Finance (Fei)

Transforming Financial Back-office
Processes to Optimize Working Capital

Veena Gundavelli
President & CEO
Emagia Corporation
EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL
OPTIMIZE WORKING CAPITA
Emagia Introduction
Leading Provider of Working Capital Management Software Solutions to

Global 2000 companies
Leadership in Working Capital Management Solutions

Emagia Customers Include:
In Business Over 8 years

Unlocked over $10.3 Billion
in Working Capital
Have Delivered Over $150 Million
in Bottom Line Savings
Have Managed Over $30 Billion
in Receivables
Are Used By Over 2000
Global Users
Process Over 100 Million
Transactions Per Month
Have Been Deployed Across
Over 53 Countries
Have Been Implemented in Over
35 Different Languages and in
Over 30 Different Currencies
Agenda
Top Priorities for Todays CFO
Working Capital A Key Competitive Advantage

Transformation of Financial Back Office: 3 Step Approach
Case Studies: Highly Effective Finance Organizations
Transformation of Role of Finance
Top 3 Areas of Finance Focus
1. Performance Managing enterprise-wide performance to

maximize share holder value
2. Growth Partnering with the enterprise to support new
growth strategies
3. Risk Strengthening process controls and streamlining
processes to reduce risk and meet fiduciary/regulatory
compliance standards
Top 2 Challenges in Finance Departments
1. Structural Complexity Multiple Disconnected Operations,

Lack of Standardized Processes, Lack of Collaboration within
and outside of Finance Departments
2. Fragmented Information Disconnected Systems, Lack of
Information Insight, Lack of Consolidated Information in
Timely Order, Lack of Integrated or Global View of
Processes, Lack of Single version of truth
Roadmap to an Agile Finance Organization
Components of the Working Capital Cycle

Customer-to-Cash
Forecast-to-Fulfillment
Supply
Replenishment Chain
Strategy
Dispute
Customer
Management Strategy
Sales
Cash
Management
Receipts
Cash
Collection
Customer
Service
Revenue
Management
Billing
Order
Fulfillment
Transportation
Risk
Management
Distribution
Contract
Management Accounts
Receivable
Sales Order
Credit Processing
Check
Inventory
Warehousing
Product
Management
Supply Chain
Management
Forecasting
Sales Order
Forecasting
Production
Scheduling
Raw
Production
Material Planning
Planning
Production
Accounts
Payable
Cash
Management
Payment
Processing
Disbursement
Management
Purchasing
Strategy
Budgeting &
Forecasting
Expenditure
Management
Invoice
Processing
Discrepancy
Management
Originating
Requirements
Selection
& Negotiation
Ordering
& Contracting
Receiving
Procure-to-Pay
Unlock Working Capital From Your Financial Operations

Cash is the life blood of any business
Cash-to-Cash Cycle is the largest consumer/source of cash
Cash Flow from Operations Free measurement of health of
any business
Receivables One of the top 3 largest assets of any business
Free Cash Flow has stronger influence on share price
compared to Earnings
Impact of Better Working Capital Management: Case Study
Situation
Hi-tech Company with over $500M in revenues

Serious failures in receivables management
High DSO (> 110 days), Bad debt write-offs increasing
Depressed Stock Price
Speculations that either the new products are not working or sales reported
were not true
Solution
Streamlined entire order-to-cash processes, staff, management focus and
adopted specialized technology
Working Capital Management focus right from Board and C-level executives
Impact of Better Working Capital Management: Case Study
Result
Reduced DSO to high 50s
Increased cash by equivalent of
four month of sales
Reduced bad debt expense by
millions of dollars
Increased stock price

dramatically
Source: Parson Consulting
Cash Tied in Financial Operations

Working capital remains top of mind for many CFOs. Indeed, continued
working capital improvement or even a controlled, temporary reduction
can ultimately drive growth.
2005 Working Capital Survey
Magazine
Potential Cash Flow From
Unlocking Working Capital
Inventory
Receivables
$49 Bn
$91 Bn
$71 Bn
$162 Bn Opportunity to
Drive Cash Flow Improvements
Source: McKinsey & Co. Study
of Top 24 U.S. Corporations
Payables
Working Capital Improvements In Receivables, Payables and Cash Flow

