The power of a single AR ledger
- 1. The Power of a Single AR Ledger
- 2. • Introduction • The Accounts Receivable (AR) Management Challenge • The Role of the AR Ledger • The Penalties of a Fragmented AR Ledger • Solutions and Benefits • Case Study • Conclusion • Questions Agenda
- 3. 3 Introduction • Management of the AR asset is a multi-faceted, unrelenting, task. The AR asset’s condition deteriorates every day unless the right actions are performed in the right quantity with the right quality. • A fragmented AR ledger, resident on several ERP systems, delays and diminishes the required actions. Valuable time is wasted compiling consolidated AR data. • Customers of multiple divisions whose AR is unconsolidated constitute an elevated credit risk
- 4. 4 The AR Management Challenge - 2022 • Manage elevated Credit Risk while Driving Revenue • Collect receivables on a timely basis • Accommodate various Divisions and Business Models with wide variation in revenue streams, customers, markets, ERPs • Deliver an Excellent Customer Experience • Accommodate Work-from-Home • Do it all without adding staff
- 5. The Role of the AR Ledger • Data Lake for AR Asset • Single source of the truth • Auditable asset detail supporting statutory accounts (every penny of AR owed by every customer). Validates asset, revenue and profit valuations • Aged Trial Balance (ATB) = General Ledger (GL) balance • Basis for risk assessment, analysis and actions to manage AR asset • Metrics: derived from AR Ledger A single, consolidated AR Ledger is much more efficient & accurate
- 6. 1. Inefficiency: time wasted compiling data from several, disparate AR ledgers (Watch List) 2. Elevated Risk of Error 3. Elevated Credit Risk : Aged AR balances carried on multiple AR ledgers for same customer impedes full understanding of total credit exposure and risk 4. Cripples auto-cash and Deduction resolution 5. Complicates data presentation on Customer Care Portal 6. Kmart story The Penalties of a Fragmented AR Ledger
- 7. • Conceptually, the Solution is easy: a single, consolidated AR Ledger that includes every penny, transaction and customer that has AR; “The Power of One”. • Individual customer AR data contained on separate ERP’s should be aggregated into one total to enable accurate assessment of total exposure and credit risk. Parent/child linkage required. • Generation of consolidated AR ledger from multiple ERP’s must be automated and available on demand. Robust query and Analytics capability a “must have.” Solutions & Benefits
- 8. A Single AR Ledger improves the quality and efficiency of: • AR portfolio analysis – aging, aggregate Credit Risk • Individual Customer aggregate Credit Risk analysis • Collection portfolio allocation to Collectors • Auto-cash • Deduction processing, analysis & prevention • Provision of complete information on Customer Care (EIPP) Portal and in Statements of Account sent to customers • Cash Forecasting • Global view of AR asset/currency exposure • Ability to properly value Allowance for Doubtful Accounts and Reserves for Deductions, Disputes, Returns, Claims, etc. enabling proper valuation of AR, Revenue and Profit Solutions & Benefits
- 9. Technology to create a Single AR Ledger from source data contained in multiple ERP’s must: • Interface seamlessly with the ERP’s containing the separate AR Ledgers. Enable update “on demand” • Include all open transactions and customer information (credit limits, sales data, etc.) contained in subsidiary ledgers • Aggregate accurately by customer, tracking complex parent/child relationships Solutions & Benefits
- 10. 10 Situation Overview Our client, a global manufacturing company with three Global Shared Service Centers (SSC’s) had widely dispersed operations and systems: a. 34 business units operating in 150 countries b. 120 disparate financial systems (~ ERP) c. 14 languages, 30 banking relationships Customer Value • Deployed Emagia AR Solution – multiple modules including Receivables Automation which enabled Consolidated AR Ledger • Enabled creation of SSC’s resulting in huge cost savings and service improvements in Order to Cash function • Current AR is 85% • Auto-cash hit rate is 92% • Risk assessment of 100% of customers Case Study – Consolidated AR Ledger
- 11. Conclusion • A fragmented AR Ledger creates many obstacles to the efficient and effective managing of the AR Asset • Achievement of world class AR management performance is virtually impossible without an automated, consolidated AR Ledger (especially cost performance of 0.04% of revenue) • Delivery of uniform, excellent Customer Experience requires consistency of service delivery enabled by centralized organizations using a single AR Ledger • A consolidated AR Ledger is a foundation to excellent AR and Order-to-Cash process management. If you don’t have it, make 2022 the year you implement it!
- 12. 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 Orders Credit Cash Application Collections Deductions Payments Invoicing