Touchless AR Processing Boosts Productivity

Strong revenue growth makes everybody happy. Well, maybe not everybody. Consider the case of Old Dominion Freight Lines, a leading "super-regional" motor freight carrier with revenues of $1.5 billion in 2010. By its nature, this company receives a high volume of remittances each day. In the last quarter of 2010, the company saw a 20 percent increase in shipments and a 21 percent increase in tonnage compared to the prior year's fourth quarter. The accounting and IT managers grew concerned that the spike in units sold would put an untenable amount of stress on the accounts receivable (AR) process and require additional headcount just to stay above water.

There was a more nuanced risk. Ken Erdner, Old Dominion's vice president of information technology, told APQC that before the growth spurt, the company was sporting respectable productivity metrics—clearing 400 remittances per hour with a staff of eight people who would manually enter data into the accounting system to reflect customer payments received at the lockbox bank.

"The people doing this work were very good," said Mr. Erdner, but as the business grew steadily, headcount swelled. Even then, they occasionally got backed up on Fridays and over the weekend and could not get customer accounts updated before the open of business on Monday. Sometimes the delay would stretch to Tuesday morning. The risk was that customers would get shut off even though they had paid their bills on time. Then again, there was the risk that duplicate invoices would be issued, resulting in more cost to sort out the mess. In all, the danger of irritating customers was not acceptable.

Old Dominion's answer was to automate receivables processing by implementing software called "Brainware Distiller for Remittances." Brainware specializes in intelligent data capture and enterprise search solutions to help large organizations rapidly process large volumes of documents and retrieve data from across the enterprise. Brainware Distiller validates information against known data sources in an organization's information systems.

It does this, says Mr. Erdner, "by using fuzzy, fault-tolerant logic." Mr. Erdner reports that since the implementation AR has boosted its productivity by more than 500 percent. The processing staff, now down to two from eight people, can process 2,000 remittances per hour on a peak day, versus 400 previously. "We are now putting about 80 percent of our remittances through Brainware, and of those, almost 80 percent go automatically right through the system. So, we're only handling manually 20 percent of that 80 percent to verify why something did not get processed properly. It could be a valid reason but maybe it didn't match up perfectly," said Mr. Erdner.