SAP Users Speak Out on Credit and Collections Shortcomings

  • Written By: Steve McVey
  • Published: February 1 2000

SAP Users Speak Out on Credit and Collections Shortcomings
S. McVey - February 7th, 2000


A recent survey of companies who have implemented SAP Accounts Receivable revealed more than a few areas where the system failed to deliver. We undertook the survey in response to a client inquiry regarding SAP A/R module implementations and possible effects on Days Sales Outstanding (DSO) metrics. DSO, a measure of a company's ability to collect its receivables, is computed in various ways, though we defined it as DSO = (Accounts Receivable*365 Days) / (Total Revenues).

Companies participating in the survey belonged to a broad range of industries, including aerospace, consumer goods, electronics/high technology, and chemicals. Contacts in these companies were chosen from people who were either involved directly in the SAP implementation or who tracked DSO as part of their jobs. Their titles included CIOs, Finance Managers, Controllers, and SAP Project Managers (among others).

The two subcategories of interest within the A/R function are credit management and collections management:

Credit Management: A preventative or front-end function, credit management encompasses activities that seek to validate customers' ability to pay before a sale is made. In theory, perfect credit management would all but obviate

Collections Management: On the back end, after the sale is made, collections management attempts to maximize receipt of outstanding payments, hopefully with minimum investments of employee time and expense.

Although nearly all respondents reported one or more influences on credit and collections that did not relate to SAP, 70% of them felt that shortcomings of the SAP A/R module were at least partly to blame for the observed rise in DSO. The top three non-SAP conditions given as potential sources of problems were:

1. Ineffective use of the system due to inadequate training or failure of management to drive its adoption

2. Lack of knowledgeable personnel due to organization growth accompanied by high employee turnover

3. Delay in collections due to negative economic factors affecting customers; general and within specific industries.

Survey Results Summary

90% of respondents indicated that DSO reduction was a goal of the organization

Of all the respondents, 30% saw a decrease in DSO with SAP while 30% saw a increase.

Survey results indicated an average increase in DSO of one day following an SAP go-live.

No companies less than 39 months live had reduced credit and collections staff by more than 22%.

Respondents highlighted specific areas they felt contributed to increase in DSO:

SAP failed to offer adequate data analysis tools and reports

In some cases, the credit and collections management functionality within SAP was not adequate.

Most of the people who participated in the survey said that reduction of DSO or other metrics was an important goal of the organization. Some specific comments included the following:

"A primary focus is on aging of accounts and driving down 90-day past due aging."

"Business Unit Credit Managers have been chartered with responsibility to develop and implement Business Unit collection best practices that address industry and market conditions but are predicated on Corporate Collections policies."

"We have developed and implemented AR management and collections training programs for customer service personnel."

The following two graphs display key results of the survey:

Change in DSO Following SAP Go-Live

Survey results indicated an average increase in DSO of one day following an SAP go-live.

Of all the respondents, 30% saw a decrease in DSO with SAP while 30% saw a increase.

Comparison of Time In-Service with DSO Change

All companies less than 2 years live saw an increase in DSO.

Only after 23 months did anyone recognize a decrease in DSO.

The Respondents Speak Out

Many responses painted a vivid portrait of problems associated with SAP credit and collections functionality as well as some general complaints about its analytical tools and reporting. A sampling of these follow.

SAP failed to offer adequate data analysis tools and reports:

"While we have corrected some problems through configuration modifications and enhancements to customized reports, we are still faced with limited flexibility within SAP and cannot 'slice and dice' AR data to the extent we would like."

"Too much information is presented at once; there is no way to cut the data well."

"On the collections side, we are using a download system to identify components of various buckets. aging report is 200 pages long."

"reporting on credit collection side is almost useless."

SAP Collections Management Issues:

"Collections management is inefficient. Before SAP, it took six steps to identify a call, take notes, get the next account, etc. Now, it takes 43 steps."

"Collections doesn't allow users to drill-down, prioritize calls, or perform exception reporting."

"Enhancements to custom reports have provided some flexibility to capture/extract data, however, despite ensuring that the same formula and data is used, in some cases there is still a significant difference in SAP DSO and the DSO we arrive at when calculated outside of SAP."

SAP Credit Management Issues:

"We have installed Dun & Bradstreet for credit management and use SAP only for monitoring credit management."

"Can't analyze total population globally, geographically, or by product; SAP gives basic information only, no drill-down; poor risk analysis capabilities."

"The notes taking functionality looks to be from the 1970s."

User Recommendations

Most ERP systems provide a good deal of breadth, but rarely do they offer sufficient depth of functionality in every area for every industry. This reality provides Value Added Resellers a livelihood filling gaps in ERP functionality and services. While SAP and other vendors have made moves toward assimilating parts of their VAR networks, it seems that, for credit and collections, SAP's VARs have little to worry about. In addition to VARs, there are various other alternatives for companies struggling to wrest value from SAP's A/R module. For instance, many complementary software companies, such as Getpaid and, offer "bolt-on" applications that provide enhanced features and standard interfaces to SAP. However companies choose to address SAP shortcomings, nasty surprises can be avoided if client references are consulted before the purchase is made.

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