A/R Efficiency With Artificial Intelligence Northern Ohio AFP

A/R Efficiency With Artificial Intelligence Northern Ohio AFP September 16, 2019 Blaine Carnprobst 412.762.9993 Receivables Product Advisor [email protected] PNC Financial Services Group

Outline Receivables Update Process Payments vs. Remittance Data Decoupled and Missing Remittance Detail Receivables 2.0 Receivables 3.0 Key Take-Away’s 2019 The PNC Financial Services Group, Inc. 2

Receivables Update Process Check Remittance Detail Lockbox Remote Deposit Into Lockbox On-Line Viewing of All Transaction Types to Resolve Exceptions ACH Credits Received Remittance Addenda Intra-Day Viewing Decisioning and Editing EDI Remittance Detail ACH Payment Wire Payment A/R Data Concatenated & Transmitted Wire Payments Structured Data Unstructured Data 2019 The PNC Financial Services Group, Inc. 3

Receivables Update Process Check Remittance Detail Decoupled Payments Lockbox Remote Deposit Into Lockbox On-Line Viewing of All Transaction Types to Resolve Exceptions ACH Credits Received Remittance Addenda Emailed Remittance Data File “Pulls” of Remittance Data Intra-Day Viewing Decisioning and Editing EDI Remittance Detail ACH Payment Wire Payment A/R Data Concatenated & Transmitted Wire Payments Structured Data Unstructured Data Emailed Remittance Data File “Pulls” of Remittance Data 2019 The PNC Financial Services Group, Inc. 4

Check Usage Continues to Decline Percentage of B2B check payments received by organizations 100% 90% 80% 70% 60% 50% ? TBD 40% 30% 20% 10% 0% 2004 2007 2010 2013 2016 2019 Source: AFP Electronic Payment Survey Check has historically been the most reliable source of Remittance Detail . . . 2019 The PNC Financial Services Group, Inc. 5

Decoupled and Missing Remittance Detail Inconsistent Remittance Delivery Organizations’ Method of Receiving ACH Remittance Information With Payment (potential for automation) Separate from Payment (requiring manual intervention) 18% EDI/CTX or EDI/CCD 55% Email 11% 3rd Party Website 22% Mail 18% Customer Website 15% Fax 5% Organization’s Website 4% Other 3% ISO 20022 AFP Electronic Payments Survey 2019 The PNC Financial Services Group, Inc. 6

B2B Receivables Example 84% of ACH / EDI items, 86% of ACH / EDI Dollars And ACH accounts for 2/3 of Total Dollars 2019 The PNC Financial Services Group, Inc. 7

B2B Receivables Example ACH / EDI account for 60% of monthly collected dollars, but only 23% have invoice data 2019 The PNC Financial Services Group, Inc. 8

Payments vs. Remittance Data Payments Check Remote Capture EFT: ACH / EDI / Wire Card EBPP Online Bill Payment Mobile App RTP / RealTime Payments Remittance Data 2019 The PNC Financial Services Group, Inc. 9

Solving for Accounts Receivables A Complex Puzzle Payments - Checks - ACH - FedWire - Credit Card - Real-Time Payments Channels - Lockbox - Field Collections - On-Line Banking - E-Payments - U.S. & International - E-Mail - Web Portal - EBPP Your Organization’s Business Functions - Customer Onboarding - Credit Scoring & Ongoing Review - Invoicing - Payment Acceptance - Cash Application - Deductions - Collections 2019 The PNC Financial Services Group, Inc. 10

Connection Through Lockbox Workflow Unique email address per Lockbox – example [email protected] Emails can come - Direct from Remitters, or - Forwarded by A/R staff Emailed Remittances Sent to Dedicated Lockbox Email Address Items Automatically Matched Email Connection Single Data Feed Paper Remittances Received by Client Client Client Scans Scans Remittances into Remittances into Workflow Workflow Lockbox Operator Matches Remittance with Payment Text Embedded in Emails Supported email attachments & embedded text .doc .docx .xls .xlsx .csv .pdf .rtf .txt .tif 2019 The PNC Financial Services Group, Inc. .jpg .bmp .html 11

Connected Payment Matched to Email on Day Payment Received Lockbox 123456 – ABC Company EDI Payments – Web page on 1/29/2018 EDI Transaction ID G-0001111 PGH-123456 00000000000000 SMITH INC. Email Contents shown as images Smith Inc. ABC Company EDI Payments 2019 The PNC Financial Services Group, Inc. 12

Email Content Email and Attachments Contained as Images Lockbox 123456 – ABC Company EDI Payments – Web page on 1/29/2018 EDI Transaction ID G-0001111 PGH-123456 I.R. CUSTOMER Page 3 – DLN 123456. 15172008102x/123456.15172008102x.1.2 0000.jpg Smith Justin T. A/R Cash Application Group ABC Company Phone – 555-555-1212 Fax – 555-555-1213 E-Mail: Smith [email protected] Bill Pay Clerk (mailto:Bill Pay [email protected] 2019 The PNC Financial Services Group, Inc. Email Content Within Transaction Images 13

