Maxing Out Your Credit . . . and Accounts Receivable

Department Potential

Windy City Session 11

10:10 am – 11:00 am

Friday, June 8th 2012

2

Speaker Information

Andrew Shaffer□ Manager, Global Treasury & Credit□ Responsible for global cash management including investments

and banking relationships, overseeing the credit and accounts receivable department, leads the customer to cash process globally as part of a working capital management initiative and manages the company’s debt obligations.

Holly Crandell□ Supervisor, Treasury□ Responsible for supervising a team of four, overseeing daily

operations of customer deductions, cash application, and credit management.

Hollister Incorporated - Overview

Privately held, global company that develops, manufactures and markets healthcare products, servicing over 90 countries.□ Headquarters in Libertyville, Illinois□ Manufactures in United States, Ireland, Denmark and

India□ Treasury staff of 8 to oversee global cash

management, foreign exchange, insurance risk management, credit, real estate and company stock program

□ Additional 4 accounts receivable and credit staff to oversee cash application, deduction resolution and collections for the US business unit

3

Hollister Overview

A global manufacturer of…

Wo

un

d C

are

Ost

om

yC

on

tin

ence

4

Evolution of Accounts Receivable and Credit 10 FTEs down to 6 FTEs in 3 years

5

Evolution of Accounts Receivable and Credit

Accounts Receivable staff changes□ 2008 – FTE 10 (3 A/R staff, 4 Credit staff, 2

Supervisors, 1 Manager)

A/R

Supervisor

Credit & A/R

Manager

Credit

Supervisor

Deduction

Coordinator

Cash

Application

Deduction

Coordinator

Credit

Representative

Credit

Representative

Credit

Representative

Credit

Representative

6

Evolution of Accounts Receivable and Credit

Accounts Receivable staff changes□ 2012 – FTE 6 (2 A/R staff, 2 Credit staff, 1

Supervisor, 1 Manager)Credit & A/R

Manager

A/R & Credit

Supervisor

Deduction

Coordinator

Cash

Application

Credit

Representative

Credit

Representative

7

Accounts Receivable and Credit Process Improvements & Automation

Automatic cash application (cash hit rate)

Reporting tools leveraged

Objective calling plan created

8

Automatic Cash Application

Incentives for improving the automatic cash application process□ One person’s full job responsibilities□ Historical levels around 64%□ Not fully utilizing system capabilities□ No additional time for value added activities

9

Automatic Cash Application

Current Cash Application Process□ JP Morgan Chase receives all checks and keys in all

relevant information– Customer name, bank account number, routing number,

invoice number and invoice dollar amount

10

Automatic Cash Application

□ JP Morgan Chase scans a copy of the check and remittance detail and uploads it onto the online portal

□ Electronic File sent to our company to be loaded into SAP

11

Historical automatic posting rate of 63% Steps to Improve

□ From the scanned copies of the checks, input the bank account number and routing number into the customer master

□ For customers with multiple ship-to accounts, maintain the correct payer relationship

Automatic posting rate increased to an average of 79%

Automatic Cash Application

12

Automatic Cash Application

% of Cash Automatically Applied

63.4% 63.6%

75.6%

78.8% 79.8% 80.0% 79.6% 80.1% 78.9% 78.9% 79.2% 78.7%80.4%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12

% of Cash Automatically Applied Goal

13

Automatic Cash Application

Average of 2,400 checks received per month

Realized 16% improvement in automatic application

Annual savings of 192 hours (5 weeks)□ Assume 2.5 minutes of processing time per check

14

Accounts Receivable and Credit Process Improvements & Automation

Automatic cash application (cash hit rate)

Reporting tools leveraged

Objective calling plan created

15

Leveraging Reporting Tools

Goals of automated reporting□ Quicker time to generate reports□ Eliminate hand written notes□ Generate higher quality of tracking customer activities□ Ease in monitoring personnel

16

Leveraging Reporting Tools

Integrated reporting tool using SAP and Excel called EDW, including:□ Sales rebate report summary – savings of 288 hours

annually□ Customized customer statements□ Standard customer deduction report□ Customer A/R Aging report

17

Leveraging Reporting Tools

Outstanding Deductions run out of SAP□ Transaction FBL5 – Customer line item display□ Time consuming to run report□ Limited capability for customization

