Helping a beleaguered Pharma MNC facing multiple complex issues

Case Study in Account receivables in terms of high DSO and Risky AR in their
India operations while aggressively expanding.

www.myndsol.com 1
 Our client, an American global medical company specializing in eye care products
with headquarters in Texas, USA with global revenues over $ 6 billions. It is a
wholly owned subsidiary of a Global Pharma giant with revenue over $ 48 billions,
headquartered out of Basel, Switzerland (Fortune 100 Company, Rank 2 in
Pharmaceutical vertical).
With operations in 75 countries, their products are sold in over 180 countries.

C l i e n t India headquarter is located in Bangalore with facilities in major cities as well i.e.
I n t r o d u c t i o n Delhi, Mumbai, Ahmedabad, Indore, Chennai, Kochi, Kolkata, Ghaziabad etc.
Their India operations are at national level & geographically it’s segmented into
three regions. North Region, West Region and South Region which covers 8
Zones, 42 Branches & 6,500 Customer base.

In India, they transact primarily into Ophthalmic Equipments, Surgical Products &
Pharma Products. FY 16-17 India revenue stood at ~1050 Cr.

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 BACKGROUND 41%
On the back of aggressive growth plans & cutting edge
technologically advanced products , Client registered
multifold YOY growth by both organic and inorganic way In 150
32%
India.
27%

Somewhere in 2012, they started facing a phenomena which 20%

is common amongst almost all market aggressive
organizations and that is of very high growth with scarce cash 80
flow due to prolonged cash conversion cycle and higher
DSO.
In this case, their Surgical & Equipment Division in India
faced these challenges. And the situation kept on
deteriorating further in coming years.
2012 2013 2014 2015
The Overdue Vs. Outstanding ratio went on to 41% in 2015
from 20% in 2012. Also, the total outstanding and Overdue OS – 79.77 Cr. OS – 110 Cr. OS -120 Cr. OS – 150 Cr.
OD- 15.62 Cr. OD- 30.2 Cr. OD – 38.1 Cr. OD – 62 Cr.
value increased from 80 Cr & 16 Cr to 150 Cr & 62 Cr
respectively in the same time frame for the surgical business
Overdue Vs. Outstanding Ratio
This is where Mynd Solutions was engaged in order to first
(Surgical Business)
audit and then improve the processes with quantifiable
progress results.

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 DIAGNOSIS
Customer Categorization
Statistical analysis of Customer Background
Standardized Customer On boarding process

Credit Control
Opportunity Conceptualization & Implementation of Credit Policy
Credit risk identification & Mitigation mechanism

Areas Communication
After a thorough audit of the then existing Effective and objective information flow.
processes , we Identified some major areas of Complete 360 degree view of AR health across
improvement right from beginning of the organization.
customer acquisition till Sales and Collection.
Un-standardized process
Inconsistent order to cash processes, control issues.
Unstructured Governance mechanism

Automation
Advanced Statistical and process control.
Automating the redundant and error prone work.
Actionable intelligent information dissemination.
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Solution
&Implementation
Risk Mitigation.

Preventive Tool & Corrective

Solution Techniques Solutions

Since there was a need to resolve the accumulated AR and also to ensure that this
situation never arises again, we developed and implemented a combination of preventive
solution (Credit policy) , automation (analytics, alerts etc.) and corrective solutions (old
AR review and liquidation plan).
I M P L E M E N TAT I O N
PREVENTIVE ANALYTICS & CORRECTIVE
SOLUTIONS INFORMATION TOOL SOLUTIONS
In order to ensure the mitigation of the Sending right information at the right level A simulation was done basis the data
future credit risk and to regulate the at the right time was the primary objective available up to Dec-14 and customers
existing AR anomalies so as to prevent the of this automation along-with the credit which could go into credit hold along with
accumulation of AR and to liquidate the policy automation. other high risk customers contributing to
already existing one. A credit policy was 70% of the total OS were shortlisted to be
This customized AR CARE tool automated
conceptualized, written, simulated and worked under a special project w.e.f 1st
Predictive Credit Analysis, Customisable
implemented by us. March 2015. This was done to provide all
workflows for integrating complex logics for
It was a customized credit policy designed customers a fair and equal platform at the
Credit line/ Credit Terms checks and
to govern all credit related aspects and time of Credit Policy inception so that
approvals (WFM)
decisions. neither sales nor the cash flow suffers.
Accessible from anywhere in the field (over
It helped in containing the credit exposure Due to its value addition, this exercise was
the internet), thereby empowering the
within the organizational tolerance limits later expanded & extended where Mynd is
Sales and Distribution team with ready
and facilitated quality sales with timely playing a crucial role of bridging the Gap
information to facilitate Credit and
collections. between the Sales force and the CSA
Collections related decisions
responsible for collections.
The predictive customizable alerts made
sure the awareness and greater AR
ownership across organization. 6
CREDIT POLICY
CREDIT RISK
Credit Policy conceptualized and implementation was done to ensure growth of
quality business at minimal AR risk.

