Value-based Credit Management
with @RISK
PALISADE EMEA 2012 Risk Conference
London, April 18th
Beat Koch, Partner
Abendo AG
passion for value creation
Content
1.
2.
3.
4.
5.
Abendo AG
Introduction Value-based Management
Trade Credit
Concept of Value-based Credit Management
Case study: Credit Trader with @RISK
6. Conclusion
passion for value creation
2
Content
1.
2.
3.
4.
5.
Abendo AG
Introduction Value-based Management
Trade Credit
Concept of Value-based Credit Management
Case study: Credit Trader with @RISK
6. Conclusion
passion for value creation
3
Abendo AG
Beat R. Koch, lic.iur., MBA, CAIA, CCM
• Founder & Partner Abendo AG in 2010
• > 15 years experience as a CEO in Financial Information / Credit industry
• International business experience (UK, Ireland, France, Germany, Japan)
Abendo AG
• Located in Adliswil (near Zurich) / Switzerland
• specialised in customer value measurement and short-term financial management
• customers in Germany, Switzerland and UK
passion for value creation
4
Abendo AG
Delivery
Supplier
Customer
Cash & Value
passion for value creation
passion for value creation
Core Competencies
• Customer Selection / Customer Value Mgmt
•
•
•
•
Financial Supply Chain Management
Working Capital Management
Revenue Management
Credit Management
5
Content
1.
2.
3.
4.
5.
Abendo AG
Introduction Value-based Management
Trade Credit
Concept of Value-based Credit Management
Case study: Credit Trader with @RISK
6. Conclusion
passion for value creation
6
Value-based Management vs. Accounting
Accounting View
Value Perspective
Economic Profit
Economic
Profit
Accounting
Profit
Profit
Equity
Cost
Debt
Financing
Accounting
Loss
passion for value creation
Result,
e.g.
NOPAT
Economic Loss
(single /multi
Period(s))
Revenue
Expenses
7
Return
Strategic Options
Economic Profit
Cost Control
Return (NOPAT) – Capital
Charge
Improve margin
Capital Invested
Return
Economic Profit
Return
Economic Profit
Return (NOPAT) – Capital
Charge
Return (NOPAT) –
Capital Charge)
Grow Sales
EP > 0 Investment
Capital Invested
Return
Capital Invested
Economic Profit
Manage
Assets
Return (NOPAT) –
Capital Charge
EP < 0: Divestment
Capital Invested
passion for value creation
8
Economic Profit
Value Drivers
Grow Sales
Control Costs
Value Calculation
Sales
./. Cost
= EBIT
./. Tax
= NOPAT
Manage Assets
Capital x Cost of
Capital
= Capital Charge
=
Economic Profit
(1 period)
passion for value creation
MVA
MVA
MVA
(nMVA
Perioden)
MVA
(n
Perioden)
Perioden)
(n(nperiods)
Perioden)
(n
9
Content
1.
2.
3.
4.
5.
Abendo AG
Introduction Value-based Management
Trade Credit
Concept of Value-based Credit Management
Case study: Credit Trader with @RISK
6. Conclusion
passion for value creation
10
Fundamentals of Trade Credit
Delivery (Product / Service) now (t0)
Supplier
Customer
Payment in future (tn)
Credit is the ability of a business or individual to obtain value on faith, in
Return for an expected payment of economic value in the future.
passion for value creation
11
Why do companies offer Trade Credit?
External pressure
Sales & Marketing
Investment
Offering and extending trade credit
Efficiency
Finance
Information
R. Pike, Trade Credit, 1998, p. 12
passion for value creation
12
Where does Credit Management fit?
Infrastructure
HR
Support
activities
IT
Procurement
Services
Marketing & Sales
Outbound logistics
Operations
Inbound logistics
Primary
activities
Adapted from Porter, Competitive Advantage, 1985
passion for value creation
13
Credit Management touches ALL activities!