18

Leveraging Reporting Tools

TableReason code 0 Days 1-30 Days 31-60 Days 61-90 Days 91-120 Days >120 Days Total021 Pricing Deduction $ 44.40 $ 150.96 $ 36.92 $ 0.00 $ 0.00 $ 232.28022 Mdse Return $ 522.28 $ 1,003.82 $ 966.21 $ 43.16 $ 456.33 $ 38,386.73 $ 41,378.53023 Dup use of Credit $ 11.83 $ 0.00 $ 0.00 $ 0.00 $ 11.83025 Insufficient Info $ 179.40 $ 0.00 $ 179.40026 Shortage Deduction $ 4,535.62 $ 403.68 $ 211.50 $ 0.00 $ 0.00 $ 4,786.53 $ 9,937.33027 Dispute Freight $ 75.00 $ 330.26 $ 25.00 $ 0.00 $ 0.00 $ 0.00 $ 430.26028 Damage Product $ 1,046.45 $ 1,600.51 $ 3,781.19 $ 0.00 $ 2,638.79 $ 9,066.94030 Disputed Tax $ 390.99 $ 227.80 $ 15.28 $ 441.47 $ 6.92 $ 344.92 $ 1,427.38031 Disputed Pricing $ 3,599.98 $ 772.20 $ 0.00 $ 300.00 $ 74.25 $ 347.10 $ 5,093.53032 Disputed Return $ 9,957.93 $ 9,108.61 $ 131.76 $ 0.00 $ 0.00 $ 132.26 $ 19,330.56033 Disputed Dup use of Credit $ 0.00 $ 0.00035 Disputed Insufficient Info $ 5,811.46 $ 0.00 $ 3.75 $ 19.47 $ 0.00 $ 0.00 $ 5,834.68036 Disputed Shortage $ 18,422.08 $ 8,451.38 $ 3,216.34 $ 698.76 $ 2,553.64 $ 4,643.71 $ 37,985.91037 Disputed Freight $ 95.05 $ 74.05 $ 25.00 $ 0.00 $ 0.00 $ 0.00 $ 194.10038 Disputed Damaged $ 3,559.41 $ 597.18 $ 0.00 $ 202.32 $ 0.00 $ 0.00 $ 4,358.91Overall Result $ 47,193.60 $ 22,178.22 $ 6,232.27 $ 5,486.37 $ 3,091.14 $ 51,280.04 $ 135,461.64

Deduction Report through EDW□ Quick report to run□ Can customize easily

19

Accounts Receivable and Credit Process Improvements & Automation

Automatic cash application (cash hit rate)

Reporting tools leveraged

Objective calling plan created

20

Creating an Objective Calling Plan

Goals for Objective Calling Plan□ Eliminate subjectivity for calling and repercussions for

past due invoices□ Eliminate hand written notes□ Enhance capability for monitoring

21

Creating an Objective Calling Plan

Set specific targets and actions based on days past invoice due date□ 10 days – call Accounts Payable□ 20 days – call Accounts Payable□ 30 days – call Accounts Payable and Purchasing□ 45 days – call Supervisor/Manager and hold any

newly submitted orders□ 60 days – Send a letter to management indicating

their account status and possibility of changing to CIA□ 75 days – Send a second letter to management and

change the customer terms to CIA

22

Creating an Objective Calling Plan

EDW Credit Calling Plan

TableAccounting Clerk Customer Doc.number Customer PO Number Item Text Net due date 60 Days Key Due Date Days Delinquent1 21161 94882114 71227 LM 4/10/12 faxed 4/18/12 03/9/2012 $ 402.75 05/8/2012 60

103906 94863033 1252612 Net 90 - see notes HLC 02/26/2012 $ 19.15 05/8/2012 722001855 94879708 537793 # 03/8/2012 $ 41.89 05/8/2012 61Result $ 463.79

2 72546 94868146 406149 ck will cut 5/4/12 03/1/2012 $ 80.94 05/8/2012 68101681 94877449 493848 pays 90 days 03/7/2012 $ 79.14 05/8/2012 62Result $ 160.08

3 73775 94875054 20022770 ck# 46118 mailed 5/1/12 03/4/2012 $ 83.55 05/8/2012 65101075 94877509 1-1211216966 LM 4/30/12 CK TO CUT 5/4/12 03/7/2012 $ 835.50 05/8/2012 62101089 94868211 1-4121214386 ck to cut 4/27/12 03/1/2012 $ 374.45 05/8/2012 68

94868212 1-4121214389 ck to cut 4/27/12 03/1/2012 $ 85.40 05/8/2012 6894868215 1-4121214630 ck to cut 4/27/12 03/1/2012 $ 31.32 05/8/2012 68

101674 94863049 12-158335 ck# 331832 mailed 5/3/12 02/26/2012 $ 131.13 05/8/2012 72103718 94863134 3786584 Price disp 5/3/12 ck mailing 5/4/12 02/26/2012 $ 553.90 05/8/2012 722046512 94872847 213134 See notes LM 4/17/12 LM 4/27/12 03/3/2012 $ 55.92 05/8/2012 66Result $ 2,151.17

4 71344 94872774 3981 ck# 12330 mailed 5/2/12 03/3/2012 $ 106.80 05/8/2012 662007759 94877513 DD log# 2572848 4/27/12 03/7/2012 $ 43.63 05/8/2012 622009707 1401449910 # Mdse Retd rga# 60268323 2/10 r/c see <$131.90> 03/9/2012 $ 26.38 05/8/2012 602073074 94882181 90679 LM 4/11/12 price Dispute 4/12/12 03/9/2012 $ 1,260.00 05/8/2012 602095573 94881925 812995585 Faxed 4/12/12 03/9/2012 $ 384.11 05/8/2012 60Result $ 1,820.92

Overall Result $ 4,595.96

23

Creating an Objective Calling Plan

Each day call customers who fall on the specific past due day.□ Streamlines calling to just customers who need to be

contacted□ No judgment calls needed on the action to take

24

Summary

Key Changes in the past 3 years

□ Cash Application Automation

□ Leveraging Reporting Tools

□ Implementing Credit Calling Plan

25

Contact Information

Andrew B. Shaffer

Manager, Global Treasury & Credit

Hollister Incorporated

2000 Hollister Drive

Libertyville, IL 60048

Telephone: 847.680.2825

Email: Andrew.Shaffer@Hollister.com

Holly L. Crandell

Supervisor, Treasury

Hollister Incorporated

2000 Hollister Drive

Libertyville, IL 60048

Telephone: 847.680.2818

Email: Holly.Crandell@Hollister.com

26