1. SAP Receivables Management Dispute & Collection Module Implementation August 13, 2012 Judy Wagner, Director Corporate Credit Roche Diagnostics Corporation

2. ERP Version & Receivables Management Modules SAP ERP Version – 6.0 Receivables Management version – Enhancement Pack 4 Modules used – Collection Management and Dispute Management 2

3. Number of customers and their characteristics 17,000 overall payers Approximately 6,000 active payers –Size varies across all segments, small to large –Both public and private customer 3

4. AR Size AR Balance –Between $250 - 300 M –Average 89% current –Average auto cash hit rate 81% Annual Sales –$2+ B –688K+ invoices generated in 2011 –DSO averages ~45 days Staff –Supervisors – 3 –Collectors – 16 –Credit Analysts – 4 –AR (Cash App) - 4 4

5. Main sources of overdue payments Disputes –Pricing –Tax certificates Customer cash flow issues –Related to government reimbursement 5

6. SAP Receivables Management Best in class/fit with SAP Provided a solution that did not have bolt on solutions that would have to be maintained and upgraded in future Partnered with SAP out of Germany to create a global template and to assist with the implementations on first 4 affiliates –Listened and understood our global approach –Brought solution through process discussions and gap analysis –Great partners with exceptional knowledge on Receivables Management 6

7. Global instance vs. Regional instance – why? Align processes across the global utilizing the same tools Easier support model if we all use essentially the same global template Establish best practices Saved costs in long run as we did not have to do full requirement gathering for each country Consistent reporting and shared knowledge going forward –Training manuals –Resources 7

8. Organizational Environment RDC first site to go live August 2011. Spain live in 2012 and working now with Tucson who is expected to go live beginning of 2013. Future state – 6-8 organizations on 1 instance of SAP and 3 affiliates on another instance of SAP, all organizations are separated by different company codes Users: –16 Collection –50 Contracting (Pricing) –4 Cash application –4 Customer Service –1 Tax No shared service at this time, however, tool could be leverage to do this 8

9. Gaps identified in the modules No bolt on software, however, we did custom program some items into Receivables Management Gaps identified dispute management: –Enhanced correspondence with ability to utilize various templates and attaching supporting files –Correspondence is able to be configured in multiple languages –System able to assign process deadlines automatically –Program that identifies overdue cases –Workflow functionality based on reason code and potential next steps –Ability to automatically begin the creation of debit and credit from Receivables Management –Automatic creation of disputes needed to be program, functionality exists 9

10. Gaps identified in the modules Gaps identified collection management: –Added key fields from F.35 into Receivables Management, i.e. text –Added fields from credit management (i.e. DSO, credit risk) –Integrated Collection Module with the dunning process –Able to upload mass creation of promises to pay –Added field for rolling 12 month sales 10

11. Reporting Using BW, 7 reports –Collection Management Worklist summary Customer contact results Promise to pay –Dispute Management Flexible dispute management report Dispute Aging Turn Around Time Management Overview 11

12. Roles & Processes in Collections Management Collection Specialist Collection of Receivables Collection Manager Controls Collections Data Synchronization and Worklist creation 12

13. Collection of Receivables Process Overview Three basic processes Collection Specialist performs: Automatically createdKey figures per worklist itemPromise to pay PersonalizedValidation detailDispute cases Search functionsDue date gridResubmissions StatisticsInvoice overviewCustomer contact Overview of past payments, contacts, and resubmissions 13 Access Worklist Prepare Customer Contact Contact Customer

14. Collection Manager process for Control of Collections Define Collection Strategies Maintain Collection Groups Adjust Business Partner Master Data Supervise Collection Process 14 Collection Rules Collection Strategy Collection group Business partner Collection profile Allocate worklist items Control statistics

15. Collection Rule Collection rules reflect the reason why a customer is to be contacted. A collection rule formulates the prerequisites that a customer in a collection segment must fulfill in order to receive valuation points. SAP delivers various collection rules in the standard. Collection rules are listed for each collection strategy. Example of a rule: Prerequisite + Condition = Collection Rule Risk Class Total Open Items Since N Days Broken Promise to Pay 15

