KPI’s and Value
Proposition
TRMG FALL CONFERENCE – OCTOBER 24, 2106
Opportunity for Value Proposition

Credit management overall view that it is a downstream department

General lack of respect for credit and AR management

Turnover in position

Determining the right audience

A meaningful measure fills a need and meets a specific objective…if it
doesn’t accomplish a purpose don’t use it
Obstacles to KPI acceptance

Don’t know enough about the company’s finance needs to contribute
beyond A/R

Don’t cultivate relationships with CFO/Controller/Sales Management

Don’t take opportunities to expand important skill sets besides credit and
collections

Is there a “right” measure?
The Value Proposition

Measure as much as you can

Document important contributions – Toot your horn

Ask for more opportunities for incentives – performance laden to show
impact

Improve financial performance – reduce bad debt expense and
accruals, increase cash flow, increase productivity
How to Show Value

Cash flow forecasting

Aging Changes

Risk Warnings

Qualitative and Quantitative depiction of cash delays

Dashboards

Customer intelligence (customer practices, management/ownership
movement and linkages, pay patterns)
Cash Flow Forecasting
Grand Total
Outstanding
Balance
Del Cash Current
31-60
1-30 Days Days
61-90
Days
91-120
Days
121-180
Days
181-240
Days
Over 240 Days
AUGUST 2016 CASH PROJECTION
July ending AR
77,865,408
7,060,848
56,614,538
14,190,023 3,207,895 1,366,912 1,075,066 774,948
61,450
574,577
Revised Ending AR
77,865,408
7,060,848
56,614,538
14,190,023 3,207,895 1,366,912 1,075,066 774,948
61,450
574,577
Revised August
Projection
64,458,822
3,923,937
48,696,734
11,838,151 2,356,060 791,512
528,464 293,148
37,442
170,805
60,782,774
3,024,773
45,282,850
12,475,151 1,599,659 569,096
455,210 272,052
73,397
105,358
94%
77%
93%
86%
196%
61%
Actual August
Collections
Actual %
Projection
105%
68%
72%
93%
Measure cash
collections
production
by month
and by aging
bucket.
Affords ability
to measure
MoM
performance
by portfolio
segmentation
Cash Collection Productivity
Month
Revenue
Sum Cash
Collected
Collections vs
Sales
Sum of
Collectors
Sum of Collections by
Collector
16-Jan
57,927,990.21
71,284,504.83
123%
22
3,325,032
16-Feb
62,965,522.98
56,383,720.15
90%
22
2,642,942
16-Mar
68,689,049.31
72,722,268.14
106%
23
3,403,635
16-Apr
65,218,677.10
63,548,863.42
97%
23
3,011,566
16-May
64,910,413.20
66,579,088.33
103%
23
2,819,914
16-Jun
70,247,030.53
65,948,467.28
94%
25
2,920,415
16-Jul
64,896,656.08
63,083,714.96
97%
25
3,005,188
Cash by HC is a
good indicator to
support either
increasing or
decreasing HC in a
department…this
can be driven down
to the collector level
for performance
reviews
Aging Changes
Team
Month
Sales
Inv Count Open Amount
Current
Days 1-30
Days 31-60
Unique Portfolio
Days 61-90
Days 91-120 Days 121-180 Days 181-240
Days 240+
DSO
% Current
30 Days
Over 30 Days
Aug-15
$
56,091,288
81,745
$
85,731,205
$
54,693,189
$
16,111,161
$
5,979,024
$
1,979,502
$
1,448,770
$
2,172,592
$
949,356
$
2,397,612
42
63.80%
17.41% 14,926,855.64
Sep-15
$
57,297,206
75,904
$
86,636,703
$
56,293,772
$
15,632,002
$
5,922,593
$
3,218,485
$
1,292,942
$
1,765,644
$
1,074,314
$
1,436,951
46
64.98%
16.98% 14,710,929.29
Oct-15
$
53,767,745
70,822
$
79,584,945
$
52,370,477