Recruiting,
training,
rewarding to
achieve credit
goals
Credit systems
Procedures
Structure
Information on
customers,
credit scoring
methods
Infrastructure
HR
IT
Financing credit
operations
Services
Trade credit
part of sales
package
Marketing & Sales
Collection
Effectiveness
& Efficiency
Outbound logistics
passion for value creation
Operations
∆ Inventory
due to credit
Inbound logistics
Supplier credit
terms
Procurement
Trade credit
enhance value
of product /
service
Bad debts, cah
discount,
interest &
charges
14
10 Elements of Credit Management function
Company
Operationen
Vertrieb
Finanzen
Core Processes
2
Value-based Management
Corporate Strategy
Delivery
Credit Initiation
(Sales/Marketing)
Credit Policy
Credit Strategy
Credit Management
4
6
5
Collection Management
Economic Profit
1
3
Credit Risk Management
Customer Support
Legal
Finance / Controlling
Audit
7
Support Processes
8
Organisation
9
Personal
10
Systems
Environment / Market
passion for value creation
15
Phases in Trade Credit offering
Credit Loss
Default
Write-Offs
“Forced” Credit Period
Due
Delivery /
Fulfilment
Credit Period
Accounts Receivable
Current Accounts
(credit period)
Overdue Accounts
(delinquency period)
Defaulted Accounts
(collection period)
Written-off
Accounts
(period of
prescription)
Disputed Accounts
(dispute resolution period)
passion for value creation
16
Dimensions in Cash Flow valuation
2
Uncertainty
Present
Value
Value 0
3
1
Amount t
Cash in / Cash Out
Timing
Time
0
t
4
Discount Rate
passion for value creation
17
Risk associated with Trade Credit
Revenue (booking)
Delivery
Delivery / Value Chain
Operational Risk (Supplier, Customer, Outsourcer)
Performance
Risk
Transport Risk
Invoicing Risk
Fulfillment &
Return Risk
Claim Risk
Force Majeure
Trade Credit Risks
Supplier
Customer
Payment
Operational Risk (Supplier, Customer, Outsourcer)
Payment
Mapping
Payment
Transaction
Country Risk
Currency Risk
Counterparty
Risk
Force Majeure
Cash Collection (booking)
passion for value creation
Due Date
18
Risk = Spread of future Cash Flows
Economic Profit
Upper Limit
expected Economic
Profit
Lower Limit
Time
Risk
Discounting (WACC)
passion for value creation
19
Trade Credit and Risk
Mean
Economic Capital
Risk beyond
unexpected loss
• Extreme situations
• ……..
VaCR
+ 99% percentile
Expected Loss
Unexpected Loss
Standard-RiskCost
Equity Risk Premium
Tail Risk
EL = PD x EAD x (1-R)
EL = Expected Loss
PD = Probability of Default
EAD = Exposure at Default
R = Recovery Rate
passion for value creation
20
Financing Trade Credit
Additional
Need for
Financing due
to Trade Credit
∆ A/R
• Sales Growth due to Trade Credit
• Change Credit Period
• Terms (Credit Period, Cash Discount)
• Delinquency
• Processing
∆ Liquidity
• Liquidity adjustments
• Sales Growth
• Risk Assessment (Reserve, Economic
Capital)
∆ Inventory
• Change Inventory due to Sales Growth
∆ Fixed Assets
Additional
Source of
Financing due
to Trade Credit
passion for value creation
∆ A/P
• Infrastructure due to Sales Growth
• Infrastructure due to Credit granting
• interest free Loan due to additional volume
• Supplier
• Prepayments
• Wages and Salaries
• Tax
21
Content
1.
2.
3.
4.
5.
Abendo AG
Introduction Value-based Management
Trade Credit
Concept of Value-based Credit Management
Case study: Credit Trader with @RISK
6. Conclusion
passion for value creation
22
Value-based function of Trade Credit
Add Value
Goal
Trade Credit
• Sales Support
• Customer Acquisition
• Customer Retention
Base service
• Margin
• Capital
• Risk
Offering
passion for value creation
23
Traditional vs. Value-based Credit Management
Value Based Credit Management
Value Contribution
Too high
passion for value creation
high
low
extend
keep
monitor
low
extend
keep
monitor
avoid
high
Traditional Credit Management
avoid
Too high
high
low
Risk
Risk
Focus on default risk only
(single dimension)
Optimize value contribution and risk
(multi dimension)
24
Credit Management and Value-based Management
Credit Policy
Value Drivers
Value Calculation
∆ Sales
(Growth)
∆ NOPAT
Trade
Credit
Management
∆ Costs
∆ Capital
∆ Capital Charge
=
∆ Economic
Profit
passion for value creation
25
Value Creation in Credit Management
Return
Marketing
Strategy
Investment
Strategy
Control Costs
(credit cost and
impact on operating
cost and margin)
NOPAT
Grow Sales
Credit Policy
-
(additional Sales
due to credit
offering)
Capital Charge
Financing &
Risk
Management
Strategy
Manage Assets
(impact on working
capital)
Capital
=
Economic
Profit
passion for value creation
26
Credit Policy & Sales
Gross Sales
Starting position:
Currency
Offering trade credit increases sales
(otherwise extending trade credits will
destroy corporate value)
Question:
Credit terms max. economic profit?
?
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
?
?
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
27
Bad Debts vs. Sales
Gross Revenue
Currency
Goal: Maximize Gross Sales?
Goal: Minimize Bad Debts?
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
28
Bad Debts vs. Sales
Gross Revenue
Currency
Goal: Maximize Gross Sales?
Goal: Minimize Bad Debts?
strict
passion for value creation
Thesis:
Neither pure sales
focus (max. Sales) nor
solvency view (min.
Bad Debt) offer
optimal solution.
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
29
Bad Debts vs. Sales
Currency
Increasing Cash Discounts
Increasing Bad Debts (after collection
and charges) due to relaxed policy.