The Cash Application Problem: RIP OFF THE BANDAGES ! ru inv ncate acc oice o d num ount r ber s fo CT r an mat X m d tin ap / o g pi r ng Com Pay bined for ments m ope ultiple com rating pan ies led oup Dec ments y t Au autho ons un ducti non- ons de de & ducti e Tra de d tra pa ent & etail d m Pay ittance rem ugh thro rence diffe rces sou ts ort Sh ymen d and Pa horizerized Mis inc sing Remorrec or det ittan t ai l ce T Poor hm s algorit Lack of IT resources and / or E R constrain P ts Barriers to STP 2019 The PNC Financial Services Group, Inc. 14

Receivables 2.0 Advancing The A/R and Deduction Management Process Receivables 2.0 A/R Matching: Additional “Open A/R File Intelligence” Intra-Day Exception Management: Window of Opportunity to Repair Exceptions Before Transmission Workflow Management: Post-Processing Workflow Queues (e.g. Deduction Staff, Customer Contact, Billing Error, etc.) 2019 The PNC Financial Services Group, Inc. 15

Receivables 2.0 A/R Matching C2B Account-Level Data - MICR cross-reference table - “Swap” for billing system changes - Accept file OR Reject file B2B Invoice-Level Data - Open Invoice / Policy / Account file - Interactive data capture feedback from Open file - e.g. PO Number F Invoice Number - Data manipulation following data capture completion C2B & B2B Exceptions pushed out to “Exception Manager” or “Decisioning” Queue - e.g. Short-pay, Invalid Payment Info, etc. 2019 The PNC Financial Services Group, Inc. 16

Receivables 2.0 Exception Management & Workflow Intra-Day Transaction Review Designated operators can access daily exceptions A/R data transmission updated following completion by A/R staff “Rejected” transactions PULLED from workflow 2019 The PNC Financial Services Group, Inc. 17

Advanced A/R & Deduction Management Receivables 3.0 Extended A/R Matching with Plug-In to A/R Artificial Intelligence to Learn Remitter Practices Automated Coding of Trade & NonTrade Deductions Workflow Efficiency for Deduction Management 2019 The PNC Financial Services Group, Inc. 18

Advanced A/R & Deduction Management Receivables 3.0 Intelligent pattern matching Apply specific rules for invoice matching Deduction identification & coding 2019 The PNC Financial Services Group, Inc. Cash discount analysis Remittance data from variety of sources 19

Advanced A/R & Deduction Management Receivables 3.0 Intelligent pattern matching Payer transaction references e.g. Purchase Order or Shipment ID Remitter that pays multiple accounts but only includes info for one account Recognize characters appended to invoice numbers e.g. Spoilage, damaged goods, returns, promotional discount 2019 The PNC Financial Services Group, Inc. 20

Advanced A/R & Deduction Management Receivables 3.0 Apply specific rules for invoice matching A/R system “plug in” Include extended invoice-level detail Unbalanced invoice amount processing rules 2019 The PNC Financial Services Group, Inc. 21

Advanced A/R & Deduction Management Receivables 3.0 Deduction identification & coding Analyze remitter trends Automatically detect Deduction reasons Deduction trend analyses that could lead to customer negotiation 2019 The PNC Financial Services Group, Inc. 22

Advanced A/R & Deduction Management Receivables 3.0 Cash discount analysis Evaluate cash discounts taken vs. payment timing Analyze customer payment trends 2019 The PNC Financial Services Group, Inc. 23

Advanced A/R & Deduction Management Receivables 3.0 Remittance data from variety of sources Lockbox A/R files EFT A/R files Email data source Website file pulls incl. 3rd party sites 2019 The PNC Financial Services Group, Inc. 24

ROI Opportunities Cash Application Deduction Management Improved DSO and DDO(1) Data processing costs Payments without remittance data Validation of payments to outstanding billing data prior to A/R posting Improved A/R Hit Rate Timeliness of A/R posting completion Automated coding of reason-codes for Deductions (1) DSO Days Sales Outstanding Workflow improvement Lessen revenue losses due to Deductions: Reporting at Customer level and Reason Code level Internal process improvement justification Billing changes Logistics (shipping & packaging) DDO Days Deductions Outstanding 2019 The PNC Financial Services Group, Inc. 25

Key Take-Away’s Payments Sources and Trends Email Remittance Receipts Website File Pulls Check via Lockbox Volume? Volume? Check via Local Collection Increasing or steady? Increasing or steady? ACH with Addenda Receivables Matching Opportunities Data enrichment before transmission Payment interrogation Swapping information (e.g. PO Number vs. Invoice Number) ACH without Addenda Wire with Addenda Wire without Addenda Other Sources 2019 The PNC Financial Services Group, Inc. 26