16. Data Sources for Collection Rules Dunning DataOpen Item Data Customer DataPayment Data SAP Accounts Receivable Dispute Case Data SAP Dispute Management Contact DataPromise to pay Data Resubmission Data SAP Collections Management Credit Rating Credit Exposure SAP Credit Management 16

17. Collection Strategies Collection Strategies comprise company-specific rules for collecting receivables. Collection strategies have the following purpose Determine which customers are to be contacted in collection management (basis for automatic worklist creation Prioritize customers on the collection worklist Define the currency in which the amounts are to be displayed on the worklist Determine the time intervals of the aging of receivables per customer in a segment (due date grid) Define the type of integration with dunning in Accounts Receivable Accounting Determine the influence of the terms of payment on Collections Management (consideration of cash discounts) 17

18. Sample Collection Strategies IndustryZ: Prv: CD LVC Weighted ValueStrategy DescriptionPrerequisites and Conditions (Values)Exit Rule (X) 10Total of All Items Overdue Since n DaysItem Total: From 0.00 to 0.00 Days Overdue: 60 20Broken Promise to PayTotal Promised: From 0.00 to 0.00 Level of Promise to Pay: 0 to 0 5Total of Amounts from Dispute Cases to Be CollectedTotal Amounts: From 0.00 to 0.00 10Total of All Items Overdue Since n DaysItem Total: From 25,000 to 50,000 Days Overdue: 91 20Total of All Items Overdue Since n DaysItem Total: From 25,0001 to 100,000 Days Overdue: 91 40Total of All Items Overdue Since n DaysItem Total: From 100,001 to 999,999,999 Days Overdue: 91 40Dunned Amount Still To Be Collected n Days after dunningDunning Level: 4 to 4 Days Since Last Dunning: 30 Successful Customer Contact in Last n DaysDays Since Last Contact: 7X 20There is a resubmission due for the customerContact Person was Absent Contact Person Requests to be Called Later 185Total Valuation This strategy can probably be simplied since we would only Dun these customers and that for the most part would be the only contact made on these accounts. 18

19. Sample Collection Strategy IndustryY053 Prv: Applied Science Weighted ValueStrategy DescriptionPrerequisites and Conditions (Values)Exit Rule (X) 30Total of All Items Overdue Since n DaysItem Total: From 0.00 to 0.00 Days Overdue: 30 Risk Category Low 40Total of All Items Overdue Since n DaysItem Total: From 0.00 to 0.00 Days Overdue: 30 Risk Category Med 50Total of All Items Overdue Since n DaysItem Total: From 0.00 to 0.00 Days Overdue: 30 Risk Category High 60Total of All Items Overdue Since n DaysItem Total: From 0.00 to 0.00 Days Overdue: 30 Risk Category Very High 10Total of All Items Overdue Since n DaysItem Total: From 25,000 to 50,000 Days Overdue: 91 20Total of All Items Overdue Since n DaysItem Total: From 25,0001 to 100,000 Days Overdue: 91 40Total of All Items Overdue Since n DaysItem Total: From 100,001 to 999,999,999 Days Overdue: 91 20Broken Promise to PayTotal Promised: From 0.00 to 0.00 Level of Promise to Pay: 0 to 0 20Broken Promise to PayTotal Promised: From 0.00 to 0.00 Level of Promise to Pay: 0 to 0 5Total of Amounts from Dispute Cases to Be CollectedTotal Amounts: From 0.00 to 0.00 10Dunned Amount Still To Be Collected n Days after dunningDunning Level: to Days Since Last Dunning: 30 Successful Customer Contact in Last n DaysDays Since Last Contact: 7X 20There is a resubmission due for the customerContact Person was Absent Contact Person Requests to be Called Later 305Total Valuation 19

20. Sample Collection Strategy IndustryZ: Prv: Affiliates Weighted ValueStrategy DescriptionPrerequisites and Conditions (Values)Exit Rule (X) 100Amount of Individual Items Overdue Since n DaysItem Total: From 0.00 to 999,999,999 Days Overdue: 60 100Total Valuation 20

