Accounts Receivables Management Case Studies
See the power of outsourced A/R with our informative case studies.
Discover how accounts receivable outsourcing helps businesses increase cash flow and save accounting department overhead expense. Browse our case studies and see firsthand how the accounts receivable best practices we have established accelerate our clients’ success.
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Distributor
The right credit line to support growth.
# of employees: 15+
Annual Revenue: $20 mil+
Overview:
A distributor wanted to find a company that could assist with recommended credit lines for their customers. They needed someone with significant experience in vetting customers and making recommendations on large credit lines, generally in the range of $10,000 to $100,000. The distributor had a credit insurance policy but many accounts were either not covered or did not get covered with a sufficient amount. We were asked to act as their Credit Manager, providing recommended credit lines of sufficient size to help prevent sales losses. The distributor also wanted to consider outsourcing their ‘first party’ invoice collection, in order to utilize our sophisticated software to improve customer payments.
Client Pain Points:
The company lacked the personnel and experience to manage credit investigations and recommendations on their customers. While they had a credit insurance policy, they were concerned it was restricting their growth due to both conservative decisions or by not extending the credit line amounts needed to expand sales. They did not want to undertake the risk without the support of a Credit Manger with significant experience who could assist with in-house credit line decision-making.
Solutions Implemented:
Axim thoroughly investigated their complete customer base, fully vetting both existing and new accounts to determine their ability to pay. Our experienced credit personnel recommended credit lines in amounts needed to spur growth, based on numerous resources that demonstrated the credit worthiness of the client’s customers. The various methods for decision-making are determined by each individual industry and customer base but generally include credit reports, trade references, public records (suits, judgments, tax liens, etc.), financial statement analysis and the use of instruments used to secure certain accounts such as, L/C’s, personal guarantees, and other forms of collateral.
Results:
The client has remained with Axim since 2009 and we continue to provide first party collection and credit recommendations on an ‘as needed’ basis. Bad debt losses over the past 7 years have been well within budget.
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Apparel
Seamless exit from the factoring arena.
# of employees: 75+
Revenue: $100 mil+
Overview:
A large apparel firm came to Axim in 2008 to explore the benefits of exiting their factoring relationship and outsourcing their entire A/R department processes to Axim, including customer order approval, first party invoice collection and deduction management. The challenge was to efficiently and seamlessly move out of the factoring arena with minimal effect on customers, to reduce costs and improve personal relationships with each account.
Client Pain Points:
The client felt that a factoring solution was too expensive for their business. Having been factored for many years, they had no internal credit or collections department. They needed to either staff their own department or look for a company to fill the need.
Solutions Implemented:
Axim tailored an exit strategy by providing a seamless transition out of factoring, ensuring that no customer was inconvenienced by the move. We quickly input all outstanding receivables into our proprietary software and notified each customer of the change and the benefits it would bring. We communicated with customers in our client’s name, so to the customers and the client’s in-house personnel, the exit was a non-event. Order approval was accomplished in real time through the elimination of lag due to the submission of data to and from the factor. Just due invoices were collected from each customer in a friendlier manner, creating an atmosphere of cooperation and enhanced service, from purchase order entry through to invoice payment. The client now receives payments directly from each customer, then applied by client personnel, eliminating the duplicate accounting that was necessary with the factor. Axim and the client were motivated to resolve each dispute quickly to eliminate any barriers for payment, so the customer deduction issue common to the apparel industry was minimized.
Results:
The relationship began in 2008 and continues to flourish today. Bringing the A/R function to Axim reduced costs by over 50%, with bad debt nominal and within budget. The receivables perform extremely well, with less than 2% over 60 days past due. Additional benefits include eliminating the need to staff and monitor an internal A/R department and the negative effects associated with employee turnover.
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IT
Fast analysis of large credit line decisions.
# of employees: 50+
Revenue: $400 mil+
Overview:
A large IT service company was having issues with their credit insurance provider and wanted to consider alternatives without exposing their company to unnecessary risk. They required quick responses on large credit lines in order to fill orders quickly in a very competitive environment. The credit insurance provider was not able to provide their responses in a timely fashion, creating stress within the sales department and management. They came to Axim seeking a solution.
Client Pain Points:
The company was concerned with the amount of time it was taking the credit insurer to provide responses on credit lines in excess of $1 million and believed that more timely responses were critical to their sales goals. They lacked the in-house expertise to analyze the credit worthiness of their customers for credit lines of this size and needed a credit manager or outsourced service to provide this function on an ongoing basis.
Solutions Implemented:
Axim discovered that approximately 85% of their client base was comprised of public companies. Therefore, quarterly financial statements were available–a requirement due to the size of the credit lines they were seeking. Through discussions with upper management, we agreed on a solution that included a comprehensive examination of their customers, credit line recommended amounts, and a memo outlining the pros and cons of each customer. Due to our management team’s 40+ years of experience, the client decided to forego the insurance policy and accept Axim’s recommendations on all active and future customers. A process was set up to easily assign lines to customers requiring small credit lines and a tailored solution for reviewing and reporting on customer lines in excess of $1 million up to $20 million. 3-day review timelines were established for large credit lines.
Results:
Axim’s services have been very cost effective for the client. By working with us, they reduced expenses by 40% with a turnaround average of 1-2 days, when compared to the credit insurance policy. The majority of their account base has been accommodated with the credit line amounts requested. During the 8 years they have used our services, there have been no credit losses on public companies and only one loss taken on a private company, for a nominal amount.
We contracted with Axim, Inc. in 2012 to manage the credit and collection function for our company. Their service has allowed us to grow while keeping our past dues and bad debt below industry norms. In one specific case, we had an opportunity to do very large business with an up and coming retailer that due to their newness were not being approved by the factoring community or other manufacturers in our industry. Axim understood our appetite for sales growth and after undertaking a very thorough vetting process, were able to recommend a large credit line where most others had refused. To this day, they are still one of our largest customers. Suffice to say we are most pleased with Axim’s performance.
-Ron Perlman, Liverpool Jeans