The document discusses strategies for performing collections in an economic downturn. It provides context on the current economic crisis through an abbreviated overview of its causes. It then examines implications for trade credit and collections, including trends of increasing payment delinquencies and companies relying more on credit. The document proposes strategies like working smarter through payment behavior analytics and prioritizing collections efforts. It presents an example of insights that can be gained about a company's recent payment trends to help focus collections activities.

1. Performing Collections in an
Economic Downturn
Chris Hobson
Chief Marketing Officer, Cortera
November 2008
Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 1

2. Agenda
• About Cortera
• Anatomy of the Credit Crunch (abbreviated version!)
• Implications for Trade Credit & Collections
• DBT and Past Due Trends
• Strategies & Solutions
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 2

3. About Cortera
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 3

4. Agenda
• About Cortera
• Anatomy of the Credit Crunch (abbreviated version!)
• Implications for Trade Credit & Collections
• DBT and Past Due Trends
• Strategies & Solutions
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 4

5. It’s Ugly Out There
$2 trillion in retirement
plan value wiped out
Source: Congressional Budget Office

6. So how did we get into this mess anyway?
• I am not an economist…
 Not making predictions about the economy
 Not giving investment advice
 Not suggesting your approach to Credit Policy or Collections Strategies
• …but I did stay at a Holiday Inn Express last night
 The causes are varied and complex
 We’re ALL to blame… Credit too Cheap
for too Long
Poor Oversight by Irresponsible
Congress Borrowing
Poor Judgment by Irresponsible
GSEs Lending
Securitization &
Poor Judgment by Exotic Securities
Ratings Agencies
Insufficient
Regulatory
Oversight
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 6

7. Cheap Credit Drove Asset Prices (Housing)
Fed
Congress Borrowers
GSEs Lenders
Ratings Fat Cats
Agencies
Regulators
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 7

8. Consumers were like drunken sailors on shore leave
Fed
Congress Borrowers
GSEs Lenders
Ratings Fat Cats
Agencies
Regulators
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9. Lenders sold risky products to anyone with a pulse
Fed
Congress Borrowers
GSEs Lenders
Ratings Fat Cats
Agencies
Regulators
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 9

10. Fat Cats played games with the loans that neither the buyer
nor the seller fully comprehended
Fed
Congress Borrowers
GSEs Lenders
Ratings Fat Cats
Agencies
Regulators
Value of total derivatives
outstanding (Dec 2006)
$415 trillion!!!!
U.S.
Economy
$12
trillion
GDP
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 10

11. Regulators, Ratings Agencies, GSEs and Congress were
wrong, conflicted or asleep at the switch
Fed
Congress Borrowers
GSEs Lenders
Ratings Fat Cats
Agencies
Regulators
“I was
wrong.”
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 11

12. The Reckoning is here…
Household debt in delinquency or default, $ bil, annualized
900
Default Q3 08 $851Bn 30+dpd
800 90-120 Days
700 60-90 Days
30-60 Days
600 30 Days
500
400
300
200
100
0
'00 '01 '02 '03 '04 '05 '06 '07 '08
Sources: Equifax, Moody’s Economy.com
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 12

13. Agenda
• About Cortera
• Anatomy of the Credit Crunch (abbreviated version!)
• Implications for Trade Credit & Collections
• DBT and Past Due Trends
• Strategies & Solutions
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 13

14. The reckoning is here…
…what it means for Commercial Credit & Collections Professionals
• Triple whammy 144
134 2001 Small business (R)
122
Recession 118
124
 Consumer confidence and spending 114 114
104
are slowing, (probably) leading to a 94
110
106
recession & more bad debt 84
74 102
• Spillover effect on SMBs 64
Consumers (L) 98
54
44 94
98 99 00 01 02 03 04 05 06 07 08
Sources: Conference Board, NFIB
Source: Credit Research Foundation
 Banks aren’t in a position to extend
working capital loans
Trade Receivables ($trn)
Source: Federal Reserve Z-1, Sep 2008
Trade Receivables growing despite
3.00
a slow down = companies are
Recent Trade Credit & extending payments
2.50
Collections Statistics 2.00
• 90% or respondents report that
 Companies are slowing payments to customers are relying on them 1.50
for working capital needs 1.00
• 66% of respondents are
suppliers to shore up their working experiencing a general
0.50
slowdown in payments -
capital Source: Credit Research Foundation, October 2008
2002 2003 2004 2005 2006 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 14

15. Agenda
• About Cortera
• Anatomy of the Credit Crunch (abbreviated version!)
• Implications for Trade Credit & Collections
• DBT and Past Due Trends
• Strategies & Solutions
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 15

16. Cortera creates, aggregates and compiles
business data from thousands of sources
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 16

17. Slowdown in payments
Across all industries
Average % of A/R over 30 days past due
Source: Cortera Trade Payment Database
25.00%
20.00% 19.67%
18.07%
15.00%
12.06%
10.00%
9.55%
8.31%
Note: these numbers
5.00% fluctuate from month-to-
month and should be
viewed as indicative of a
trend as opposed to in
absolute.
0.00%
May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 17

18. Slowdown in payments
Breakout for Select Sectors of the Economy
Average % of A/R over 30 days past due
Source: Cortera Trade Payment Database
20.00%
18.00%
16.00%
14.00%
12.00%
Construction & Building Supply
10.00% Transportation
Manufacturing
8.00% Energy
6.00%
Note: these numbers
4.00% fluctuate from month-to-
month and should be
viewed as indicative of a
trend as opposed to in
2.00% absolute.
0.00%
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 18