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
30
Net Sales
Gross Sales
- Bad Debts
Currency
- Cash Discounts
= Net Sales
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
31
Net Sales
Gross Revenue
- Bad debts
Goal: Max. Net Sales?
Currency
- Cash Discounts
= Net Sales
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
32
Net Sales
Gross Revenue
- Bad Debts
Goal: Max. Net Sales?
Currency
- Cash Discounts
= Net Sales
Thesis:
Maximizing Net Sales
isn‘t solution either
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
33
Cost increase due to Trade Credit
Currency
Sales increase will increase cost of
base service as well. Margin of base service
offers „reserve“ pool for value
contribution.
Low credit cost,
Marginal
activities
High credit cost (processes,
material expenses,
infrastructure, service
providers)
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
34
Net Operating Profit after Tax (NOPAT)
Gross Sales
- Bad Debts
Currency
- Cash Discounts
= Net Sales
- Cost of goods sold,
overhead and tax
- Credit Cost
= NOPAT (Profit)
Goal: Max. NOPAT?
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
35
NOPAT
Gross Sales
- Bad Debts
- Cash Discounts
= Net Sales
Currency
Thesis:
Maximizing profit
is not enough.
- Cost of goods sold,
overhead and tax
- Credit Cost
= NOPAT (Profit)
Goal: Max. NOPAT?
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
36
Currency
Increased Capital Charge due to Trade Credit
Increased Capital Charge due
to higher investments in Net Working
Capital and longer Credit Period.
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
37
Economic Profit
Gross Revenue
- Bad Debts
Currency
- Cash Discounts
= Net Sales
- Cost of goods sold,
overhead and tax
-Credit Costs
= NOPAT (profit)
- Capital Charge
= Economic Profit
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
38
Economic Profit
Gross Revenue
- Bad Debts
- Cash Discounts
= Net Sales
Currency
Economic profit is
valid benchmark to
max. company value.
Goal: Maximizing Economic profit!
- Cost of goods sold,
overhead and tax
-Credit Costs
= NOPAT (profit)
- Capital Charge
= Economic Profit
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
39
Economic Profit
Gross Revenue
- Bad Debts
- Cash Discounts
= Net Sales
Currency
Optimal mix of Bad Debts,
Cash Discount, Credit
Costs and Capital Charge
- Cost of goods sold,
overhead and tax
-Credit Costs
= NOPAT (profit)
- Capital Charge
Goal
= Economic Profit
strict
passion for value creation
- Short credit period
- Strict collection policy
- No cash discounts
- Only high ratings accepted
Credit Policy
relaxed
-Long credit period
-Relaxed collection policy
- Cash discounts
- Also lower ratings accepted
<
<
<
<
Capital Charge
Credit Costs
Cash Discounts
Bad Debts
40
Example: Investment Scenario 1 - Invest
High probability of positive Value Contribution
Expected
Value Contribution
(Mean)
passion for value creation
passion for value creation
41
Example: Investment Scenario 2 - Do not Invest
Low probability of positive Value Contribution
Expected Value
Contribution
negative
passion for value creation
passion for value creation
42
Calculation Economic Profit Trade Credit
1. Growth
2. Cost Efficiency
Credit Cost
Credit History
Coll. Effectiveness
& Efficiency
Limits & Securities
Depreciation
Policy
Credit Loss
EL = PD*LGD*EAD
∆ Net Sales
∆ Variable Cost
∆ NOPAT
Cash Discounts
∆ Fixed Cost
∆ Gross Sales
Tax Rate
Interest & Charges
3. Capital Efficiency
(-)
∆ A/P
Credit Policy
Credit Terms &
Conditions
Cash Collection
Management
∆ Inventory
∆ Fixed Assets
A/R
∆ Capital Cost
∆ Capital
Charge
=
∆ Economic
Profit
Risk Management
(unexpected loss)
passion for value creation
43
Content
1.
2.
3.
4.
5.
Abendo AG
Introduction Value-based Management
Trade Credit
Concept of Value-based Credit Management
Case study: Credit Trader with @RISK
6. Conclusion
passion for value creation
44
Case Study
Company
• Business Unit “Agriculture” of Germany based trading company
• Revenue Business Unit > EUR 3.5bn
Trading Lines
• Corn
• Pest management
• Seeds
• Animal Feed
• Fertilizer
• Other Services
Credit Management
• A/R Agriculture approx. EUR 300 Mio.
