1. Five Best Practice AR Metrics You Should Track

2. Introduction Objectives of Reporting The Power of One Five Best Practice AR Metrics Customer Success Story Conclusion Questions Agenda

3. Controlling demand for reports is difficult. 100% automation of standard reports and quick query capability is way to limit time spent on reporting. Beware the “Reporting Downward Spiral First month of sub-par results elicits special reports/analytics requests from Management. Result: 4 work days spent reporting (vs. the normal 2), and 16 days devoted to improving performance Second month of sub-par results increases special requests. Result: 6 days of reporting, 14 days of driving improvement Less time devoted to driving results leads to third month of sub-par results 3 Introduction

4. Objectives of Reporting KPI’s (Key Performance Indicators) To measure the performance of the management of the revenue stream and Accounts Receivable asset: effectiveness efficiency To provide a level of insight into operations and challenges – not deep dive Analytics published on monthly basis To minimize the time and cost of reporting 4 Objectives of Reporting You cannot manage what you don’t measure

5. A Single Consolidated View of the Total AR Asset is Imperative Global scope Every penny of every dollar Every open transaction for every customer If you have it, “what’s the big deal?” If you don’t, you know the problems it causes 5 The Power of One Anything less than the “Power of One” is a disadvantage.

6. The Critically Important Five AR Metrics Credit: Average Days to Complete a New Credit Review Collections: Average Days Delinquent Cash Application: Auto-Cash Hit Rate Deductions: Average Resolution Cycle Time Credit to Cash Process Cost as a % of Revenue 6 Five Best Practice AR Metrics

7. Credit: Average Days to Complete a New Credit Review Definition: Elapsed time from receipt of Credit Application from a prospective customer to establishment of Credit Limit Critically important in an economy where many companies are suffering with depressed revenue. Speed in onboarding new customers is essential. Hackett World Class performance is 2 days Key Best Practice: on-line Credit Application with digital signature, automated incorporation of Credit Bureau & bank and trade references 7 Five Best Practice AR Metrics

8. 8 Collections: Average Days Delinquent Definition: Actual vs. Best Possible DSO gap Best Possible DSO: if every penny of every invoice was paid on due or early pay discount date Not affected by granting extended terms Hackett World Class performance is 4 days Key Best Practice: automated, customized Collection Prioritization logic which drives Collector activity and automation of contacts Five Best Practice AR Metrics

9. Cash Application: Auto-Cash Hit Rate Definition: % of Customer Payments Applied to Open Invoices Automatically Payments posted only at account level and those posted manually excluded Automation displaces manual effort and drives productivity and accuracy Hackett World Class performance is 75% - hit rates above 90% have been achieved Key Best Practice: AI driven, automated extraction of remit data from multiple sources in multiple formats and application to open invoices, enhanced by machine learning 9 Five Best Practice AR Metrics

10. Deductions: Average Resolution Cycle Time Definition: Average elapsed time to resolve a Deduction from Creation date (value-weighted and exclude automatic-small-balance-write-offs). Resolution is removal from AR ledger or delegation for Collection. Short resolution times reflect high productivity and promote increased recovery of denied deductions Hackett World Class performance is 7 days Key Best Practice: AI driven, automated, deduction creation and assignment of reason code, via extracting data from customer vendor portals and remit information from multiple sources in multiple formats (remit advice, debit memos, etc.) 10 Five Best Practice AR Metrics

11. 11 Five Best Practice AR Metrics Credit to Cash Process Cost as a % of Revenue Definition: Total cost (salary, benefits, supplies, allocated IT and Facilities/overhead) of Credit, Invoicing, Collections, Cash Application and Deductions processing, as a % of Net Revenue. Cost of these functions will vary with scale of revenue. Expression as a % of revenue ensures comparability Hackett World Class performance is 0.041% Key Best Practice: AI driven, automated processing eliminating 70 – 80% of manual and semi-manual work in these five functions.

12. Analytics – Process Improvement Recurring Reporting is not the vehicle for deep data analyses. Separate, less frequent Analytics reports are. Common examples are: Deduction and Dispute analysis by root cause provides data to: Pinpoint Order to Cash process flaws to be corrected Enable cost/benefit estimates for corrective actions Analysis of credit memo reason codes will serve the same purpose. Analysis of order release function by Credit can be useful. Calculate orders held as % of total orders reviewed. If % is low, it may mean orders are being held unnecessarily because of screening criteria that are too strict (credit limits too low) and/or they flag customers whose orders would be held in only extreme cases (i.e., National Accounts). This wastes staff time and delays order fulfillment. Root cause data is the key to process improvement

13. $2 Billion Receivables * 85% Current AR 100% Customer Touch 15 days DSO Reduction 91% Dispute Cycle Reduction THE EMAGIA EXPONENTIAL IMPACT 118 M Working Capital Savings Pharma Manufacturer Improves Cash flow Overview: Global leader is providing integrated services, superior drug delivery technologies and manufacturing solutions. Over $2.5 B in revenues and 11,000 employees who support over 7,000 products for over 1,000 customers all around the world. Digital OTC Solution: Emagia AI-powered Digital Receivables Platform – Credit, Collections, Deductions, Cash App, Analytics & Customer Payments Portal. Deployed as a single unified global order-to-cash platform over 4 ERP systems - Oracle, JD Edwards, MYOB and Change Point Client focus of strong working capital management and reducing cost achieved Configurable Collections Strategies – dynamic modification based on parameters High Efficiency Collector Workbench Automated Reminder and Dunning Letters Collaborative Workflow Based Resolution – alerts, reminders and escalations Detailed Audit Trails Root Cause Analysis e.g. dispute management DSO reduction of 15 days. $118 million Working Capital savings

14. 14 There are many KPI’s focused on AR Management results The challenge is to enable monitoring of key activities and results without devoting too much time and resource to reporting The Five Best Practice AR Metrics we have identified will accomplish the reporting objective Conclusion Remember: Analytics fuel process improvement

15. Questions

16. 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 Next Emagia Master Class Session Topic: Strategic AR Management Book Your Seat Today ! Orders Credit Cash Application Collections Deductions Payments Invoicing