SAP Receivables Management Dispute Collection Module Implementation August

SAP Receivables Management Dispute & Collection Module Implementation August 13, 2012 Judy Wagner, Director Corporate Credit Roche Diagnostics Corporation

ERP Version & Receivables Management Modules • SAP ERP Version – 6. 0 • Receivables Management version – Enhancement Pack 4 • Modules used – Collection Management and Dispute Management 2

Number of customers and their characteristics • 17, 000 overall payers • Approximately 6, 000 active payers – Size varies across all segments, small to large – Both public and private customer 3

AR Size • AR Balance – Between $250 - 300 M – Average 89% current – Average auto cash hit rate 81% • Annual Sales – $2+ B – 688 K+ invoices generated in 2011 – DSO averages ~45 days • Staff – Supervisors – 3 – Collectors – 16 – Credit Analysts – 4 – AR (Cash App) - 4 4

Main sources of overdue payments • Disputes – Pricing – Tax certificates • Customer cash flow issues – Related to government reimbursement 5

SAP Receivables Management • Best in class/fit with SAP • Provided a solution that did not have bolt on solutions that would have to be maintained and upgraded in future • Partnered with SAP out of Germany to create a global template and to assist with the implementations on first 4 affiliates – Listened and understood our global approach – Brought solution through process discussions and gap analysis – Great partners with exceptional knowledge on Receivables Management 6

Global instance vs. Regional instance – why? • Align processes across the global utilizing the same tools • Easier support model if we all use essentially the same global template • Establish best practices • Saved costs in long run as we did not have to do full requirement gathering for each country • Consistent reporting and shared knowledge going forward – Training manuals – Resources 7

Organizational Environment • RDC first site to go live August 2011. Spain live in 2012 and working now with Tucson who is expected to go live beginning of 2013. • Future state – 6 -8 organizations on 1 instance of SAP and 3 affiliates on another instance of SAP, all organizations are separated by different company codes • Users: – 16 Collection – 50 Contracting (Pricing) – 4 Cash application – 4 Customer Service – 1 Tax • No shared service at this time, however, tool could be leverage to do this 8

Gaps identified in the modules • No bolt on software, however, we did custom program some items into Receivables Management • Gaps identified dispute management: – Enhanced correspondence with ability to utilize various templates and attaching supporting files – Correspondence is able to be configured in multiple languages – System able to assign process deadlines automatically – Program that identifies overdue cases – Workflow functionality based on reason code and potential next steps – Ability to automatically begin the creation of debit and credit from Receivables Management – Automatic creation of disputes needed to be program, functionality exists 9

Gaps identified in the modules • Gaps identified collection management: – Added key fields from F. 35 into Receivables Management, i. e. text – Added fields from credit management (i. e. DSO, credit risk) – Integrated Collection Module with the dunning process – Able to upload mass creation of promises to pay – Added field for rolling 12 month sales 10

Reporting • Using BW, 7 reports – Collection Management • Worklist summary • Customer contact results • Promise to pay – Dispute Management • Flexible dispute management report • Dispute Aging • Turn Around Time • Management Overview 11

Roles & Processes in Collections Management Collection Specialist Collection of Receivables Collection Manager Controls Collections Data Synchronization and Worklist creation 12

Collection of Receivables Process Overview • Three basic processes Collection Specialist performs: Access Worklist Prepare Customer Contact Customer Automatically created Key figures per worklist item Promise to pay Personalized Validation detail Dispute cases Search functions Due date grid Resubmissions Statistics Invoice overview Customer contact Overview of past payments, contacts, and resubmissions 13

Collection Manager process for “Control of Collections” Define Collection Strategies Collection Rules Collection Strategy Maintain Collection Groups Collection group Adjust Business Partner Master Data Business partner Collection profile Supervise Collection Process Allocate worklist items Control statistics 14

Collection Rule Collection rules reflect the reason why a customer is to be contacted. A collection rule formulates the prerequisites that a customer in a collection segment must fulfill in order to receive valuation points. SAP delivers various collection rules in the standard. Collection rules are listed for each collection strategy. Example of a rule: Prerequisite Risk Class + Condition = Collection Rule Total Open Items Since N Days Broken Promise to Pay 15