• Bad Debt < 0.5%
Challenge: low Margin Economic Profit
passion for value creation
45
Case Study: Corn Value Contribution
6,000,000
10000000.00
2009
1000000.00
5,000,000
Cumulative EVC2 per Order
100000.00
4,000,000
10000.00
3,000,000
Order Size
1000.00
100.00
2,000,000
10.00
1,000,000
1.00
0.10
1
104
207
310
413
516
619
722
825
928
1031
1134
1237
1340
1443
1546
1649
1752
1855
1958
2061
2164
2267
2370
2473
2576
2679
2782
2885
2988
3091
3194
3297
3400
0
2010
4,000,000
10,000,000.0
3,500,000
2011
6,000,000
10,000,000.0
1,000,000.0
1,000,000.0
5,000,000
3,000,000
100,000.0
100,000.0
4,000,000
2,500,000
10,000.0
10,000.0
2,000,000
3,000,000
1,000.0
1,000.0
1,500,000
100.0
100.0
2,000,000
1,000,000
10.0
10.0
500,000
1,000,000
1.0
1.0
passion for value creation
0
0.1
1
97
193
289
385
481
577
673
769
865
961
1057
1153
1249
1345
1441
1537
1633
1729
1825
1921
2017
2113
2209
2305
2401
2497
2593
2689
2785
2881
2977
3073
3169
1
107
213
319
425
531
637
743
849
955
1061
1167
1273
1379
1485
1591
1697
1803
1909
2015
2121
2227
2333
2439
2545
2651
2757
2863
2969
3075
3181
3287
3393
3499
0
46
Project Goals
• Improve working relations between Credit department and Sales Units
• Support Sales functions with Risk Adjusted Pricing Tools
• Identify Customers creating / destroying value
• Develop Tools to predict Value Contribution per Transaction / Customer
• Forecast positive Value contribution per Transaction / Customer
• Forecast Credit Costs (incl. Expected loss)
• Forecast Economic Capital at 99% confidence level covering unexpected loss
passion for value creation
47
Overview Trade Credit Master (1)
Order Volume &
Frequency
Customer Portfolio
Expected Value Contribution 2 (EVC2)
Risk Management
• Hedge
Portfolio Management
=
Credit Risk
Model
Calculation EVC2 incl. Credit
Options: PBD, POD, Trade Credit
Value Contribution
Internal Rating
Value Change due to Trade Credit
offering
high
Order
abzüglich
Credit Cost per
Rating Class
Years Customer
Relationship
Valuation CLV
Business Unit Agriculture
Rating Class per
Customer
Warehousing
business?
extend
keep
monitor
low
Expected Value
Contribution per
Segment
avoid
Too high
Credit Unit
low
Risk
Trade Credit Application
WACC
passion for value creation
high
Corporate Policy
Business Cycle
48
Overview Trade Credit Master (2)
Other
Fertilizer
Seeds
RE2-Marge
Animal Feed
RE2-Marge
Pest Management
RE2-Marge
Corn
Erwarteter Wert &
RE2-Marge
Erwarteter
Wert & pro
Standardabweichung
RE2-Marge
Erwarteter
Wert & pro
Expected
Value
Standardabweichung
Segment
RE2-Marge
Erwarteter Wert
& pro
Standardabweichung
Segment
Erwarteter Wert
& pro
Contribution
2
Standardabweichung
Segment
Erwarteter Wert
&
Standardabweichung
Segment pro
Standardabweichung
Segment pro
(EVC2)
Segment
Expected Margin &
Standard deviation
Customer n
Customer 4
Customer 3
Customer 3RE2-Marge
Customer 2RE2-Marge
Customer 1RE2-Marge
Erwarteter Wert &
RE2-Marge
Erwarteter Wert & pro
Standardabweichung
RE2-Marge
Erwarteter Wert & pro
Standardabweichung
Segment
RE2-Marge
Payment
Erwarteter
Wert
& pro
Standardabweichung
Segment
Erwarteter
Wert
&
Standardabweichung
pro
Segment
History
Erwarteter
Wert
& pro
Standardabweichung
Segment
Standardabweichung
pro
Segment
Expected
payment &
Segment
Standard deviation: On
time, delinquent, default
Credit Cost
(Credit Period, Risk
Class specific
experience)
Order Data
passion for value creation
• Expected Value Contribution (EVC2)
• Expected Credit Cost
• Economic Capital (unexpected Loss)
• Probability EVC2 > 0
passion for value creation
49
Cockpit Trade Credit Master (1)
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
passion for value creation
44604740
D
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.13
7.05%
90.00%
31,843.77
-16,324.85
-6,556.17
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
130,044.22
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
63.89%
80.00%
8.0%
6.0%
7.05%
5.38%
99.8%
100.0%
106.6%
90.00%
63.89%
90.00%
100.00%
1.24% EVC2 before Credit
22.75% expected Margin
Economic Capital (99%)
4.0%
EVC2 incl. Credit
EVC2 after Credit
2.0%
expected Margin
EVC2 Trade
0.0%
Economic Capital (99%)
