Strategic AR Management. Accounts Receivable (AR) Management. What is Strategic AR Management? Definition of Strategic AR. Driving Revenue and Margin Growth. Definition of Strategic AR

1. Strategic
AR Management
January 14, 2021

2. Agenda
 Introduction
 Definition of Strategic AR
 Transformation to Strategic AR
 Benefits
 Conclusion
 Questions

3. Introduction
Accounts Receivable (AR) Management Has Changed
Today’s economy with reduced revenue, low interest rates,
and management focus on the customer experience, requires
a major shift from Traditional AR Management.
What is Traditional AR Management?
• It is a focus on transaction processing, collections effectiveness,
low bad debt exposure, and minimal headcount.

4. Introduction
Accounts Receivable (AR) Management Has Changed
 What is Strategic AR Management?
It is a focus on:
a. driving revenue & margin growth
b. providing an exceptional customer experience
c. managing credit risk to support the firm's Trade Credit Strategy
d. producing strong cash flow
e. ultra-efficiency.
Low DSO and bad debt expense are no longer the highest priority

5. Definition of Strategic AR
Driving Revenue and Margin Growth
 Provide ability to Sell Profitably:
• To High Risk customers & markets
• To New Revenue Streams & Business Models
• Directly to select customer segments vs thru retailers & distributors
• Small orders
 Provide ability to:
• Reduce margin loss from invalid and self-inflicted deductions
(e.g., label errors)
• Better control unauthorized price discounts
• Match margins to customer risk
• Free up Sales Team time from Administration,
AR issues – provide “free” additional sales reps

6. Definition of Strategic AR
Provide Exceptional Customer Experience
 Accommodation of customers’ electronic & mobile ordering & payment modalities
 Ease and speed of placing an order, with fast, accurate fulfilment
 Fast, professional “first call” solution to queries, issues
 High degree of self-service capability (24/7/365)
 Uninterrupted flow of products & services. Credit needs accommodated
Manage Credit Risk per Trade Credit Strategy
 Trade-off between incremental revenue and company’s expressed risk tolerance
consistent with Strategy
 Especially important in Covid 19 economy: credit risk elevated while revenue has
decreased

7. Definition of Strategic AR
Produce Strong Cash Flow
 Generate cash flow from AR consistent with Financial strength of the customer
base and payment terms granted
 Ensure strong portfolio coverage
 Control exposure to High Risk accounts
Achieve Ultra Efficiency
 Hackett World Class performance for Credit to Cash operations is 0.04% of revenue
 Automate 70 – 80% of manual effort in most Credit to Cash operations

8. Transformation to Strategic AR
 Digital Transformation using AI Powered Digital Assistants
 Strategic Alignment
 Policy Changes
 Process Changes with focus on Value Creation to the Customer
Automation is key to achieving customer responsiveness, efficiency,
and effectiveness required.

9. Transformation to Strategic AR
Digital AI Powered Automation can reduce manual effort in these
operations by 70 – 80%
Digital Transformation using AI Digital Assistants (examples)
 Functionality:
• On-line credit application with automated credit information gathering and scoring.
• EIPP with full featured Customer Portal:
• accommodating the new modalities of customer payments
• enabling customer self-service to manage their accounts
• Automated Collection prioritization, Collector Workbench, dunning, order hold, etc.
• AI Enabled Digital Assistants extract dispute/deduction data from Customer Vendor
Portals & route deductions to designated Resolver
• AI Enabled Digital Assistants extract remittance data from multiple customer sources
with multiple formats and auto post cash with hit rates of 85 – 95%
 Advanced Analytics capabilities fuels process improvement

10. Transformation to Strategic AR
 Strategic Alignment:
• Trade Credit Strategy – how will Trade Credit be used to optimize cash flow
and profit?
 Policy Changes that Eliminate Work:
• sampling vs review of 100% of transactions
• granting allowance (price discount) in return for no deductions for shortage,
damage, etc.
• raising automatic small balance write-off of deductions ($600/42%/2%), etc.
Process Redesign to Increase Efficiency & Effectiveness with Focus on
Value Creation to the Customer

11. Benefits of Strategic AR Management
Incremental Revenue & Margin Growth
• Increased gross & net sales
• Enhanced net margin
• Exceptional Customer Experience
• Ultra Cost Efficiency
Greater Collection
effectiveness & efficiency
= lower AR
Improved Customer
Satisfaction
Customer
Loyalty
Enhanced
margins
Increased Revenue
& Profit

12. Conclusion
 Transactional AR Management will not serve you well in a future
of fierce competition for revenue and low interest rates
 Strategic AR Management focuses on increasing margins &
delighting customers
 The Covid 19 economy will place a premium on cost efficiency &
the ability to sustain an adequate cash flow from a financially
weakened customer base
 Strategic AR Management can position you to deliver the
required performance

13. Questions

14. If you have any questions or comments
about this session, please let us know in
the chat box or write to us at
info@emagia.com
Next Emagia Master Class Session
Topic: Boost Your Revenue with AI Powered
Digital Credit
Date & Time: Thursday, 28th January, 10AM PST
Book Your Seat Today !
Orders
Credit
Cash Application
Collections
Deductions
Payments
Invoicing