21. How SAP Dispute Management helps collections Controls and streamlines the dispute case process Central component for handling dispute cases enables cross- department dispute resolution Integrated in financial but also in logistical process Organizes and stores all information and documents related to a dispute case Includes sophisticated reporting –Detect quality issues –Control workload –Track dispute process –Deductions per customer 21

22. What is a Dispute Case? A dispute case is a new business object that –Has descriptive attributes –Is like a folder that links all relevant documents and objects –Can be processed across multiple departments –Supports different communication channels 22

23. Updating Dispute Management Information Dispute Management is automatically informed of financial transactions such as: Incoming payment for disputed items Offset credit memos for disputed amount Manual clearing positing The update is visible in the dispute case In corresponding amount fields As linked objects in specific folders 23

24. Correspondence Can be created Automatically by events like –Creating a dispute case –Closing a dispute case Manually by the user when processing the dispute case SAP delivers standard customer correspondence for FAX, e-Mail, and letter –Notification that a dispute case has been created –Notification that dispute case has been closed –Query regarding dispute case –Information about dispute case Customers can create their own correspondence –Using Smart forms –Data available for correspondence All attributes External Notes Object keys of objects sorted in the dispute case folder (case record) 24

25. Reporting Receivables Management Dashboard - January 2012 Collection Activity for the MonthGoal of 25% Dashboard Date1/6/2012 Collection SpecialisNo of worklist itemsNo of completed Worklist Items% of completed Worklist Items 283730510.75% CURRENTLY THE PTP DATA IS ONLY SHOWING OPEN PTP ITEMS AND DOES NOT REFLECT ITEMS PAID WITH A STATUS OF 'KEPT' - THIS IS BEING ADDRESSED Promise To Pay Activity for the MonthActivity is only for payments promised for Current MonthGoal 85% Kept 245$1,145,152.90$15,000.00 Dispute Activity for the MonthGoal TAT < 45 daysGoal no deduction amounts beyond 61 Day aging bucket Coordinator Number of Open Dispute CasesAverage Resolution Time (Days)Current Disputed Amount0 - 30 Days31 - 60 Days61 - 90 Days 91 - 120 Days >= 121 Days 46424.98$1,657,151$675,116$643,305$266,561$69,263$2,907 100.0%40.7%38.8%16.1%4.2%0.2% Receivables Management Dashboard - July 2012 Collection Activity for the MonthGoal of 25% Dashboard Date7/31/2012 Collection SpecialistNo of worklist itemsNo of completed Worklist Items% of completed Worklist Items 11567304926% Promise To Pay Activity for the MonthActivity is only for payments promised for Current MonthGoal 85% Kept Collection SpecialisNumber of Promise to PayAmount PromisedAmount Paid (Promise to Pay) % Promised Kept % Promised Broken% Partially Kept 1342$11,608,609.48$9,942,803.9586% Dispute Activity for the MonthGoal TAT < 45 daysGoal no deduction amounts beyond 61 Day aging bucket Coordinator Number of Open Dispute CasesAverage Resolution Time (Days)Current Disputed Amount0 - 30 Days31 - 60 Days61 - 90 Days 91 - 120 Days >= 121 Days 15323$942,774$423,465$54,157$450,032$5,665$9,455 100.0%44.9%5.7%47.7%0.6%1.0% 25

26. Key Challenges Faces Change Management Experienced Collection Team Numerous years on old system Felt safe Established business processes Well documented processed for old system Involvement of other groups Gain buy-in Eliminate redundancy Metric reporting and measurement New process metrics and people measurements

27. Lessons Learned Change Management Security Batch roles Master Data Know data gaps Understand regression impact Market to non- power users Contracting Tax Customer Service Flexible tool and processes Challenge allowing people to create their processes TechnologyProcess

28. Finance 2011 Accomplishment Launch of Receivables Management Receivables Management Planning Testing Innovation

29. Judy L. Wagner Director Corporate Credit Phone: 317-521-2040 Email: judy.wagner@roche.com

30. 30 We Innovate Healthcare