$
13,667,857
$
5,226,945
$
3,001,828
$
1,311,637
$
1,569,080
$
1,117,454
$
1,319,667
44
65.80%
17.02% 13,546,611.11
Nov-15
$
52,096,790
66,336
$
77,724,554
$
50,403,029
$
14,688,647
$
4,906,213
$
3,104,157
$
1,234,657
$
1,491,435
$
792,887
$
1,103,528
44
64.85%
16.25% 12,632,877.43
Dec-15
$
85,920,953
74,780
$ 107,514,710
$
82,910,648
$
11,941,171
$
4,866,248
$
3,010,990
$
1,848,379
$
1,332,860
$
729,738
$
874,675
42
77.12%
11.78% 12,662,890.70
Jan-16
$
57,786,769
65,276
$
89,032,181
$
64,025,789
$
13,000,397
$
4,205,960
$
2,774,321
$
1,893,177
$
1,906,496
$
670,023
$
556,017
41
71.91%
13.49% 12,005,993.82
Feb-16
$
62,828,771
71,380
$
96,015,919
$
66,195,649
$
16,973,194
$
6,309,746
$
2,230,193
$
1,270,040
$
2,171,135
$
446,040
$
419,922
47
68.94%
13.38% 12,847,076.16
Mar-16 $
67,444,061
72,010
$
88,957,968
$
68,613,229
$
11,619,467
$
3,569,309
$
1,807,459
$
747,122
$
1,469,623
$
730,571
$
401,189
40
77.13%
9.81%
8,725,272.38
Apr-16
$
61,882,663
73,793
$
86,662,893
$
68,821,265
$
10,883,703
$
2,466,867
$
1,396,550
$
721,239
$
849,200
$
1,167,347
$
356,723
41
79.41%
8.03%
6,957,924.89
May-16 $
63,783,714
73,753
$
85,859,718
$
65,497,504
$
13,040,353
$
3,698,441
$
862,670
$
925,594
$
689,041
$
614,301
$
531,815
41
76.28%
9%
7,321,861.34
Jun-16
$
68,309,673
76,374
$
87,485,896
$
68,724,557
$
10,972,200
$
3,529,382
$
2,073,119
$
602,098
$
639,597
$
274,661
$
670,282
39
78.56%
8.90%
7,789,138.80
Jul-16
$
63,900,817
77,379
$
88,980,908
$
67,762,564
$
14,156,211
$
3,213,691
$
1,370,800
$
1,063,171
$
754,597
$
82,944
$
576,929
41
76.15%
7.94%
7,062,133.21
Aug-16
$
71,160,289
77,709
$
90,375,446
$
69,713,098
$
13,584,313
$
2,976,289
$
1,767,337
$
789,287
$
831,954
$
136,555
$
576,615
39
77.14%
7.83%
7,078,035.51
Aging Changes – Track AR
movements
Customer A
Month
Sales
Inv
Count
Open
Amount
Current
Days 1-30
Unique Portfolio
Days 31-60 Days 61-90
Days 91120
Days 121180
Days 181240
Days 240+
DSO
% Current
30 Days
Over 30 Days
Dec-15 $
2,445,837
3,209 $
2,664,909 $
1,986,173 $
270,935 $
129,439 $
190,635 $
26,443 $
18,899 $
20,437 $
21,949
33
74.53%
15.3%
407,800.65
Jan-16 $
1,427,002
2,499 $
1,921,567 $
1,297,775 $
397,519 $
94,226 $
61,071 $
56,790 $
17,552 $
12,368 $
(15,733)
36
67.54%
11.8%
226,273.21
Feb-16 $
1,403,385
2,217 $
1,671,851 $
1,245,884 $
298,327 $
51,612 $
21,111 $
47,099 $
18,862 $
7,900 $
(18,944)
36
74.52%
7.6%
127,640.31
Mar-16 $
1,377,130
1,807 $
1,387,925 $
1,175,334 $
110,122 $
30,951 $
16,869 $
10,552 $
43,297 $
7,904 $
(7,105)
30
84.68%
7.4%
102,469.03
Apr-16 $
2,469,165
2,517 $
2,682,484 $
2,457,946 $
130,538 $
31,542 $
15,276 $
6,425 $
31,278 $
9,949 $
(468)
35
91.63%
3.5%
94,000.92
May-16 $
2,293,931
3,129 $
3,261,168 $
2,511,705 $
610,048 $
82,892 $
24,104 $
9,050 $
9,770 $
14,101 $
(501)
42
77.02%
4.3%
139,415.72
Trending
analysis can
lead to
further
investigation
of root
cause
analysis
High Risk Alerts
If you have the ability to risk profile your portfolio you could report on
predictive statistics that would support a High Risk Watch Account
Customer
Risk of
default
DSO last
Total A/R Past due month
DSO 60
days
Dso 12 months Comments
XYZ
Manufacturing
Very high
$ 582,000 $ 62,000
62
58
47
Payment slowing; previous
bankruptcy
ABC Signs
High
$ 88,000 $ 44,000
79
92
97
Cash dropping, state tax liens
Risk Distribution

