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$2 Billion Global Manufacturer of Commercial and Industrial Products Takes a Strategic Move To Improve Financial Performance -- A Case Study

This global manufacturer with four distinct products divisions decided to outsource its A/R portfolio as part of an overall strategic initiative to improve corporate financial performance. 

·  A/R portfolio of $350+ million 

·  Multi-year A/R backlog as a result of

· Complex pricing

· Inadequate staff to handle large volume of deductions

· Difficult conversion to Oracle in 1998

· Acquisition integration difficulties

In September 2000, Creditek deployed a team of 90 highly skilled A/R specialists, led by dedicated Client Managers and Team Leaders to take full responsibility for all U.S. collection and deduction management functions from Day 1 of the receivable cycle.  They worked closely with Client's top management team as well as department managers in the development of strategies, commitments and a comprehensive execution plan to support overall objectives.  The first order of business was an intensive collection and dispute resolution campaign.  Simultaneously, the going-forward portfolio was brought under new management.  The client retained cash application.

With Creditek's expert assistance, the client’s invoice backlog was brought under control while significantly reducing customer disputes and deductions. This has helped stabilize the entire accounts receivable function.  In 11 months:

  • Reduced DSO by 35%, improving cash flow by over $132 million -- the end of year goal

  • Improved invoice turnover (collection efficiency) by 42%

  • Improved current A/R by 20%

  • Improved customer deduction turnover by 153 days and reduced the outstanding deduction balance by 77%

  • Identified root causes to reduce billing inaccuracies and customer payment deductions to cure backlog

  • Reduced client headcount and allowed executive focus on core competencies

  • Helped improve customer satisfaction by more accurately reporting the accounts receivable

In their March 30, 2001 teleconference with Financial Analysts, this client acknowledged, “Our DSOs have improved in each quarter since Q2 of last year when we first initially addressed the problem [and engaged Creditek].  And between Q2 and Q4 of 2000 the improvement in DSO was especially strong at almost 20 percent.  We are able to continue to achieve future-further improvements in accounts receivable performance throughout 2001.”

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