Automatic Cash Application

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Maxing Out Your Credit . . .
and Accounts Receivable
Department Potential
Windy City Session 11
10:10 am – 11:00 am
Friday, June 8th 2012
Speaker Information
 Andrew Shaffer
□ Manager, Global Treasury & Credit
□ Responsible for global cash management including investments
and banking relationships, overseeing the credit and accounts
receivable department, leads the customer to cash process
globally as part of a working capital management initiative and
manages the company’s debt obligations.
 Holly Crandell
□ Supervisor, Treasury
□ Responsible for supervising a team of four, overseeing daily
operations of customer deductions, cash application, and credit
management.
2
Hollister Incorporated - Overview
 Privately held, global company that develops,
manufactures and markets healthcare products,
servicing over 90 countries.
□ Headquarters in Libertyville, Illinois
□ Manufactures in United States, Ireland, Denmark and
India
□ Treasury staff of 8 to oversee global cash
management, foreign exchange, insurance risk
management, credit, real estate and company stock
program
□ Additional 4 accounts receivable and credit staff to
oversee cash application, deduction resolution and
collections for the US business unit
3
Hollister Overview
Continence
Wound Care
Ostomy
A global manufacturer of…
4
Evolution of Accounts Receivable and Credit
10 FTEs down to 6 FTEs in 3 years
CASH
APPLICATION
AUTOMATION
LEVERAGE
REPORTING
TOOLS
EVALUATE
HEADCOUNT
CREATE
OBJECTIVE
CALLING PLAN
RE-EVALUATE
PROCESSES
5
Evolution of Accounts Receivable and Credit
 Accounts Receivable staff changes
□ 2008 – FTE 10 (3 A/R staff, 4 Credit staff, 2
Supervisors, 1 Manager)
Credit & A/R
Manager
Deduction
Coordinator
A/R
Supervisor
Credit
Supervisor
Deduction
Coordinator
Credit
Representative
Credit
Representative
Cash
Application
Credit
Representative
Credit
Representative
6
Evolution of Accounts Receivable and Credit
 Accounts Receivable staff changes
□ 2012 – FTE 6 (2 A/R staff, 2 Credit staff, 1
Supervisor, 1 Manager)
Credit & A/R
Manager
A/R & Credit
Supervisor
Deduction
Coordinator
Credit
Representative
Cash
Application
7
Credit
Representative
Accounts Receivable and Credit
Process Improvements & Automation
 Automatic cash application (cash hit rate)
 Reporting tools leveraged
 Objective calling plan created
8
Automatic Cash Application
 Incentives for improving the automatic cash
application process
□ One person’s full job responsibilities
□ Historical levels around 64%
□ Not fully utilizing system capabilities
□ No additional time for value added activities
9
Automatic Cash Application
 Current Cash Application Process
□ JP Morgan Chase receives all checks and keys in all
relevant information
– Customer name, bank account number, routing number,
invoice number and invoice dollar amount
10
Automatic Cash Application
□ JP Morgan Chase scans a copy of the check and
remittance detail and uploads it onto the online portal
□ Electronic File sent to our company to be loaded into
SAP
11
Automatic Cash Application
 Historical automatic posting rate of 63%
 Steps to Improve
□ From the scanned copies of the checks, input the