0.0%
10.0%
20.0%
30.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
7,077.56
Mean excl. EC
Expected Cost Rate
5.80%
Expected Margin
Probability EVC2 positive
Max Credit Costs
31,729.92
Max EVC2
Min Credit Costs
681.01
MinEVC2
Credit Cost 99% <
28,267.10
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.38%
1.24%
22.75%
27,743.07
993.66
EUR/%
1,515.57
1.24%
63.89%
30,245.11
-45,940.08
-27,743.07
50
Cockpit Trade Credit Master (2)
Input
• Customer Ident
• Ordered Products
• Requested payment period
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
44604740
D
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.13
7.05%
90.00%
31,843.77
-16,324.85
-6,556.17
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
130,044.22
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
63.89%
80.00%
8.0%
6.0%
99.8%
100.0%
106.6%
90.00%
63.89%
90.00%
100.00%
1.24% EVC2 before Credit
22.75% expected Margin
Economic Capital (99%)
EVC2 incl. Credit
EVC2 after Credit
2.0%
expected Margin
EVC2 Trade
0.0%
Economic Capital (99%)
0.0%
10.0%
20.0%
30.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
7,077.56
Mean excl. EC
Expected Cost Rate
5.80%
Expected Margin
Probability EVC2 positive
Max Credit Costs
31,729.92
Max EVC2
Min Credit Costs
681.01
MinEVC2
Credit Cost 99% <
28,267.10
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.38%
4.0%
Risk-adjusted- Pricing
Price Calculation based on payment
before delivery, payment on delivery
and trade credit
7.05%
5.38%
1.24%
22.75%
27,743.07
993.66
EUR/%
1,515.57
1.24%
63.89%
30,245.11
-45,940.08
-27,743.07
Probability positive EVC2
Probability positive EVC2 for base
service and trade credit
Risk / Return Matrix
Base Service
EVC2
distribution base
service
passion for value creation
Return (EVC2-Margin) and Risk
(Economic Capital at 99%) for base
service and trade credit.
Credit Cost
Trade Credit
Credit Cost
distribution
EVC2 distribution
trade credit
Economic Capital (99%): Equity to
compensite unexpected loss at confidence
level of 99%.
51
Calculation Methodology Trade Credit Master
Payment History (2008-2011) per customer (last 48 months)
20115067
20160001
20203039
20231908
20299175
…
pünktl.
25.38%
45.10%
13.79%
24.78%
24.78%
…
zu spät
74.62%
54.90%
86.21%
75.22%
75.22%
…
1-10
65.47%
34.33%
25.14%
55.06%
55.06%
…
11-20
6.92%
6.88%
13.07%
11.27%
11.27%
…
21-30 31-40 41-50 51-60 61-70 71-80 81-90 Ausfall
3.20% 2.35% 1.51% 1.17% 1.00% 1.00% 1.00% 0.10%
14.73% 1.00% 2.96% 1.00% 1.00% 1.00% 1.00% 0.10%
13.07% 18.24% 11.34% 2.72% 6.17% 4.45% 1.00% 0.10%
4.38% 1.74% 0.98% 0.49% 0.32% 0.20% 0.15% 0.65%
4.38% 1.74% 0.98% 0.49% 0.32% 0.20% 0.15% 0.65%
…
…
…
…
…
…
…
…
Expected Value Contribution and Standard Deviation per product
Getreide
μ
σ
Corn
Pflanzenschutz
μ
Pest
σ
Saatgut
μ
Seeds
σ
Feed
Futtermittel
μ
Fertilizer
σ
Other
Düngemittel
μ
σ
Sonstige
μ
σ
0
33.22%
32.16%
31.92%
22.16%
26.19%
22.85%
22.19%
14.91%
20.88%
20.06%
50
32.59%
29.72%
27.33%
19.28%
28.08%
19.06%
19.82%
12.00%
22.66%
15.87%
97.20%
15.64%
200
22.27%
22.05%
20.08%
16.96%
22.90%
16.03%
15.83%
11.51%
18.29%
11.24%
97.20%
15.64%
1000
14.34%
14.10%
12.57%
12.31%
19.99%
11.40%
8.76%
7.62%
16.36%
8.10%
97.20%
15.64%
2500
9.31%
10.64%
8.74%
9.70%
17.86%
11.15%
6.27%
5.00%
13.49%
7.15%
97.20%
15.64%
10000
7.39%
9.60%
5.34%
11.57%
16.19%
11.36%
4.60%
4.48%
9.87%
7.01%
97.20%
15.64%
25000
7.54%
11.01%
9.06%
17.66%
12.05%
14.46%
7.49%
9.24%
8.16%
6.62%
97.20%
15.64%
100000
10.14%
7.07%
-4.79%
7.19%
8.51%
3.03%
1.10%
0.90%
4.21%
2.85%
97.20%
15.64%
BayWa Kundenkreditwerkzeug
Pilotversion 20.12.2011
EINGABEN
KundenNr
Ludwig Lang
92364-Deining-Dorfstr. 5
Rating
Bestellwert
Getreide
Pflanzenschutz
Saatgut
Futtermittel
Düngemittel
Sonstige
Bestellwert
Zahlungsziel (Tage)
46312371
BB
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
Grundgeschäft
Erwarteter RE2
Erwartete Marge
Wahrscheinlichkeit RE2 positiv
Max RE2
Min RE2
Verlust mit 99%Sicherheit kleiner als
@RISK-Diagramm
EUR/%
8,593.43
7.05%
90.34%
37,951.97
-22,811.52
-6,749.09
Risk adjusted Pricing
Preis Vorauszahlung
Preis Barzahlung
Preis Kreditzahlung
0.00%
20.00%
Kredittage
-10
0
30