19. Agenda
• About Cortera
• Anatomy of the Credit Crunch (abbreviated version!)
• Implications for Trade Credit & Collections
• DBT and Past Due Trends
• Strategies & Solutions
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 19

20. What is a collector to do?
• Work harder
• Hire additional staff
• Automate the Collections process
Recent Trade Credit & Collections Statistics
• Outsource collections • 27.6% increase in accounts placed for collections
vs. 2007
• Total value of accounts placed hit new record of
$13B
Source: Commercial Collections Agency Association, 3rd Quarter 2008 Account
Placement Study
• Work smarter
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 20

21. Cortera Collections Insights
• Insights into companies’ payment behavior
 Payment score rates how fast they pay
• Identification of recent changes/trends in payment
behavior
 Identify potential risk in accounts that are paying slower of late
 Determine accounts that are paying others faster than before
 Prioritize collections efforts with this knowledge
Today's # Avg Days Payment
Industry Companies Beyond Avg Industry Avg Industry Score Trend- Payment
LINK ID Position Type Payment Score Reporting Terms Current Balance Total Balance 3 mos Trend These accounts are
improving their
320036823 Headquarters 95 8 1 $ 695.67 $ 769.83 10 Improving
payment behavior
332603060 Branch 78 2 1 $ 116.25 $ 232.50 -3 Steady
332426653 Headquarters 90 8 3 $ 3,089.33 $ 3,414.08 12 Improving
323105040 Branch 68 2 12 $ 340.17 $ 481.83 -6 Steady
326771349 Branch 43 7 22 $ 2,087.25 $ 11,346.83 -17 Declining
Emphasize collections
330691101 Stand Alone 85 5 5 $ 1,795.92 $ 2,094.92 2 Steady with these companies
since their payment
334143088 Stand Alone 68 9 4 $ 1,982.58 $ 3,371.50 -15 Declining
score is declining
333273051 Branch 60 7 19 $ 93,422.83 $ 181,290.33 -6 Steady
331821726 Branch 28 10 14 $ 1,297.50 $ 3,026.92 -35 Declining
333214667 Headquarters 95 6 4 $ 2,542.58 $ 2,601.33 6 Steady
333418663 Branch 65 3 3 $ 403.42 $ 614.08 -5 Steady
328871736 Branch 45 11 9 $ 27,647.08 $ 48,487.92 -23 Declining
328110374 Headquarters 98 8 3 $ 317.83 $ 322.33 7 Steady
329342728 Branch 98 4 4 $ 23,531.83 $ 30,274.25 11 Improving
10/29/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 21

22. Knowing recent payment trends can make all the difference
Score
decline
accelerates
in the last
3 months!
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 22

23. Knowing recent payment trends can make all the difference
Would you rather just know this?
A/R Aging Report
Current Payment Score
Current 30-60 60-90 90+ Payment Score Trend- 3 mos Payment Trend
Company X $2,389.80 $235.78 $127.58 $1,347.89 89 10 Improving
Company Y $2,985.63 $1,489.39 $0.00 $0.00 45 -38 Declining
A/R Aging Report
…or this?
Current Payment Score
Current 30-60 60-90 90+ Payment Score Trend- 3 mos Payment Trend
Company X $2,389.80 $235.78 $127.58 $1,347.89 89 10 Improving
Company Y $2,985.63 $1,489.39 $0.00 $0.00 45 -38 Declining
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 23

24. How does it work? How much does it cost?
1. Export a customer
file from your A/R or
ERP system
You pay only $0.75 per 2. Login and upload it
matched record into Cortera BOOST
You receive a scored
file in minutes, including
LINK ID
320036823
Position Type
Headquarters
Today's Industry # Companies
Payment Score
95
Avg Days
Reporting Beyond Terms
8 1
Avg Industry Current Avg Industry Total Payment Score
Balance
$ 695.67
Balance
$ 769.83
Trend- 3 mos Payment Trend
10 Improving
payment trends
332603060 Branch 78 2 1 $ 116.25 $ 232.50 -3 Steady
332426653 Headquarters 90 8 3 $ 3,089.33 $ 3,414.08 12 Improving
323105040 Branch 68 2 12 $ 340.17 $ 481.83 -6 Steady
326771349 Branch 43 7 22 $ 2,087.25 $ 11,346.83 -17 Declining
330691101 Stand Alone 85 5 5 $ 1,795.92 $ 2,094.92 2 Steady
334143088 Stand Alone 68 9 4 $ 1,982.58 $ 3,371.50 -15 Declining
333273051 Branch 60 7 19 $ 93,422.83 $ 181,290.33 -6 Steady
331821726 Branch 28 10 14 $ 1,297.50 $ 3,026.92 -35 Declining
333214667 Headquarters 95 6 4 $ 2,542.58 $ 2,601.33 6 Steady
333418663 Branch 65 3 3 $ 403.42 $ 614.08 -5 Steady
328871736 Branch 45 11 9 $ 27,647.08 $ 48,487.92 -23 Declining
328110374 Headquarters 98 8 3 $ 317.83 $ 322.33 7 Steady
329342728 Branch 98 4 4 $ 23,531.83 $ 30,274.25 11 Improving
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 24

25. Agenda
• About Cortera
• Anatomy of the Credit Crunch (abbreviated version!)
• Implications for Trade Credit & Collections
• DBT and Past Due Trends
• Strategies & Solutions
Thank you!
Questions?
Chris Hobson
chris@cortera.com
11/6/2008 Strictly Confidential & Proprietary to Cortera, Inc. | Distribution or Reproduction Prohibited 25