Forecasting Can Be A Hidden Reservoir To Drive Financial Excellence
Close the Short-term Liquidity Gap

Short-term
Liquidity Gap
Regulate Cash Outflows

Improve Disbursements Forecasting
Greater Need
to Borrow
Accelerate Cash Inflows

Improve Cash Receipts Forecasting
Higher Interest
Expense
Higher Debt-to
Equity Ratio
Cash Inflows
Lower Return
on Invested
Capital
Receivables
Payables
Time
Cash Outflows
Cash Flow Visibility, Control and Predictability Ensures Better Working
Capital Management and Cash Conversion Cycles
Barriers to Working Capital Excellence

Working Capital
Process
Typical Challenges
Impact on Financial Performance
Accounts
Receivable
Disconnected A/R Systems and

Processes
Ineffective Credit Risk Extension
Slow Customer-to-Cash Cycle
Manual Processes
Unattended Disputes
Higher DSO
Increased Bad Debt Expense
Slower Quote-to-Cash Cycle
Higher Operational Expenses
Higher Revenue Risk
Accounts
Payable
Disconnected A/P Systems and

Processes
Inefficient Payment Decisions
Inefficient Procure-to-Pay Cycle
Manual Processes
Sub-optimal DPO
Increased Administrative Expenses
Lost Discount Savings
Cash Flow
Forecasting
Inaccurate Short-term Forecasts

Sub-optimal Investment Strategies
Reduced Efficiencies
Lowered Returns from Cash
Management
Limited Consolidated Visibility

Lack of Structured Real-time Data
Discrepancies in Forecast Models
Lack of Structured Forecasting
Process
Transforming the Enterprise to Drive

Sustainable Value
Decision
Support
Working
Capital
Optimization
Cash Flow
Process Management
Cash Flow Transactions Management
Best
Practices
Based
Standardization
Transaction
Management
From Working Capital Vision
Transforming the Enterprise to Drive

Sustainable Value
Value
Effectively Driving
Profitable Growth
Working
Working
Capital
Capital
Optimization
Optimization
Balancing Risk
And Performance
Managing
Complexity
Cash Flow
Process
Process
Management
Management
Cash
Cash Flow
Flow
Transactions
Transactions
Management
Management
Standardization
Simplification
Controls &
Efficiencies
& Risk
Management
Strategic Focus
Sustainable
Growth &
Shareholder
Value
Time
To Working Capital
Actualization
Level 1 Transformation : Transactions Management
Simplification and Integration of EnterpriseWide Information Management

Working
Capital
Optimization
Reduce structural and data complexity

Reduce number of disparate Finance Platforms
Reduce number of ERP instances
Reduce number of point transaction solutions
Cash Flow
Process Management
Rationalize common platforms for consolidation and

reporting across receivables, payables, treasury
Deploy solutions that address multi-currency, multilanguage, multi-level organizational and customer
hierarchies
Transactions Management: Reality Out There
Level 1 Transformation : Transactions Management
Advantages
Single version of truth
Working Capital
Platform
Reduces number of reconciliations

Reduces time and effort needed to gather information
Faster access to information for decision making
JD Edwards
BaaN
Legacy
Systems
Level 2 Transformation : Process Management
Standardize Process Management Management

with Technology
Working
Capital
Optimization
Streamline and document internal processes for local and globally

operations order-to-cash, procure-to-pay, treasury
Implement enterprise-wide standard policies and rules on credit,
collections, deductions, payables, billing, dispute handling
Cash Flow
Process Management
Formulate workflow and collaboration processes across finance,

sales, order-entry, customer support, purchasing and other
departments
Automate business processes with common technology, platforms
Adopt functional best practices in the industry
Level 2 Transformation : Process Management
Working
Capital
Optimization
Cash Flow
Process Management
Advantages
Improves productivity and efficiency