Standard Disclosure PNC, PNC Bank, ACHIEVEMENT, PINACLE, Working Cash, ActivePay, Global Trade Excellence, Vested Interest, Midland Loan Services, Enterprise!, CMBS Investor Insight, Portfolio Investor Insight, Borrower Insight, Shared Servicing, PNC Riverarch Capital, and PNC Erieview Capital are registered marks of The PNC Financial Services Group, Inc. (“PNC”). PNC Retirement Solutions is a service mark of PNC. Bank deposit, treasury management and lending products and services, and investment and wealth management and fiduciary services, are provided by PNC Bank, National Association (“PNC Bank”), a wholly-owned subsidiary of PNC and Member FDIC. Certain fiduciary and agency services are provided by PNC Delaware Trust Company. Foreign exchange and derivative products (including commodity derivatives) are obligations of PNC Bank. Equipment financing and leasing products are provided by PNC Equipment Finance, LLC, a wholly-owned subsidiary of PNC Bank. Energy financing is provided by PNC Energy Capital LLC, a wholly-owned subsidiary of PNC Equipment Finance, LLC. Aircraft financing is provided by PNC Aviation Finance, a division of PNC Equipment Finance, LLC. Asset–based lending is provided by PNC Business Credit, a division of PNC Bank and PNC Financial Services UK Ltd. (an indirect wholly-owned subsidiary of PNC Bank) in the United Kingdom. Specialty finance products are provided by Steel City Capital Funding, a division of PNC Bank. Merchant services are provided by PNC Merchant Services Company. Direct equity investing and mezzanine financing are conducted by PNC Capital Finance, LLC through its PNC Riverarch Capital, PNC Mezzanine Capital and PNC Erieview Capital divisions. Investment banking and capital markets activities are conducted by PNC through its subsidiaries PNC Bank, PNC Capital Markets LLC, Harris Williams LLC, Harris Williams & Co Ltd. and Solebury Capital LLC. Services such as public finance investment banking services, securities underwriting, and securities sales and trading are provided by PNC Capital Markets LLC. Merger and acquisition advisory and related services are provided by Harris Williams LLC and Harris Williams & Co. Ltd. Equity capital markets advisory and related services are provided by Solebury Capital LLC. PNC Capital Markets LLC, Harris Williams LLC and Solebury Capital LLC are registered broker-dealers and members of FINRA and SIPC, and Harris Williams & Co. Ltd is authorized and regulated by Financial Services Authority (FRN No. 540892). Harris Williams & Co is the trade name under which Harris Williams LLC and Harris Williams & Co. Ltd. conduct business. Retail brokerage services and managed account advisory services are offered by PNC Investments LLC, a registered broker-dealer and a registered investment adviser and member of FINRA and SIPC. Annuities and other insurance products are offered through PNC Insurance Services, LLC. PNC Bank is not registered as a municipal advisor under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Act”). Investment management and related products and services provided to a “municipal entity” or “obligated person” regarding “proceeds of municipal securities” (as such terms are defined in the Act) will be provided by PNC Capital Advisors, LLC, a wholly-owned subsidiary of PNC Bank. PNC Bank and certain of its affiliates including PNC TC, LLC, an SEC registered investment advisor wholly-owned by PNC Bank, do business as PNC Real Estate. PNC Real Estate provides commercial real estate financing and related services. Through its Tax Credit Capital segment, PNC Real Estate provides lending services, equity investments and equity investment services relating to low income housing tax credit (“LIHTC”) and preservation investments. PNC TC, LLC provides investment advisory services to funds sponsored by PNC Real Estate for LIHTC and preservation investments. Registration with the SEC does not imply a certain level of skill or training. This material does not constitute an offer to sell or a solicitation of an offer to buy any investment product. Risks of each fund are described in the funds’ private placement memorandum or other offering documents. Important Investor Information: Securities and insurance products are: Not FDIC Insured Not Bank Guaranteed Not A Deposit Not Insured By Any Federal Government Agency May Lose Value In Canada, PNC Bank Canada Branch, the Canadian branch of PNC Bank, provides bank deposit, treasury management, lending (including asset-based lending through its Business Credit division) and leasing and lending products and services (through its Equipment Finance division). Deposits with PNC Bank Canada Branch are not insured by the Canada Deposit Insurance Corporation. Deposits with PNC Bank Canada Branch are not insured by the Federal Deposit Insurance Corporation, nor are they guaranteed by the United States Government or any agency thereof. In the event of the failure of PNC Bank, deposits with PNC Bank Canada Branch would be treated as unsecured general liabilities, and creditors would be considered general creditors of PNC Bank. Lending and leasing products and services, as well as certain other banking products and services, require credit approval. PNC does not provide legal, tax or accounting advice unless, with respect to tax advice, PNC Bank has entered into a written tax services agreement. PNC does not provide investment advice to PNC Retirement Solutions and Vested Interest plan sponsors or participants. 2019 The PNC Financial Services Group, Inc. All rights reserved. 2019 The PNC Financial Services Group, Inc. 27