Data Sources for Collection Rules SAP Accounts Receivable SAP Dispute Management SAP Collections Management SAP Credit Management • Dunning Data • Customer Data Open Item Payment Data • Dispute Case Data • Contact Data Promise to pay Data • Resubmission Data • Credit Rating • Credit Exposure 16

Collection Strategies comprise company-specific rules for collecting receivables. Collection strategies have the following purpose • Determine which customers are to be contacted in collection management (basis for automatic worklist creation • Prioritize customers on the collection worklist • Define the currency in which the amounts are to be displayed on the worklist • Determine the time intervals of the aging of receivables per customer in a segment (due date grid) • Define the type of integration with dunning in Accounts Receivable Accounting • Determine the influence of the terms of payment on Collections Management (consideration of cash discounts) 17

Sample Collection Strategies Industry Weighted Value 10 Z: Prv: CD LVC Strategy Description Total of All Items Overdue Since n Days Prerequisites and Conditions (Values) Item Total: From 0. 00 to 0. 00 Days Overdue: 60 20 Broken Promise to Pay Total Promised: From 0. 00 to 0. 00 Level of Promise to Pay: 0 to 0 5 Total of Amounts from Dispute Cases to Be Collected Total Amounts: From 0. 00 to 0. 00 10 Total of All Items Overdue Since n Days Item Total: From 25, 000 to 50, 000 Days Overdue: 91 20 Total of All Items Overdue Since n Days Item Total: From 25, 0001 to 100, 000 Days Overdue: 91 40 Total of All Items Overdue Since n Days Item Total: From 100, 001 to 999, 999 Days Overdue: 91 40 Dunned Amount Still To Be Collected n Days after dunning Dunning Level: 4 to 4 Days Since Last Dunning: 30 Successful Customer Contact in Last n Days Since Last Contact: 7 20 There is a resubmission due for the customer Contact Person was Absent Contact Person Requests to be Called Later 185 Total Valuation Exit Rule (X) X This strategy can probably be simplied since we would only Dun these customers and that for the most part would be the only contact made on these accounts. 18

Sample Collection Strategy Industry Weighted Value Y 053 Prv: Applied Science 30 Strategy Description Total of All Items Overdue Since n Days Prerequisites and Conditions (Values) Item Total: From 0. 00 to 0. 00 Days Overdue: 30 Risk Category Low 40 Total of All Items Overdue Since n Days Item Total: From 0. 00 to 0. 00 Days Overdue: 30 Risk Category Med 50 Total of All Items Overdue Since n Days Item Total: From 0. 00 to 0. 00 Days Overdue: 30 Risk Category High 60 Total of All Items Overdue Since n Days Item Total: From 0. 00 to 0. 00 Days Overdue: 30 Risk Category Very High 10 Total of All Items Overdue Since n Days Item Total: From 25, 000 to 50, 000 Days Overdue: 91 20 Total of All Items Overdue Since n Days Item Total: From 25, 0001 to 100, 000 Days Overdue: 91 40 Total of All Items Overdue Since n Days Item Total: From 100, 001 to 999, 999 Days Overdue: 91 20 Broken Promise to Pay Total Promised: From 0. 00 to 0. 00 Level of Promise to Pay: 0 to 0 5 Total of Amounts from Dispute Cases to Be Collected Total Amounts: From 0. 00 to 0. 00 10 Dunned Amount Still To Be Collected n Days after dunning Dunning Level: to Days Since Last Dunning: 30 Successful Customer Contact in Last n Days Since Last Contact: 7 There is a resubmission due for the customer Contact Person was Absent 20 305 Exit Rule (X) X Contact Person Requests to be Called Later Total Valuation 19

Sample Collection Strategy Industry Weighted Value 100 Z: Prv: Affiliates Strategy Description Prerequisites and Conditions (Values) Amount of Individual Items Overdue Since n Days Item Total: From 0. 00 to 999, 999 Exit Rule (X) Days Overdue: 60 100 Total Valuation 20

