Bizpact

Accounts Receivable

Case Study 2A: Monitoring AR Activity and Improving the Discounting Policy

Project Overview

Project: Monitoring AR Activity and Improving the Discounting Policy

Client Profile: The client is a leading bakery company in the Middle East, operating in 7 countries with 10 plants and 25 depots. Their inventory is spread across multiple locations in Saudi Arabia.

Challenge

  • Flawed Discount Process: The discount process was not followed robustly or as per the existing credit monitoring policy.
  • Excessive Exception Cases: Numerous exception cases were allowed every month, indicating non-compliance with the existing credit monitoring process.
  • Outstanding Dues: The outstanding process was not robust, with dues exceeding 365 days still recorded in the system.

Solutions Provided

  • Streamlined Discounting Process: A more robust discounting process was established by creating a “Discount Master” at the customer level. This documented all agreements and ensured consistency in applying discounts.
  • Exception Handling: A structured process was introduced to scrutinize customer ledgers with periodic exceptions. Strict checks and follow-ups were implemented to ensure payments were made, minimizing future exceptions.
  • Debtors Aging Monitoring: Regular monitoring reduced debtors aged over 365+ days by at least 30%. The debtors’ patterns were analyzed, and good and bad debtors were identified for targeted follow-up.

Partnership with BSS – Key Benefits

BSS collaborated closely with the client to implement a comprehensive finance and accounting (F&A) solution that addressed the major challenges. The key steps included:

  • Customer Default Identification: Identified customers making regular payment defaults.
  • Credit Limit Updates: Monitored and updated customer credit limits regularly.
  • Real-Time Monitoring: Shared real-time flash reports weekly to monitor customer aging and due payments.

Outcome

Through these solutions, BSS enhanced the accounts receivable process, improved compliance, and significantly reduced aged receivables.

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