40.00%
60.00%
84.22%
80.00%
Preis (EUR)
121,739.56
121,973.00
123,991.59
Wahrscheinlichkeit RE2 > 0
p RE2 Grundleistung > 0
p RE2 inkl. Kredit > 0
6.0%
4.0%
99.8%
100.0%
101.7%
90.34%
84.22%
90.34%
100.00%
5.55% RE2 vor Kredit
15.08% erwartete RE2-Marge
Economic Capital (99%)
RE2 nach Kredit
2.0%
erwartete RE2-Marge
erwarteter RE2 vor
0.0%
Kredit
Economic Capital (99%)
0.0% 5.0% 10.0% 15.0% 20.0%
Economic Capital (99%)
Economic Capital (99%)
Zins Economic Capital (99%)
Kreditkosten
EUR/%
Berechnung RE2 nach Kredit
Erwartete Kosten
1,829.71
erwarteter RE2 nach Kredit, exkl. EK
Erwartete Kostenmarge
1.50%
Erwartete Marge
Wahrscheinlichkeit RE2 positiv
Max RE2
33,634.36
Max RE2
Min RE2
1,829.71
Min RE2
Kosten mit 99%Sicherheit kleiner als
24,429.30
Verlust mit 99%Sicherheit kleiner als
@RISK-Diagramm
@RISK-Diagramm
8.0%
RE2-Marge
KndnNr
7.05%
5.53%
erwarteter RE2 inkl
Kredit
7.05%
5.53%
5.55%
15.08%
18,393.94
188.88
EUR/%
6,763.72
5.55%
84.22%
37,084.21
-45,363.56
-18,393.94
@RISK-Montecarlo-Simulation
(100‘000 Iterationen)
• EVC2 Base Service
• Credit Cost current payments
• Credit Cost delinquent payments
• Credit cost and bad debt defaults
• EVC2 Trade Credit
• Probabilities
passion for value creation
52
Example Trade Credit Master : Customer with AAA-Rating
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
passion for value creation
45638171
AAA
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.50
7.05%
90.35%
40,490.36
-21,759.38
-6,777.42
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
122,880.25
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
87.84%
80.00%
7.2%
7.0%
6.8%
6.6%
6.4%
6.2%
5.5%
7.05%
5.56%
99.8%
100.0%
100.7%
90.35%
87.84%
90.35%
100.00%
6.34% EVC2 before Credit
6.47% expected Margin
Economic Capital (99%)
EVC2 incl. Credit
EVC2 after Credit
expected Margin
EVC2 Trade
Economic Capital (99%)
6.0%
6.5%
7.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
857.88
Mean excl. EC
Expected Cost Rate
0.70%
Expected Margin
Probability EVC2 positive
Max Credit Costs
33,114.54
Max EVC2
Min Credit Costs
589.82
MinEVC2
Credit Cost 99% <
2,487.60
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.56%
6.34%
6.47%
7,895.07
49.37
EUR/%
7,735.61
6.34%
87.84%
39,900.54
-38,102.45
-7,895.07
53
Example Trade Credit Master : Customer with AA-Rating
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
passion for value creation
43709546
AA
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.43
7.05%
90.31%
36,202.84
-21,376.63
-6,828.39
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
123,103.50
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
87.03%
80.00%
7.5%
7.05%
5.60%
99.8%
100.0%
100.9%
90.31%
87.03%
90.31%
100.00%
6.17% EVC2 before Credit
6.73% expected Margin
7.0%
Economic Capital (99%)
EVC2 incl. Credit
6.5%
EVC2 after Credit
expected Margin
EVC2
Trade
6.0%
Economic Capital (99%)
0.0% 2.0% 4.0% 6.0% 8.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
1,071.64
Mean excl. EC
Expected Cost Rate
0.88%
Expected Margin
Probability EVC2 positive
Max Credit Costs
31,758.23
Max EVC2
Min Credit Costs
618.53
MinEVC2
Credit Cost 99% <
2,686.54
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.60%
6.17%
6.73%
8,206.24
58.86
EUR/%
7,521.79
6.17%
87.03%
35,323.36
-32,741.96
-8,206.24
54
Example Trade Credit Master : Customer with A-Rating
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
passion for value creation
46411079
A
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.46
7.05%
90.40%
38,041.95
-21,453.22
-6,822.94
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
123,318.91
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
86.39%
80.00%
7.5%
7.0%
7.05%
5.59%
99.8%
100.0%
101.1%
90.40%
86.39%
90.40%
100.00%
6.00% EVC2 before Credit
6.93% expected Margin
Economic Capital (99%)
6.5%
EVC2 incl. Credit
EVC2 after Credit
6.0%
expected Margin
EVC2
Trade
5.5%
Economic Capital (99%)
0.0% 2.0% 4.0% 6.0% 8.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
1,272.69
Mean excl. EC
Expected Cost Rate
1.04%
Expected Margin
Probability EVC2 positive
Max Credit Costs
29,325.44
Max EVC2
Min Credit Costs