How SAP Dispute Management helps collections • Controls and streamlines the dispute case process • Central component for handling dispute cases enables crossdepartment dispute resolution • Integrated in financial but also in logistical process • Organizes and stores all information and documents related to a dispute case • Includes sophisticated reporting – Detect quality issues – Control workload – Track dispute process – Deductions per customer 21

What is a Dispute Case? • A dispute case is a new business object that – Has descriptive attributes – Is like a folder that links all relevant documents and objects – Can be processed across multiple departments – Supports different communication channels 22

Updating Dispute Management Information Dispute Management is automatically informed of financial transactions such as: • Incoming payment for disputed items • Offset credit memos for disputed amount • Manual clearing positing The update is visible in the dispute case • In corresponding amount fields • As linked objects in specific folders 23

Correspondence Can be created • Automatically by events like – Creating a dispute case – Closing a dispute case • Manually by the user when processing the dispute case SAP delivers standard customer correspondence for • FAX, e-Mail, and letter – Notification that a dispute case has been created – Notification that dispute case has been closed – Query regarding dispute case – Information about dispute case • Customers can create their own correspondence – Using Smart forms – Data available for correspondence • All attributes • External Notes • Object keys of objects sorted in the dispute case folder (case record) 24

Reporting Receivables Management Dashboard - January 2012 Collection Activity for the Month Collection Specialis No of worklist items 2837 No of completed Worklist Items 305 Goal of 25% % of completed Worklist Items 10. 75% Dashboard Date 1/6/2012 CURRENTLY THE PTP DATA IS ONLY SHOWING OPEN PTP ITEMS AND DOES NOT REFLECT ITEMS PAID WITH A STATUS OF 'KEPT' - THIS IS BEING ADDRESSED Promise To Pay Activity for the Month Activity is only for payments promised for Current Month Goal 85% Kept 245 $1, 145, 152. 90 $15, 000. 00 Dispute Activity for the Month Coordinator Goal TAT < 45 days Number of Open Dispute Cases 464 Average Resolution Time (Days) 24. 98 Goal no deduction amounts beyond 61 Day aging bucket Current Disputed Amount $1, 657, 151 100. 0% 0 - 30 Days $675, 116 40. 7% 31 - 60 Days $643, 305 38. 8% 61 - 90 Days $266, 561 16. 1% 91 - 120 Days >= 121 Days $69, 263 $2, 907 4. 2% 0. 2% Receivables Management Dashboard - July 2012 Collection Activity for the Month Collection Specialist No of worklist items 11567 Promise To Pay Activity for the Month Collection Specialis Goal of 25% % of completed Worklist Items 26% Activity is only for payments promised for Current Month Number of Promise to Pay 1342 Dispute Activity for the Month Coordinator No of completed Worklist Items 3049 Amount Promised $11, 608, 609. 48 Dashboard Date Goal 85% Kept Amount Paid (Promise to Pay) $9, 942, 803. 95 % Promised Kept 86% Goal TAT < 45 days Number of Open Dispute Cases 153 Average Resolution Time (Days) 23 7/31/2012 % Promised Broken % Partially Kept Goal no deduction amounts beyond 61 Day aging bucket Current Disputed Amount $942, 774 100. 0% 0 - 30 Days $423, 465 44. 9% 31 - 60 Days $54, 157 5. 7% 61 - 90 Days $450, 032 47. 7% 91 - 120 Days >= 121 Days $5, 665 $9, 455 0. 6% 1. 0% 25

Key Challenges Faces Change Management Experienced Collection Team • Numerous years on old system • Felt safe Established business processes • Well documented processed for old system Involvement of other groups • Gain buy-in • Eliminate redundancy Metric reporting and measurement • New process metrics and people measurements

Lessons Learned Change Management Security • Batch roles Master Data • Know data gaps • Understand regression impact Technology Market to nonpower users • Contracting • Tax • Customer Service Flexible tool and processes • Challenge allowing people to create their processes Process

Finance 2011 Accomplishment Launch of Receivables Management Flawless execution + Change management + Planning Testing On time launch Receivables Management Innovation = Achieve results

Judy L. Wagner Director Corporate Credit Phone: 317 -521 -2040 Email: judy. wagner@roche. com

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