Risk profile your
portfolio

Cater collection
activity accordingly

Develop sales
prospects from the
Low and Medium
profiles

Allows for risk pricing
for Higher risk profiles
High Risk Accounts – Payment Plans
Troubled AR Customer
Effective 4/24/2015
Payment Date
Amount
Payment Recvd
$363
6/30/2016
Y
$363
7/31/2016
Y
$363
8/30/2016
N
$363
9/30/2016
$363
10/31/2016
$363
11/30/2016
$363
12/31/2016
$363
1/30/2017
$363
2/28/2017
$363
3/31/2017
$363
4/30/2017
$363
5/31/2017
$4,356 Total Amount Due
Payment plan trackers are
useful to keep track of
these arrangements. You
will be able to report out
and manage those who
default. It becomes useful
statistics to report out to
sales/operations the
success rates of accepting
payment plans
Drivers of Cash Delays
Billing Compliance Measurements
Month
Value of Invoices
# of Invoices # Issues
% Compliant
July
14,569,120
2,852
374
87%
August
13,252,565
2,657
399
85%
Billing Compliance by Issue
July
August
Pricing
150
137
Lack of Documents
22
26
EDI
51
44
Missing Data
176
167
Each disputed
invoice creates a
cash delay. The
ability to capture
details to quantify
and qualify current
state and
improvement
opportunities to share
with operations and
billing departments
Dashboards
Recent Accounts
Risk Rating
Outstandings Past Due
Past Due
%
Account Number
Customer Name
SYS9004
Tetris LLC
High
16,257
16,257
100%
SYS9005
SYS9006
SYS9007
DK MGM
Hosting Test
ZIP DE DO
Med
Med
Low
37,555
3,000
4,997
13,258
1,000
-
35%
33%
0%
SYS9008
SYS9009
Zzschimmer & Sons
Zoltag
Med
High
66,125
125,000
22,016
58,022
33%
46%
Tools to Build and Maintain
Dashboards
Inputs
Sample Outputs
Open
Invoices
Mapped by
Division
Invoices
Open Invoices
Amount by Top n% of
Customers
ERP Data Sets
Geographic Data
• Merged data sets
• Auto-updates with new
data
• Customizable visuals
• Drilldown capabilities
with mouse-clicks
• On-the-fly custom
filtering
Open Invoices
Requiring
Signatures by
Count and Dollar
DSO or CEI

CEI – a measurement of the ability of the collections staff to collect. The
index compares the amount that was collected in a given time period to
the amount of receivables that were available for collection in that time
period

A result near 100% indicates that the collection department is effective.

High CEI numbers can be achieved by focusing on the largest receivables
whereby overlooking a number of smaller receivables that are very
overdue.

CEI, like DSO, is period driven but can concentrate on shorter periods of
duration. DSO calculations tend to be more accurate the larger the
period of evaluation.
CEI Calculation
Beginning Receivables + Monthly Credit Sales – Ending receivables balance
Beginning Receivables + Monthly Credit Sales – Ending current balance
2,682,484 + 2,293,931 - 3,261,168
2,682,484 + 2,293,931 - 2,511,705

$ 1,715,246
$ 2,464,710
70%
The formula is to combine beginning receivables for the measurement period
with the credit sales for that period, less the amount of ending receivables and
then divide this number by the sum of the beginning receivables for the
measurement period and then the credit sales for that period, less the amount
of ending current receivables.
x 100
DSO vs BPDSO (best possible)
Current Receivables x Number of Days in Period Analyzed
Credit Sales for Period Analyzed
Days
AR
Not Due AR
Sales
BPDSO

Jan
Feb
31
84,642
67,360
51,938
28
86,582
68,639
50,718
38.7
The formula is to take current receivables (the amount of receivables that are
within your credit terms i.e. not past due) as a measure of the sales for the
period
DSO vs BPDSO (best possible)
20XX
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
31
28
30
30
31
30
30
31
30
31
30
31
AR 84,642
86,582
85,225
87,461
87,081
85,858
86,161
84,827
86,823
Not Due AR 67,360
68,639
67,988
68,309
69,211
67,219
67,736
67,568
68,170
Sales 51,938
50,718
53,945
55,581
54,031
52,975
53,729
53,890
54,789
Actual DSO
49.4
47.3
47.7
48.8
48.9
48.4
48.3
48.4
#N/A
#N/A
#N/A
BPDSO
38.7
37.8
37.1
39.2
38.2
37.9
38.6
37.7
#N/A
#N/A
#N/A
Days
Target DSO
Cash Target

50.0
49.0
48.0
47.0
46.0
45.0
44.0
43.0
42.0
41.0
49,458 53,978 54,656 59,671 60,937 61,136 64,669 63,966 68,560
An example of a way to demonstrate DSO vs BPDSO
41.0
0
40.0
0
DSO vs BPDSO (best possible)

An example of a way to demonstrate DSO vs BPDSO