626.18
MinEVC2
Credit Cost 99% <
2,693.57
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.59%
6.00%
6.93%
8,452.47
73.22
EUR/%
7,320.78
6.00%
86.39%
36,618.76
-32,722.57
-8,452.47
55
Example Trade Credit Master : Customer with BBB-Rating
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
passion for value creation
43702588
BBB
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.45
7.05%
90.31%
36,106.74
-19,453.61
-6,788.44
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
123,106.75
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
86.95%
80.00%
7.5%
7.05%
5.57%
99.8%
100.0%
100.9%
90.31%
86.95%
90.31%
100.00%
6.17% EVC2 before Credit
7.14% expected Margin
7.0%
Economic Capital (99%)
EVC2 incl. Credit
6.5%
EVC2 after Credit
expected Margin
EVC2
Trade
6.0%
Economic Capital (99%)
0.0% 2.0% 4.0% 6.0% 8.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
1,070.87
Mean excl. EC
Expected Cost Rate
0.88%
Expected Margin
Probability EVC2 positive
Max Credit Costs
33,314.67
Max EVC2
Min Credit Costs
624.41
MinEVC2
Credit Cost 99% <
2,754.18
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.57%
6.17%
7.14%
8,711.60
62.88
EUR/%
7,522.58
6.17%
86.95%
35,226.62
-39,702.80
-8,711.60
56
Example Trade Credit Master : Customer with BB-Rating
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
passion for value creation
46312371
BB
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.46
7.05%
90.31%
37,739.08
-19,318.45
-6,772.70
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
123,995.72
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
84.18%
80.00%
8.0%
6.0%
7.05%
5.55%
99.8%
100.0%
101.7%
90.31%
84.18%
90.31%
100.00%
5.54% EVC2 before Credit
15.33% expected Margin
Economic Capital (99%)
4.0%
EVC2 incl. Credit
EVC2 after Credit
2.0%
expected Margin
EVC2
Trade
0.0%
Economic Capital (99%)
0.0% 5.0% 10.0% 15.0% 20.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
1,830.68
Mean excl. EC
Expected Cost Rate
1.50%
Expected Margin
Probability EVC2 positive
Max Credit Costs
33,394.54
Max EVC2
Min Credit Costs
635.04
MinEVC2
Credit Cost 99% <
24,427.34
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.55%
5.54%
15.33%
18,701.19
192.04
EUR/%
6,762.78
5.54%
84.18%
36,869.89
-43,181.88
-18,701.19
57
Example Trade Credit Master : Customer with B-Rating
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
passion for value creation
43703340
B
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.46
7.05%
90.32%
36,986.26
-19,770.13
-6,755.10
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
125,270.08
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
80.10%
80.00%
8.0%
6.0%
7.05%
5.54%
99.8%
100.0%
102.7%
90.32%
80.10%
90.32%
100.00%
4.65% EVC2 before Credit
18.68% expected Margin
Economic Capital (99%)
4.0%
EVC2 incl. Credit
EVC2 after Credit
2.0%
expected Margin
EVC2
Trade
0.0%
Economic Capital (99%)
0.0% 5.0% 10.0% 15.0% 20.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
2,919.43
Mean excl. EC
Expected Cost Rate
2.39%
Expected Margin
Probability EVC2 positive
Max Credit Costs
36,026.12
Max EVC2
Min Credit Costs
631.36
MinEVC2
Credit Cost 99% <
26,093.07
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.54%
4.65%
18.68%
22,783.65
377.65
EUR/%
5,674.03
4.65%
80.10%
35,949.38
-50,102.86
-22,783.65
58
Example: Customer with CCC-Rating
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
passion for value creation
43702287
CCC
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.48
7.05%
90.19%
40,600.51
-21,294.31
-6,811.32
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
125,791.86
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
78.33%
80.00%
8.0%
6.0%
7.05%
5.58%
99.8%
100.0%
103.1%
90.19%
78.33%
90.19%
100.00%
4.27% EVC2 before Credit
21.01% expected Margin
Economic Capital (99%)
4.0%
EVC2 incl. Credit
EVC2 after Credit
2.0%
expected Margin
EVC2
Trade
0.0%
Economic Capital (99%)
0.0%
10.0%
20.0%
30.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
3,379.90
Mean excl. EC
Expected Cost Rate
2.77%
Expected Margin
Probability EVC2 positive
Max Credit Costs
34,108.66
Max EVC2
Min Credit Costs