bank account number and routing number into the
customer master
□ For customers with multiple ship-to accounts,
maintain the correct payer relationship
 Automatic posting rate increased to an average
of 79%
12
Automatic Cash Application
% of Cash Automatically Applied
90.0%
85.0%
80.0%
78.8%
79.8%
80.0%
79.6%
80.1%
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
78.9%
78.9%
79.2%
78.7%
Dec-11
Jan-12
Feb-12
Mar-12
80.4%
75.6%
75.0%
70.0%
65.0%
63.4%
63.6%
Apr-11
May-11
60.0%
55.0%
50.0%
Jun-11
% of Cash Automatically Applied
13
Goal
Apr-12
Automatic Cash Application
 Average of 2,400 checks received per month
 Realized 16% improvement in automatic
application
 Annual savings of 192 hours (5 weeks)
□ Assume 2.5 minutes of processing time per check
14
Accounts Receivable and Credit
Process Improvements & Automation
 Automatic cash application (cash hit rate)
 Reporting tools leveraged
 Objective calling plan created
15
Leveraging Reporting Tools
 Goals of automated reporting
□ Quicker time to generate reports
□ Eliminate hand written notes
□ Generate higher quality of tracking customer activities
□ Ease in monitoring personnel
16
Leveraging Reporting Tools
 Integrated reporting tool using SAP and Excel
called EDW, including:
□ Sales rebate report summary – savings of 288 hours
annually
□ Customized customer statements
□ Standard customer deduction report
□ Customer A/R Aging report
17
Leveraging Reporting Tools
 Outstanding Deductions run out of SAP
□ Transaction FBL5 – Customer line item display
□ Time consuming to run report
□ Limited capability for customization
18
Leveraging Reporting Tools
 Deduction Report through EDW
□ Quick report to run
□ Can customize easily
Table
Reason code
021
022
023
025
026
027
028
030
031
032
033
035
036
037
038
Overall Result
Pricing Deduction
Mdse Return
Dup use of Credit
Insufficient Info
Shortage Deduction
Dispute Freight
Damage Product
Disputed Tax
Disputed Pricing
Disputed Return
Disputed Dup use of Credit
Disputed Insufficient Info
Disputed Shortage
Disputed Freight
Disputed Damaged
0 Days
$ 44.40
$ 522.28
1-30 Days
$ 150.96
$ 1,003.82
$ 11.83
31-60 Days
$ 36.92
$ 966.21
$ 0.00
$ 390.99
$ 3,599.98
$ 9,957.93
$ 403.68
$ 330.26
$ 1,046.45
$ 227.80
$ 772.20
$ 9,108.61
$ 211.50
$ 25.00
$ 1,600.51
$ 15.28
$ 0.00
$ 131.76
$ 0.00
$ 0.00
$ 3,781.19
$ 441.47
$ 300.00
$ 0.00
$ 0.00
$ 0.00
$ 0.00
$ 6.92
$ 74.25
$ 0.00
$ 5,811.46
$ 18,422.08
$ 95.05
$ 3,559.41
$ 47,193.60
$ 0.00
$ 8,451.38
$ 74.05
$ 597.18
$ 22,178.22
$ 3.75
$ 3,216.34
$ 25.00
$ 0.00
$ 6,232.27
$ 19.47
$ 698.76
$ 0.00
$ 202.32
$ 5,486.37
$ 0.00
$ 2,553.64
$ 0.00
$ 0.00
$ 3,091.14
$ 179.40
$ 4,535.62
$ 75.00
19
61-90 Days
$ 43.16
91-120 Days
$ 0.00
$ 456.33
$ 0.00
>120 Days
Total
$ 0.00
$ 232.28
$ 38,386.73 $ 41,378.53
$ 0.00
$ 11.83
$ 0.00
$ 179.40
$ 4,786.53
$ 9,937.33
$ 0.00
$ 430.26
$ 2,638.79
$ 9,066.94
$ 344.92
$ 1,427.38
$ 347.10
$ 5,093.53
$ 132.26 $ 19,330.56
$ 0.00
$ 0.00
$ 0.00
$ 5,834.68
$ 4,643.71 $ 37,985.91
$ 0.00
$ 194.10
$ 0.00
$ 4,358.91
$ 51,280.04 $ 135,461.64
Accounts Receivable and Credit
Process Improvements & Automation
 Automatic cash application (cash hit rate)
 Reporting tools leveraged
