody, for paying attention, spending some time with us. Thank you, John, for coming in. Good talking with you. And we'll turn it back over to you, Mr. Brian Weeks.

Thank you, Craig. Thank you, John, and thank you, everyone, for joining us today. The CTP credits, today's webinar slides and the recording of today's webinar will be sent to you within 5 business days. And for more on improving payments, be sure to listen to the Treasury Update Podcast Episode 266 with Deluxe by clicking the link in the chat box. Thank you, and we hope you have a good rest of the day.