Robert S. Shultz Partner, Quote to Cash Solutions (Q2C) [email protected] .

Increasing Your Credit Department’s Value Through Automation and Process Improvement

Robert S. ShultzPartner, Quote to Cash Solutions (Q2C)

[email protected]

Consulting firm focused on improving client’s liquidity focusing on:◦ The quote to cash process, policies and procedures◦ Organization: Staff deployment and alignment◦ Credit, collection and dispute management system tools

Customized skills development and training Expert witness support in bankruptcy and collection

litigation cases

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Quote to Cash Solutions (Q2C)

Quote to Cash Solutions All Rights Reserved 2009

Determining what is ripe for automation in “Your” company.

Justifying the cost

Selecting a vendor

Getting Started: Steps to an effective implementation

What can be gained through credit, collections and dispute management automation

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Today’s “Scope”


Where is the Pain? What is the potential ROI? Who needs to be involved? What solution is best: Outsource? Software

tools? What can we afford to do? or… What can we not

afford to ignore?

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Determining what is ripe for automation: First ask:


Proactive management of credit risk, cash application, collections and dispute management?

Use meaningful KPI’s and meet or exceed expectations? Have effective workflow integration, performance

efficiency and staff productivity? Able to analyze and report customer and portfolio risks

and revenue opportunities? Insure compliance with regulatory requirements? Provide the root cause information needed to lead

process improvement efforts? Serve as a valuable resource to internal stakeholders and

customers?

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A Quiz: Does Your Credit and Collections Operation….


Process Inputs

Process Outputs

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Defining the “Points of Pain” What is broken?

Credit/CollectionsCash Application

Dispute Management

• Customers• Sales• Internal

Stakeholders• Senior

Management

• Customers• Sales• Internal

Stakeholders• Senior

Management• Audit


Does your project fit within the overall systems strategy of your company?

The simple compelling need?

What implementation costs, staff resources and turnaround time will management support?

Will you be overlaying automation on broken processes?

Regardless of costs, are there control issues that mustbe addressed to meet regulatory requirements?

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Before you proceed… You must know:


No system is perfect

Tactical reality vs. a Strategic long term initiative

Incremental improvements in a short time-frame

It is all in the ROI Will it pay for itself?

ERP vs. Third Party….Do a gap analysis You may

be surprised

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Sometimes you have to “Ready, Fire, Aim”… Don’t get bogged down with long term major system implementations. They are hopes and dreams.


Credit, Collections and Cash Application Customer Management:

- Order hold/release - Bill Presentment Process Management:

- Deductions Management - Integrated Workflows- Document access, archiving and retrieval

Reporting and dynamic dashboard options:- Key Performance Indicators -Performance Tracking

Self service access to information and documents by inside stakeholders and customers

Scope: Areas where automation can help

9Quote to Cash Solutions All Rights Reserved 2009

Costs Internal IT and other staff

resources: Pre and post implementation

Software License, maintenance and training

Equipment

Savings/Benefits Increased Liquidity

through DSO reduction: ◦ Reduced need for

borrowing◦ Annual cost of funds

savings Increase in Staff

Productivity Process Improvement and

Reduced Dilution Reduction in Bad debts Intangible benefits:

◦ Better customer care◦ Competitiveness◦ Compliance

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Return on Investment Drivers


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Year 1 Year 2 Year 3Annual Revenue $ $ $

Net Receivables $ $ $

Annual Deductions $ $ $

Receivables Interest Rate % % %

Net Receivables Reduction % % %

Deduction Recovery Improvement % % %

Bad Debt Avoidance Improvement % % %

Project Benefits

Net Receivables $ $ $

Interest Cost of Net Receivables $ $ $

Value of Net Receivables Reductions * $ $ $

Headcount Avoided - - -

Burdened Labor Rate = $xxK/Annum $ $ $

Value of Labor Savings $ - $ - $ -

Annual Deductions $ $ $

Value of Deductions Improvement** $ $ $

Value of Bad Debt Avoided $ - $ - $ -

Annual Benefits $ $ $

*Interest rate * % improvement/degradation * AR balance

**Recovery rate % * yearly deductions

ROI Worksheet Template


Get strong Senior Management supportAppoint a Project Leader with a vested interestThe functional manager should not relinquish a

leadership roleCreate a team of stakeholdersEstablish a list of needs and set priorities Prepare a Request for Proposal (RFP)Evaluate options

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Getting Started:


You can customize your current ERP

A third party software provider that integrates

with your ERP

Software as a Service (SAAS)

Outsource or In-Source

“The key is to determine what best fitsyour company’s needs and reality “

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Options to consider:


Provide an overview of your business

List your functional needs Ask the vendor specific questions relevant to your

needs Do your due diligence

Be clear on the form and timing of the response Invite a “short list ” of vendors to answer

questions and demonstrate their product. Ask for your data in the demo.

