GAIN-PICE-PACE / OrlandoProcess Improvement, Metrics and
Impacts on Working CapitalA Collaborative Dialogue with the Credit Research
Foundation (CRF)Where have we Been?, Where are we Now?
Where are we Going?
Matthew (Matt) Skudera – Vice President Research and Education
April 20, 2017
Discussion Outline
Opening comments
Best Practice… Does it exist?
Where are we today and what are the real concerns and needs?
Current Trends
Where are we going?
Wrap up and Q&A
CRF/EXPERIAN SALES COLLABORATION 2
Just a reminder…
Collaboration
This is a collaborative effort, comments are welcome and
valued throughout – as an interactive discussion is always
more fun!
Not presentation
Best Practices – What are they/Do they exist?
Best Practices – “crfapedia” definition: There is really no magic eight ball; no special magic decoder ring; no list of ‘thou shall’s or shall not’s’, or anything else – it goes back to your vision:
1. What are you trying to accomplish?
2. Do you know and thoroughly understand your goals and objectives?
3. How are you going to achieving them?
In the end, nothing else matters – if you are creating value through your companies eyes – you’ve earned the right to support and deliver upon your objectives and those practices you choose...!!!!
CRF/EXPERIAN SALES COLLABORATION 4
Best Practices – What are they/Do they exist?
Regardless of what was just offered, it is essential that your desired perspective and offering be supportive and mindful of a Lifecycle Approach to customer account management and maintenance:
Account Management Decisioning (Credit Lines, Collections, Risk etc….) Portfolio Management Monitoring Reevaluating your Position Against your Objectives
Why? Because at the end of the day this is what is truly best for you and your company!
CRF/EXPERIAN SALES COLLABORATION 5
Best Practices: Is there really a Best Practice?
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What is the Current Landscape?
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Q4 2016
Bankruptcy data: Issues and opportunities for all vendors alike (Chapter 7 and 11’s)
Year Business Non- business
2011 49,667 916,447
2012 37,249 778,857
2013 27,674 673,981
2014 21,262 578,212
2015 17,495 499,554
2016 22,203 452,099
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Per the American Bankruptcy Institute
While not as robust as we would all like to see, the trend is positive on startups!
Where are we today?
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Trends – What are the current market dynamics
Cash Flow – Cash is King Integration with ERP/CRM Platforms Credit Cards Shared Services Environments Credit Scoring/Portfolio Management Risk Based Collection Activity Reporting – Business Intelligence Policy and Standardization Sales/Credit Partnership Supplier Credit Evaluations Emerging Markets – Mexico, Canada & Int’l Score Rationalization
(underlying objectives are efficiency and cost reduction without sacrificing internal or external customer service)
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Lets Take a Look at How we Categorize Ourselves Today
There are generally three typical organizational alignments: Centralized: refers to the union and consolidation of functional departments into one
location or center ◦ The operation is generally housed in the corporate headquarters location◦ Activities, particularly those regarding decision-making, become concentrated;
standardization may occur in policy, procedure and strategies Decentralized: implies a shift in organizational structure that distributes more
administrative control to a variety of local centers or groups ◦ May alleviate the bottlenecks in decision making that are often caused by central
management planning and control of activities ◦ Can help cut bureaucratic procedures and it can increase management’s sensitivity
to local business conditions and needs Shared Service Center: much like a centralized operation, but usually entails the
combination of functions that were once handled independently by disparate subsidiaries or divisions◦ There is an increase in the number of companies adopting a SSC structure for credit
and AR tasks in an effort to provide better service to clients, at a lower cost and increased efficiency
◦ Some companies provide these services from offshore/nearshore locations
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Here are a few examples of what issues, questions and opportunities exist as they relate to our defined structures
Centralized Decentralized Shared Service
Single point of contact Potential for multiple points of contacts and owners, autonomy merits scrutiny
Owner may not be a seasoned credit executive
Need to create “value” with operational and C level owner
May need to create value with multiple owners each with a differing need – as well as C level
Value here will be “mixed with” other suppliers to the same outputs of the combined shared service
Centralized platforms may have multiple feeds
Are likely on a series of platforms and may have disparate interfaces
Most likely be a series of individual or specific providers fulfilling each niche
Potential for one scorecard or multiple scorecards within one application
Potential for multiple scorecards at multiple locations and a need to consolidate outputs
Most likely scenario is a similar approach to the centralized theme
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Bankruptcy data
New start-up data
Economics of value
Small business needs
Customer educationLet me table a few items / nuggets / factoids
Customer value
Price
Overall economic or market
value
Operating model
delivery
Education
A recent CRF study highlighted the type of organizational structure used by credit task
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Source: Credit Research Foundation
Here are some specific critical activities that were also identified - accompanied by their corresponding level of importance
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Source – Credit Research Foundation
How you are organized also dictates who the credit professional reports to within the organization
Source: Credit Research Foundation
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How you are organized and who the credit professional reports to has an impact on the responsibilities as well
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Source: Credit Research Foundation
The key take-away is that as your priorities, challenges and focus evolves – the need is to stay contemporary with today’s
environment
The data shows that we are less concerned with implementing credit scoring and more concerned with improving it
We are less concerned with implementing monitoring and more concerned with improving it
Credit Professional's are still concerned with deteriorating customer credit
As the economy improves customers are interested in expansion and potentially internationally
Closer collaboration with sales is also highlighted as a requirement
Remember there is both a buy and sell side credit
The overarching take-away is that customers feel they have put the right tools in place and now are more focused on improving the outputs and criticality of those outputs - - are you ready
to help?
