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