Optimising Collections at PT Indomobil

An Interview with Jusak Kertowidjojo, President Director, PT Indomobil Finance Indonesia

Collecting cash on time is critical to every organisation. There are various elements in achieving this, from ensuring that it is as convenient as possible for customers to pay, through to efficient reconciliation, cash visibility and debt collection capabilities. Firms working predominantly in the business-to-business space, with lower volumes of collections and customers with structured accounts payable processes, tend to find collections easier. For retail companies with many thousands of individual customers, the experience can be very different. However, by implementing the greatest possible customer convenience, efficiency and cash flow visibility, companies operating in the retail space can deliver significant working capital improvements, reduce bad debts and improve margins. This in turn enables cost savings to be passed on to customers, creating competitive advantage.

IMFI made the decision to appoint HSBC Global Payments and Cash Management as a partner, and have implemented HSBC’s Integrated Receivables Solutions to extend collection channels using the ATM Bersama network with more than 13,000 ATMs across Indonesia. This greatly enhances convenience and payment flexibility for IMFI’s customers. The solution allows IMFI to have full visibility across its cash positions, including the ability to identify incoming payments on a real-time basis. Additionally, the company’s collections and receivables will be further streamlined, while improving its overall working capital management. The solution also allows all banking activities to be consolidated with HSBC via the Bank’s internet-based electronic banking platform, HSBCnet, integrating with IMFI’s back office system.

In this interview, Helen Sanders, Editor, talks to Jusak Kertowidjojo, President Director, PT Indomobil Finance Indonesia (IMFI), one of the foremost multi-financing companies in Indonesia’s car and motorcycle sector, about how the company has enhanced its collections processes.

Please could you describe briefly IMFI’s business model

IMFI was established in 1993 as the finance company in consumer vehicle financing, leasing and factoring with 191 branches, representatives and outlets across Indonesia. In consumer financing, we currently have about 300,000 customers spread across the Indonesian islands, the majority of whom are owners of 2-wheeled vehicles. Most consumers finance their vehicle purchases across a term of between 25 and 36 months. In 2008, our average monthly collection was IDR160bn.

What systems do you use internally to manage collections?

IMFI has developed an integrated in-house system across the collections process, from creating purchase orders to accounting for collections. We also use the system to monitor and manage our receivables aging. An important feature of the integrated in-house system we have implemented is its online capability, connecting our main branches around Indonesia to provide accurate and up-to-date information on collections and customer data 24 hours a day for both head office and all of our branches. [[[PAGE]]]

What were the main problems you experienced with collections prior to implementing HSBC’s solution?

One of the main problems we experienced was reconciling customer collections. Unidentified collections can damage customer relationships if amounts are chased in error and incur additional costs in the form of debt collection fees.

How did you go about finding a solution to these problems?

We talked to HSBC and realised that the virtual account solution would go a long way to reducing unidentified collections and the cost of debt collectors. Customers can make payments through ATMs near their homes, with their remittances linked directly to their assigned Virtual Account Number. This makes reconciliation easier and avoids the need to chase payments unnecessarily.

... the bank offered a solution specifically tailored to our needs, which has assisted us significantly in overcoming our cash management issues.

What made you decide to work with HSBC and select their solution?

HSBC’s reputable worldwide image was one of our main considerations in taking this deal. The bank offered a solution specifically tailored to our needs, which has assisted us significantly in overcoming our cash management issues. Furthermore, we have received excellent assistance and advice in cash management solutions. As we are engaged in a process of continuous efficiency improvement, we look forward to implementing a wider range of cash management solutions offered by HSBC in the future.

Please could you describe briefly the solution you have implemented?

IMFI has implemented end-to-end Integrated Receivables Solutions accommodating IMFI’s complex collections and receivables reconciliation requirements. The solution accommodates all forms of collection including the most complex retail collections required by IMFI. Using the concept of a virtual account, we can identify incoming payments immediately, ensuring that instalment payments are closed on time, improving our customer relationship management.

In addition, with HSBC’s regional receivables platform and delivery channel, we are able to take advantage of online transaction monitoring, consolidated reporting and advice for all our collections as well as automation of our receivables reconciliation process.

How is the solution integrated with your internal systems?

We have developed in-house software to extract data from HSBC’s Integrated Receivables Solutions and import it into our internal system. HSBC’s solution was able to produce the data format required by our internal system for ease of transfer, so it was relatively straightforward to implement and we experienced no significant difficulties. To manage the implementation, including the integration element of the project, we created an implementation team consisting of both IMFI and HSBC project managers, to tackle any problems during the process and ensure that the implementation process remained on schedule. [[[PAGE]]]

How long did it take to implement?

We started the project in April 2008 and started running HSBC’s Integrated Receivables Solutions in June, just two months later. Following the initial set up, we implemented virtual accounts for our new customers in our Jakarta branch as a pilot project, and by December 2008, we had accomplished virtual account implementation for our new customers in all branches.

What have been the outcomes since implementation?

We have achieved the objectives we set out at the start of the project. Reconciliation is more accurate, timely and less resource intensive, as we can trace customer payments on a daily basis. We book lower volumes of unidentified collections, so our accounting and reporting are cleaner and customer credit can be more accurately monitored. For example, in May 2008, before going live on the solution, we booked additional unidentified collections of IDR97m. By December 2008, this amount had fallen by 23.7% to IDR74m.

Have there been any benefits which you were not expecting?

An interesting benefit has been the enhanced profile we have received as a result of the partnership with HSBC, which has enabled us to raise our brand awareness and emphasise the quality of our solutions.

What are your future plans in the area of collections and/or developing your financial processes in areas such as payments, treasury etc.?

In the future, we want to simplify our banking arrangements further so that we reduce the number of collection banks which we use. In this way, we will have a reduced panel of banks as collection banks and payment banks.