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Key elements of an RFP :


Don’t fall in love with technology just because it exists

Look at vendors that will service what “YOU” need

Get references from companies similar in industry and size. Ask:◦ What level of support did the vendor provide pre and post

implementation?◦ How effective was the training?◦ How do users feel about the product? Is it user friendly?

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Some cautions…..


They focus on issues you are trying to resolve on a full-time basis. Credit and collections is not an after-thought, it is their market and revenue stream.

They spend R&D dollars to improve their product based on user needs.

User groups you can relate to, who have a real impact on the next release.

Implementations are easier and of shorter duration.

Why a third party vendor?

16Quote to Cash Solutions All Rights Reserved 2009

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Poor leadership from top management

Automating existing redundant or non-value-added processes

Attempts to heavily customize an “Off the Shelf” product

Unrealistic timetable: Working backwards from a “drop dead”

completion date.

An unrealistic expectations, too broad a scope

Poor project management

Inadequate IT resources

Does not address the company’s strategic marketing or financial

strategies

Inadequate education and training

People try to maintain the status quo

Inadequate testing

Flawed data migration

Forget that the project is for the users, not IT

Top Reasons Why Projects Fail:


A consistent approach to credit approval and review

Integrate the order entry/billing process

Integrate cash application

A structured approach to collections

Leverage deduction management as a road map to improve root cause visibility and processes

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What can be gained through automation?


Determining credit risk boils down to two concerns:1. The risk of payment being delayed beyond

trade terms2. The risk of non-payment

Automation can bring visibility: oDetermine the “real” risk oHelps defend decisions based on facts

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“A consistent approach to credit approval and review”


Meets the “need for speed” Consistency, predictability and fairness Quality credit decisions with reduced resources The credit manager becomes the “Go To”

person “Actionable” and “timely” information and

management reporting Quantify the basis for decisions and the

perceived risk Extend credit based on strategic company

goals

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Advantages of credit analysis automation:


Based on financial and payment history you can manage:o New account approval

o Transaction approval

o Easy access to customer and portfolio risks and trends

o Ability to segment the portfolio: Family tree, risk, industry, sales territory etc.

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Address all the dimensions of credit risk management:


oCredit and collections policies

oMarketing and sales strategies

oCash forecasting

oBad debt calculations

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Portfolio analysis is more than just credit…. It can drive:


The score is driven by the credit policy

The credit policy is agreed to up front by all areas affected

“It is critical to get senior management

endorsement” up front”

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Integrate the credit policy and process:


Take advantage of data on remittance detail in what ever form it is received Every deduction tells a story

Develop an automated dispute workflow process

Use information gathered as agenda topics for cross-functional process improvement efforts

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Integrate cash application:


Collections is not an accounting function it requires “Actionable” up to date

information

Ability to prioritize contacts, automate workflow to a “resolver and escalate when necessary

Ability to track contact notes and follow-ups

Match payments and credits to open debits

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Collections and dispute management:


Flexible assignment of accounts to a collector or reconciliation analyst

User defined collection strategies based on a customer’s level of risk and payment habits

Daily prompting of collection contacts Pre-defined contact notes to reduce keystrokes Flexible contact options: Phone, or customizable fax,

email or letter Reason code driven workflow and tracking User defined escalation and turnaround policies Track and report key performance indicators Drill down capability Minimal key strokes to get to the information needed

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Checklist of tools you should look for:


Track historical information: Customer payment history, disputes by type, status, time taken from identification to resolution and broken promises

Track customers at every level of the family tree Access to account information and obtain copies of

documents by internal stakeholders and customers A dashboard and robust management reporting tools Ability to integrate document archiving and retrieval in

to the cash application, collections and account reconciliation process

Instant access to documents Auto-dial capability for high volume collections Ability to forecast cash Self service by internal stakeholders and customers

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Checklist of tools you should look for:


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Result: Increase the value of the credit collections functions

Automation investments can pay for themselves Arbitrary decisions = A thing of the past Simultaneously analyze multiple credit variables Everyone knows the special requirements up front Easier to explain and defend difficult decisions Efficient collection practices = Cash Reduction in disputes and bad debts= Lower costs Visibility to root cause issues=Improved efficiency

and process improvements


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Questions?

Increasing Your Credit Department’s Value Through Automation and Process Improvement

Robert S. ShultzPartner, Quote to Cash Solutions (Q2C)

[email protected]

Robert S. Shultz Partner, Quote to Cash Solutions (Q2C) [email protected] .

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