Automating accounts receivable with U.S. Bank VantagePoint dramatically reduces manual processing and frees up staff time at distributor

MSC Industrial Supply Co. is a distributor of metalworking and maintenance, repair and operations products and services — everything from hole-making tools and saw blades to fasteners to janitorial and facility maintenance supplies. Once known for its 3,000-plus-page The Big Book paper catalog, the company today has an online catalog featuring over 1.5 million ready-to-ship products and has become the Amazon of the metalworking and tooling world.

Helping its many customers keep their operations running efficiently requires MSC to be nimble. That means not only having the right part or product and delivering it promptly, but also making it painless to do business with the distributor.

The high-level customer focus this requires takes an enormous amount of staff time, a challenge MSC’s Accounts Receivable (A/R) team has met in recent years thanks to its partnership with U.S. Bank. Since 2016, the U.S. Bank VantagePoint^® online receivables management solution has provided the A/R team with what its managers gratefully refer to as “the gift of time” — more available staff hours.

“VantagePoint has helped the A/R team drive down to a mere 3 percent the number of our incoming payments requiring manual research to match with remittance data to enable posting, and use that improved efficiency to restructure staff positions to realize even greater customer focus,” says Nick Gallo, senior director of credit and A/R for MSC.

Minimizing manual accounts receivable work

Annual revenues for MSC, which also offers inventory management and supply chain solutions, top $3.3 billion. By selling its wide variety of products to thousands of customers, MSC generates a high volume of both small- and large-dollar invoices. As a result, every month MSC receives an average of 100,000 lockbox checks. The company also receives approximately 20,000 Automated Clearing House (ACH) payments, about half of which don’t include remittance information because customers have sent remittance advices separately.

Before 2016, MSC’s A/R team had to manually re-associate those remittance advices with the original payments. The company needed a way to improve its automatic match rate for ACH payments, specifically CTX formatted payments, and met that need by moving its transaction flows to VantagePoint.

Previously, MSC could match only about 62 percent of CTX payments with corresponding invoices and purchase orders. With VantagePoint, the match rate jumped to roughly 92 percent.

“This quickly and significantly reduced the number of payments our team had to manually process, which was key because some payments cover hundreds or even thousands of invoices,” Gallo says.

VantagePoint supports the payment mapping that’s critical to automated posting. It retains changes made to the CTX/EDI remittance item in the system and can reapply them to future payments received from the same payer.

Working through an ERP system conversion

MSC first implemented VantagePoint in mid-2016 on its legacy enterprise resource planning (ERP) system. The distributor began using VantagePoint’s remittance re-association capabilities, providing the benefit of automatically matching ACH payments and invoices. This saved considerable time and eliminated the need for employees to key in remittance details and manually post thousands of electronic payments.

When MSC migrated to SAP, its new ERP system, in 2017, changes to the receivables management process were necessary for both MSC and U.S. Bank.

During the implementations, MSC and U.S. Bank held weekly meetings to update the status and work through challenges.

Partnering on A/R Matching

Following the transition to SAP, the A/R team experienced time-consuming rework due to the ERP system mapping some of its bank accounts to the wrong customer numbers. “When you are dealing with a $300,000 or $400,000 payment referencing 100 or 200 different invoices, rework can be quite tedious,” Gallo says.

In 2018, the company asked U.S. Bank if there was a way for the bank to pre-empt some of this rework, where items had to be identified, reversed and then reapplied. This kicked off the development of the A/R Matching feature of VantagePoint, and for about a year MSC worked closely with U.S. Bank, collaborating and acting as the primary pilot customer for the feature.

A/R Matching allows U.S. Bank to ingest a client’s open A/R file and match data against incoming payments, pulling in missing remittance data and correcting errors to automate cash posting and reporting. With this feature, VantagePoint’s effectiveness in minimizing manual reconciliation work took another leap forward.

Since implementing A/R Matching in 2019, MSC has seen match rates rise from 90-92 percent to about 97 percent, in large part due to the new feature, Gallo says. “That match rate is outstanding,” he says. “I don’t know if we can get much higher.”

Accounts receivable automation gives ‘gift of time’

VantagePoint has improved the A/R team’s workflow. More open A/R files are being matched within VantagePoint while fewer items are being researched or reworked once they reach the company’s ERP system.

Less manual posting work has enabled MSC to convert four of seven A/R associates previously dedicated to managing exceptions into “hybrid rework associates.” Cross-training has enabled those associates to both research exceptions and handle rework.

“We’ve been able to train more of our associates to be true cash application analysts and do work we haven’t had time to do before, such as collaborating with our collections department and closing out older, unapplied cash,” Gallo says.

The VantagePoint “gift of time” is enabling the A/R team to post cash more efficiently while doing a better job of keeping customer accounts in order.

That increased efficiency has been especially welcome during the pandemic, better enabling the A/R team to accommodate unanticipated time off for employees. But the real payoff is expected when the pandemic abates and business conditions improve, Gallo says. “With VantagePoint and its A/R Matching, we’re in a much better position to handle the higher volume of incoming payments we’re expecting.”