 Objective calling plan created
20
Creating an Objective Calling Plan
 Goals for Objective Calling Plan
□ Eliminate subjectivity for calling and repercussions for
past due invoices
□ Eliminate hand written notes
□ Enhance capability for monitoring
21
Creating an Objective Calling Plan
 Set specific targets and actions based on days
past invoice due date
10 days – call Accounts Payable
20 days – call Accounts Payable
30 days – call Accounts Payable and Purchasing
45 days – call Supervisor/Manager and hold any
newly submitted orders
□ 60 days – Send a letter to management indicating
their account status and possibility of changing to CIA
□ 75 days – Send a second letter to management and
change the customer terms to CIA
□
□
□
□
22
Creating an Objective Calling Plan
 EDW Credit Calling Plan
Table
Accounting Clerk
1
2
3
4
Customer
21161
103906
2001855
Result
72546
101681
Result
73775
101075
101089
101674
103718
2046512
Result
71344
2007759
2009707
2073074
2095573
Result
Doc.number
94882114
94863033
94879708
Customer PO Number
71227
1252612
537793
Item Text
LM 4/10/12 faxed 4/18/12
Net 90 - see notes HLC
#
Net due date
03/9/2012
02/26/2012
03/8/2012
94868146
94877449
406149
493848
ck will cut 5/4/12
pays 90 days
03/1/2012
03/7/2012
94875054
94877509
94868211
94868212
94868215
94863049
94863134
94872847
20022770
1-1211216966
1-4121214386
1-4121214389
1-4121214630
12-158335
3786584
213134
ck# 46118 mailed 5/1/12
LM 4/30/12 CK TO CUT 5/4/12
ck to cut 4/27/12
ck to cut 4/27/12
ck to cut 4/27/12
ck# 331832 mailed 5/3/12
Price disp 5/3/12 ck mailing 5/4/12
See notes LM 4/17/12 LM 4/27/12
03/4/2012
03/7/2012
03/1/2012
03/1/2012
03/1/2012
02/26/2012
02/26/2012
03/3/2012
94872774
94877513
1401449910
94882181
94881925
3981
DD
#
90679
812995585
ck# 12330 mailed 5/2/12
log# 2572848 4/27/12
Mdse Retd rga# 60268323 2/10 r/c see <$131.90>
LM 4/11/12 price Dispute 4/12/12
Faxed 4/12/12
03/3/2012
03/7/2012
03/9/2012
03/9/2012
03/9/2012
Overall Result
23
60 Days
$ 402.75
$ 19.15
$ 41.89
$ 463.79
$ 80.94
$ 79.14
$ 160.08
$ 83.55
$ 835.50
$ 374.45
$ 85.40
$ 31.32
$ 131.13
$ 553.90
$ 55.92
$ 2,151.17
$ 106.80
$ 43.63
$ 26.38
$ 1,260.00
$ 384.11
$ 1,820.92
$ 4,595.96
Key Due Date
Days Delinquent
05/8/2012
05/8/2012
05/8/2012
60
72
61
05/8/2012
05/8/2012
68
62
05/8/2012
05/8/2012
05/8/2012
05/8/2012
05/8/2012
05/8/2012
05/8/2012
05/8/2012
65
62
68
68
68
72
72
66
05/8/2012
05/8/2012
05/8/2012
05/8/2012
05/8/2012
66
62
60
60
60
Creating an Objective Calling Plan
 Each day call customers who fall on the specific
past due day.
□ Streamlines calling to just customers who need to be
contacted
□ No judgment calls needed on the action to take
24
Summary
 Key Changes in the past 3 years
□ Cash Application Automation
□ Leveraging Reporting Tools
□ Implementing Credit Calling Plan
25
Contact Information
Andrew B. Shaffer
Manager, Global Treasury & Credit
Hollister Incorporated
2000 Hollister Drive
Libertyville, IL 60048
Telephone: 847.680.2825
Email: [email protected]
Holly L. Crandell
Supervisor, Treasury
Hollister Incorporated
2000 Hollister Drive
Libertyville, IL 60048
Telephone: 847.680.2818
Email: [email protected]
26
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