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?

6

What is the Current Landscape?

7

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

8

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?

10

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)

11

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

12

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

13

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

15

Source: Credit Research Foundation

Here are some specific critical activities that were also identified - accompanied by their corresponding level of importance

16

Source – Credit Research Foundation

How you are organized also dictates who the credit professional reports to within the organization

Source: Credit Research Foundation

17

How you are organized and who the credit professional reports to has an impact on the responsibilities as well

18

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?

19

Where are we going?

20

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

21

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)

22

Metrics – Historical Thinking

Days Sales Outstanding (DSO) Best Possible DSO (BPDSO) Average Days Delinquent (ADD) Collection Effectiveness Index (CEI) Receivable Aging

23

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

24

Underlying objectives are efficiency and cost reduction - without sacrificing internal or external customer service

25

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?

26

The dynamics of economics…

27

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

28

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.

29

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

30

Financial Impacts

Working capital, DSO , Robotics

31

It’s not about what new…. It’s about what you do with the data you have……

32

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

33

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

Forums

3 Annually

◦ Nationally Located

◦ 250-400 Attendees

2 ½ days

Educationally Focused

Presentations from Industry Leaders

90 Research Studies

Quarterly News Letter

Quarterly Journal

Online Education

Surveys and Webinars

Compensation Calculator500 Publications

Annual Bad Debt Reports

Collection Productivity Report

Member Assistance Program

NSDTR Report

Benchmarking

Contact Detail

The Credit Research Foundation1812 Baltimore Blvd, Suite H

Westminster, MD 21157

443-821-3000

www.Crfonline.org

Questions?

41

Thank You!

42