CREDIT LIMIT & CREDIT DAYS

These were defined and designed as per the Clients business objective and the
growth projections on YOY basis.
The entire credit limit distribution was reworked and redistributed where the prime
customers got the optimum limits possible without increasing the overall business
risk. And the bottom level customers still got the limit equivalent to the sales
forecast.

RISK
CREATIVE GROWTH INNOVATE STATISTICAL
ANALYSIS

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 ANALYSIS MIS & REPORTING I N F O R M AT I O N & A L E RT S
• Various Analysis on Account Receivables • Automated & Periodic MIS & Reporting •Multiple channel Alerts on Laptop, Tablet
With different parameters i.e. PTP, EPT, DSO •24/7/365 information at disposal. and Phones via Mail & SMS.
Area Wise, Zone Wise, Region Wise, Customer •Instant access •Information request on SMS (i.e. OS, OD,
Wise. •Graphical & Pictorial depiction for more Collection & DSO)
• Standard, Customized & Real-time Dashboard interactive experience and convenience. •Credit limit breach alerts, collections overdue
•Credit Policy Automation with predictive analysis alerts and predictive alerts etc.
 AR ZONAL DRIVE

• Collaboratively
Resolution Identification
• Issue Identification

• Ownership of Issue
Resolution

• Close Monitoring of • Increment in Collection

• Meetings with CSA & Results • Reduction in OD
Client at all Levels

• Team Support for Issue

Resolution

• Introduction &
Conceptualization 9
R E S U LT S

Reduction in Overdue Reduction in DSO

RCA based AR Review, brought By Implementation of Credit Policy & AR
pendency on table . Which helped in Zonal Drive, Collection started flowing in at
effective resolution, collections and a faster pace which subsequently hammered
reduction of Overdue steeply. the DSO down significantly

Real time MIS & Analysis

The AR CARE automation ensured o Real
time MIS, Analysis and customized Alerts.
Auto credit appraisals , predictive sales hold
alerts helped in resolving the situation
beforehand which resulted into higher quality
revenue
Standardization Reduction of Risk in AR
With standardization , better These steps of introducing credit policy,
compliance was achieved in dunning, automation and zonal drive helped in
reconciliation & balance confirmation ensuring overall hygiene in sales and AR.
resulting into faster collection and less Higher quality sales ensure minimum
accumulation of AR and sharp decline disputes and consistent AR reviews ensured
in diputes consisted & effective dunning, put together
an AR with minimal risk. 10
180.00

160.00
O/D VS. O/S
140.00
TURNING POINT

120.00
After a quarter of AR

100.00 Review initiation

80.00

60.00

40.00

20.00

0.00

OD Vs. OS Ratio) DSO Trend

60% 140 124
51%
50% 120 102
40% 95 88 92
40% 37% 100
32% 32% 80 72
30%
18%
60
20% 40
10% 20
0% 0

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 S A L E S & C O L L E C T I O N S I M PA C T
Sales During May-14 to Feb-15 – 388 Cr. Sales During Mar-15 to Apr-17 – 1097 Cr.
Collection – 338 Cr. Collection During Mar-15 to Apr-17 – 1113 Cr.
Avg. Coll. Vs Sales Ratio – 87% Coll. Vs Sales Ratio – 101%
80.00 140%
127%
122% 122%
70.00 120%
114% 108% 112% 114%
108%
105% 104% 104% 104%
60.00 97% 98% 98%
95% 97% 100%
89% 92% 90%93%
50.00 81% 82% 80% 77%
80%
73% 77%
40.00
60%
30.00

40%
20.00

10.00 20%

0.00 0%

Sales Collection Ratio

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 Ground Level Effects
- DSO hammered down from the levels of 124 days to 72 days

- Overdue (OD) to Outstanding (OS) ration brought down from the heights of 51% to 18%

- Collections Vs Sales ratio pulled up from 87% before Zonal exercise to 101% post that.

- All above positive quantifiable progress was done along side a sales increase of 10% YOY.

- A scalable model developed capable of handling 20% more sales and collections.

- There were many intangible benefits such as AR awareness across sales team ensured high quality sales.

- CSA partner was made more responsible of the collections and SLAs were decided.

- Ticket logging mechanism introduced for faster and trackable issue resolution.

- Monthly Management meetings brought about more visibility and issues on the surface resulting into
resolution.
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 WE
Still Continuous Improvement is going on with help of Credit
NEVER Policy, AR Zonal Reviews and AR CARE tool………..

STOP
IMPROVING

14
THANK YOU!