Export Credit Management Stream at CCR-interactive

1. What and Who
Drives DSO?
Who is in control?
Robert Hutson
Credit Consultant, HP Inc.
The content of this presentation and discussion is personal professional, rather than Company policy or view

2. Industry update : Global computing giant Hewlett Packard
separates into two new independent publicly-traded
‘Fortune 50’ companies from November 1st 2015
• Meg Whitman, Chief Executive Officer
Hewlett-Packard Enterprise HP Inc.
n Personal Systems 59%
n Printing 41%
n EnterpriseGroup 48%
n EnterpriseServices %39
n Software 7%
n FinancialServices 6%
Revenue Mix
Leadership
Key
Markets
Financial
Metrics
• Revenue: $58.4 Billion
• Operating Profit: $6.0B
• Operating Margin: 10.2%
• Servers
• Storage
• Networking
• Services
• Software
• Cloud
• Converged
Systems
• Notebooks
• Desktops
• Mobility
• Graphics
• Ink Printing
• Laser Printing
• Managed Print
Services
• Revenue: $57.2 Billion
• Operating Profit: $5.4B
• Operating Margin: 9.4%
• DionWeisler, Chief Executive Officer

3. Agenda
 What is DSO?
 Who manages Days Sales Outstanding?
 Identify the drivers of this key metric
 Shared ownership

4. What is DSO?
 Definition: It is a financial ratio that illustrates how
well a company's accounts receivable are being
managed - Wikipedia
 Average days of sales outstanding for payment at given point in time
 Easily calculated from financial statements
 Is not a good measure of collections effectiveness
 Varies by industry and route-to-market
 Multiple inconsistent calculations
 Is not all controlled by Credit & Collections

5. So what can the Credit Manager do?
 Reset senior management expectations that published DSO is not
solely a reflection on our function or operational effectiveness
 Identify and measure the drivers that contribute to DSO
 Influence management whose functions contribute to those
drivers

6. Identifying the drivers of DSO
Controlled by Credit & Collections
 Movement in aged debt, collections effectiveness
 Early settlements
 Receivables Financing
Typically NOT Controlled by Credit & Collections
 Billing linearity
 Extended payment terms
 Invoice disputes
 Unbilled receivables

7. Identifying the drivers of DSO
30.6
0.5 1.0
-
2.4
4.6 0.2
-
0.2
29.5
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Prior Q
DSO
Linearity Extended
Terms
Early
Payment
AR
Financing
Unbilled Disputes Aged Debt Q DSO
QoQ DSO Bridge
Positive impact
Negative impact

8. Identifying the drivers of DSO
30.6
10.0 2.9
-
6.8
6.8
2.9
- -
10.7
30.0
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Net 30 v Actual DSO Bridge

9. Controlled by Credit
Drive excellence in everything we do
Aged Debt reduction
 Measure positively – Current aged % increase
 Our core competence; we should expect and deliver excellence
Early settlements
 Maximise payments within terms
 Review early-payment discounts
Receivables financing
 Factoring
 Flexible supplier financing
 Purchasing cards, ePayables

10. Not controlled by Credit
Drive excellence in everything others do
Billing linearity
 Work with supply chain / operations to deliver and invoice in month 2 of
quarter
 Work with contract management to invoice in month 2
 Sales / channel incentives improve DSO and spread production
Extended payment terms
 Quantify impact of non-standard terms within total receivables
 Impact on DSO v incremental revenue/net margin generated by conceding terms
 Ensure rigorous review and approval process for all extended payment
terms
 Why is customer asking? If to pull forward revenue, point out precedent

11. Not controlled by Credit
Drive excellence in everything others do
Invoice disputes
 Quantify and publicise impact to leverage senior management attention
 Work with dispute owners to eliminate root-causes, not just continually
fix problems
 Demonstrate that a credit/rebill resolution effectively gives customer
extended credit
Unbilled receivables
 How can we collect recognised sales that are not invoiced?
 Maximise early-stage billings; match costs and cash flow
 Work with contract teams to optimise cash flows through contract term

12. Conclusion
 DSO is often still considered to be owned wholly by Credit
 Use the power of data to identify drivers and impacts
 We owe it to ourselves to identify our co-owners
 And to partner effectively with them to influence balanced improvement

13. Thank you : Any
questions?