589.19
MinEVC2
Credit Cost 99% <
27,194.07
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.58%
4.27%
21.01%
25,626.72
438.96
EUR/%
5,213.58
4.27%
78.33%
40,011.33
-46,009.68
-25,626.72
59
Example: Customer with D-Rating
Trade Business
Expected Value Contribution 2 (EVC2)
Expected Margin
Probability EVC2 positive
Max EVC2
Min EVC2
Expected loss 99% <
@RISK graph
passion for value creation
44604740
D
EUR
90,840.00
21,711.00
2,637.00
6,526.00
119.00
140.00
121,973.00
30
EUR/%
8,593.46
7.05%
90.35%
35,575.24
-20,164.63
-6,814.62
Risk adjusted Pricing
Payment before delivery
Payment at delivery
Trade Credit
Credit Period
-10
0
30
Price (EUR)
121,739.56
121,973.00
130,142.96
Probability EVC2 > 0
p EVC2 Trade Business > 0
p EVC2 incl. Credit > 0
0.00%
20.00%
40.00%
60.00%
64.29%
80.00%
8.0%
6.0%
7.05%
5.59%
99.8%
100.0%
106.7%
90.35%
64.29%
90.35%
100.00%
1.21% EVC2 before Credit
23.76% expected Margin
Economic Capital (99%)
4.0%
EVC2 incl. Credit
EVC2 after Credit
2.0%
expected Margin
EVC2
Trade
0.0%
Economic Capital (99%)
0.0%
10.0%
20.0%
30.0%
Economic Capital (99%)
Economic Capital (99%)
Interest Economic Capital (99%)
Credit Costs
EUR/%
EVC2 after Credit
Expected Costs
7,120.41
Mean excl. EC
Expected Cost Rate
5.84%
Expected Margin
Probability EVC2 positive
Max Credit Costs
35,464.37
Max EVC2
Min Credit Costs
646.47
MinEVC2
Credit Cost 99% <
28,440.35
Loss 99% probability <
@RISK graph
@RISK graph
EVC2 Margin
Trade Credit Master
Pilotversion 20.12.2011
INPUT
Customer #
Customer Name (confidential)
Customer Address (confidential)
Rating
Order
Corn
Pest Management
Seeds
Animal Feed
Fertilizer
Other
Order Value
Credit Period (days)
7.05%
5.59%
1.21%
23.76%
28,976.50
1,049.54
EUR/%
1,473.05
1.21%
64.29%
34,195.50
-51,369.24
-28,976.50
60
Content
1.
2.
3.
4.
5.
Abendo AG
Introduction Value-based Management
Trade Credit
Concept of Value-based Credit Management
Case study: Credit Trader with @RISK
6. Conclusion
passion for value creation
61
Value-based Credit Management max. Value
Value Contribution
Value based Credit Management
Traditional Credit
Management
Receivable Management
Receivable Accounting
Only Collection
Transaction View
Collection & Risk
Limitation
Receivable
Reduce Bad
Debts, Risk
Management
and Accelerate
Collections
Credit
Receivable as
investment class
to generate
positive value
contribution
Investment Class
Focus & Content
passion for value creation
62
Not all customers deliver positive value contribution
Kumulierte Wertbeiträge (in EUR)
Cumulative Economic Profit
Theoretical max. Value
Contribution Base Service
0
Actual Value Contribution
Base Service
Value Destruction
due to Trade Credit
1'000
2'000
3'000
4'000
5'000
6'000
Kunden sortiert nach absteigenden EP/Kunde
Customers (sort by declining EP / Customer)
Wertbeitrag Grundleistung
EP Base Service
passion for value creation
Abendo Research
7'000
Actual Value Contribution
Trade Credit
Wertbeitrag inkl. Kreditvergabe
EP Trade Credit
63
Value Deduction Waterfall
Wertbeitrag (in EUR)
Value Deduction Base Service
3 Trade Credit scenarios to reduce value:
1. Financing own value deduction!
2. Trade credit causes negative EP
3. Trade Credit reduces EP
Theoretical
EP Base
Service
passion for value creation
Actual EP Base Service
( )
Actual EP incl. Trade Credit
Abendo Research
64
Concept Value-based Credit Management
← Customer Relationship (Years)
← Growth
← NOPAT-Margin
← Investments in NWC
← Investments in Assets
← Capital Cost (WACC)
← Tax Rate
Sales & Marketing
Credit Management
Value Change due
to Trade Credit
← Customer relationship
← Sales Promotion
← Credit Revenue (Interest, Charges)
← Bad debt
← Credit Administration and Financing
← Size of Order
← Credit Investments
← Credit Policy
← Risk Management
← Portfolio Management
← Business Cycle
Results
Customer
Lifetime
Value
Expected Value Contribution
Trade Credit
passion for value creation
Risk Value Contribution < 0
passion for value creation
65
Thank you!
Beat Koch
b.koch@abendo.ch
www.abendo.ch
Abendo AG
Zürichstrasse 102
CH-8134 Adliswil / Zürich
Tel +41 44 709 3040
Fax +41 44 709 3042
passion for value creation
66