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Where are we going?
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A Day in the Life – Every day is an opportunity!
Exception Based Activity
Quick Scan of Changes
to the portfolio
Critical New Account Review
Root Cause Analysis
Reactions to Executive
Needs
Collection Activity and Resulting Portfolio
Adjustments
Providing Value
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Trends – What are the current market dynamics
Cash Flow – Cash is King Integration with ERP/CRM Platforms Credit Cards Shared Services Environments Credit Scoring/Portfolio Management Risk Based Collection Activity Reporting – Business Intelligence Policy and Standardization Escheatment Supplier Credit Evaluations Fraud and Cyber Attack Prevention Canada & Int’l Score Rationalization
(underlying objectives are efficiency and cost reduction without sacrificing internal or external customer service)
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Metrics – Historical Thinking
Days Sales Outstanding (DSO) Best Possible DSO (BPDSO) Average Days Delinquent (ADD) Collection Effectiveness Index (CEI) Receivable Aging
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Metrics – Tomorrow’s Leaders
Cost to Serve (CTS) Capacity Driven Headcount (CDH) Fulltime Equivalent Optimization (FTEO) Performance Based Cash Forecasting Global Data Aggregation and Decisioning Best Practice vs. Best Cost
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Underlying objectives are efficiency and cost reduction - without sacrificing internal or external customer service
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Switching the focus - When we think about top challenges for the credit executive…
The key take-away here is that while our priorities, challenges and focus evolve – the need is to stay contemporary within the
industry remains a top priority
The data shows that we are less concerned with implementing credit scoring and more concerned with improving it
We are less concerned with implementing monitoring and more concerned with improving it
We are still concerned with deteriorating customer credit and that action is resulting in the identification of greater portfolio risk
As the economy improves customers are interested in expansion and potentially internationally
Closer collaboration with sales is also highlighted
Credit professional’s are evaluated on performance and efficiency
The overarching take-away is that credit executives feel they have put the right tools in place and now are more focused on improving the outputs and criticality of those outputs - - are you ready to help?
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The dynamics of economics…
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A simple equation… Cost vs Value… Or is it really?
Cost to Serve
Defined: Cost to Serve is a process-driven accountancy tool to calculate the profitability of a customer account, based on the actual business activities and overhead costs incurred to service that customer. In the context of supply chain management it can be used to analyze how costs are consumed throughout the supply chain.
Credit’s participation in the costing model of a businesses go to market strategy:
◦ FTE Count
◦ Deduction Experience
◦ Receivable Carrying Cost
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Artificial Intelligence vs. Robotics(AI vs. RPA)
Let’s begin by define the difference:◦ Artificial intelligence (AI) is the intelligence exhibited
by machines or software. It is also the name of the academic field of study which studies how to create computers and computer software that are capable of intelligent behavior.
◦ Robotic process automation (RPA) is the application of technology that allows employees in a company to configure computer software or a “robot” to capture and interpret existing applications for processing a transaction, manipulating data, triggering responses and communicating with other digital systems.
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AI vs. RPA
Artificial Intelligence Robotics Process Automation
Auto Cash Application
New Account Credit Application
Risk Based Collections
Auto Cash and Deduction Management
Account Decisioning
Zero Touch Collections
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Financial Impacts
Working capital, DSO , Robotics
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It’s not about what new…. It’s about what you do with the data you have……
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Other Considerations For Today’s Credit Executives
Globalization of the market Buy and sell side credit Role of Collaborative Buying Environments (Ariba, Coupa
etc… ) Credit and Purchasing Card Expansion Expansion of Responsibilities Move to Shared Services Environment
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CRF Overview
Credit Research Foundation
The Foundation’s primary objective is to provide education and research for today’s credit, accounts receivable and customer financial service professionals. CRF promotes leadership and provides linkage between practice and education, serving its diverse membership by recognizing excellence, promoting the exchange of information and fostering intellectual development.
Our Vision Statement
Credit Research Foundation Overview
Headquartered in Westminster, MD 68 Years Young Member Based 501(c)(3) Non Profit Organization 600 Members, Typically Fortune 1500 or Like Minded
Organizations
Credit Research Foundation Overview
Member Based
Member Focused Value Driven
Discipline Focused
Education
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3 Annually
◦ Nationally Located
◦ 250-400 Attendees
2 ½ days
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Presentations from Industry Leaders
90 Research Studies
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Contact Detail
The Credit Research Foundation1812 Baltimore Blvd, Suite H
Westminster, MD 21157
443-821-3000
www.Crfonline.org
Questions?
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Thank You!
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