Global Technology Company
Background
The Global Technology Company we worked with is amongst the growing band of internationally active major corporates to have discovered how The Customer Value Group helps reduce AR by improving cash collections, reducing write-off levels and cost whilst boosting customer retention rates. The Customer Value Group was appointed in September 2003 to conduct a programme to reduce the overall levels of group debt.
The Challenge
A major disconnect between the sales and financing operations was identified as being largely responsible for the blockages which had built up in the system.The sales force’s focus on collection and customer service issues was minimal as there was no incentive linked to cash collection and no DSO target.The collection department, meanwhile, was suffering from a lack of morale and know-how following a restructuring and reduction in headcount. The company lacked a formalised process by which sales and finance could discuss and resolve credit issues.
CVG Approach
The analysis quickly identified that productivity and efficiency could be increased for all the functions involved through the adoption and implementation of The Customer Value Group’s best practice software. Interest expense could be cut by 50% through a 46 day reduction in DSO. AR also could be reduced by €21-€25 million. Transaction processing costs could be reduced by the introduction of effective processes and systems, while improved knowledge would support customer requirements. Write-off levels could be reduced along with the dispute cycle time and the volume of disputes over the long term. Finally customer retention could be increased.
The Results
By December 2004 a total reduction in AR of 35% was achieved, otherwise stated as a DSO reduction of 56 days. The benefits were sustained in the following year and further costs driven out.
By December 2005, the Receivables asset was further reduced by 13% (8M€) from the previous year. Furthermore disputed items were reduced by 40% (from 9M€ to 4M€) during the same period, with an average resolution cycle of 7 days, further improving customer service levels and customer retention.
Quotes
The Customer Value Group offered a hands-on approach, whilst guaranteeing the availability of the necessary full-time external resources, especially at the beginning of the change process.
Credit Director and Project Manager
A number of things surprised and impressed us about The Customer Value Group way of working. They had the courage to tell our management facts that they did not necessarily want to hear. They created KPIs that were simple, but important, and were easy-to-implement improvements over our traditional measurements. The implementation of The Customer Value Group software has greatly supported best practice processes, contributing to the achievement of improved Working Capital.
Chief Financial Officer
You might like to
Read more about
Project Sponsor, Global Electronics Giant
Bridging the Gap
The tighter economic conditions have prompted businesses looking for competitive advantage with their customers to implement best practice software that integrates AR credit and collections with customer service management, as Dickie Bielenberg explains.
Customer Services Manager, Global Utility