Reduces operational costs and increases scalability
Enhances compliance and reduces process control risks
Mitigates and manages corporate risk
Improves Free Cash Flow
Level 2 Transformation : Quote-To-Cash Process Example
Standardize Credit Scoring Decision Management

with Technology
Credit Policies - Formulate and establish credit extension policies
across multiple customers and operating units
Credit Scoring - Implement a standardized and flexible credit
scoring approach which takes into account historical payment
patterns, external credit data and input from field sales and credit
analysts
Credit Information - Integrate with third party credit data
bureaus like D&B, Experian, etc to leverage the latest credit
information
Credit Reviews - Establish a credit review process using
workflow technology to focus credit analysts on high risk
accounts
Portfolio Analysis - Measure and monitor credit exposures across
global customer base
Standardize Collections Management with

Technology
Strategy Driven - Enable global collections to be carried out in a
proactive manner based on customer segments, regions, etc
Intelligent Collections - Direct the collections team to focus on
high impact accounts
Automation - Focus the team on high value added activities such
as customer management by automating repetitive and manual
tasks
Collaboration - Align closely with sales and leverage
relationships for faster collections. Connect to enterprise systems
within the company and outside with trading partners
Portfolio Management - Embed best practices for collections
management across multiple divisions and business units
Standardize Billing and Accounts Receivable with

Technology
Accuracy - Enable accuracy and timeliness of invoice
documentation sent to customers
Timeliness - Ensure that invoicing is properly carried out after
order fulfillment processes
Consolidation - Consolidate invoice information sent to
customers to reduce redundant business processes
Collaboration - Offer customers the ability to view all supporting
documents and transactions for the invoice
Self-Service - Offer customer self service functions to strengthen
customer relationships and facilitate speedier dispute resolution
and payment
Standardize Dispute Resolution and Deductions

Management with Technology
Predict - Proactively manage customer disputes by identifying atrisk accounts and short payments from customers
Reason Codes - Tailor specific resolution approaches across the
enterprise based on the type of dispute or deduction
Resolution Workflows - Leverage a collaborative approach to
dispute resolution and deductions management using workflow
technology
Escalations - Establish a sense of urgency with clear resolution

processes and escalation technology
Root Cause Analysis - Drive business process improvements

across the quote-to-cash cycle using root cause analysis and
process monitoring
Standardize Cash Application with Technology

Consistency - Establish a consistent approach to processing
remittances and applying cash
Automation - Facilitate faster processing of high volume
payments with reduced need for research and reconciliation
Reconciliation - Reconcile payments with erroneous reference
information invoice numbers, purchase order numbers, etc..
Corrective - Enable cash application personnel to identify and
process deductions earlier in the quote-to-cash process
Level 3 Transformation : Optimization
Optimization using Insight and Analysis

Working
Capital
Optimization
Cash Flow
Process Management
Performance Dash Boards, KPIs, Scorecards that are deployed

enterprise-wide
Executive attention from CFO, VP Finance, Controller, AR/AP
managers, Director/VP of credit collections, credit managers, sales
executive managements teams and field sales
Strategic goal setting and proactive management of performance
across the board
Analysis of historical performance and changing business

practices to eliminate bottlenecks
What-if analysis for predicting future states and setting strategies

for growth
Level 3 Transformation : Optimization

Advantages
Enable fact-based decision making with better integration

of information
Better insight into overall operations
Strategic planning and risk management
Executive attention on timely basis
Improved cash forecasting and free cash flow
management
Drives optimal levels of performance across the entire
enterprise
The ideal solution for optimizing global

Finance and treasury functions is one that
combines business intelligence with collaborative
process automation to increase world-wide efficiencies
- John Van Decker, Senior VP and Principal Research Fellow
Technologies commonly used
ERP systems (Oracle, SAP, PeopleSoft, JDEdwards, Geac) do

not cover working capital process management 67 percent of
respondents of survey were not satisfied
Home grown systems are expensive and time consuming
Adoption of specialized working capital management solutions

increasing in trend -56 percent of survey respondents indicated
plans to implement specialized solutions
Performance management dash boards rank in top 3 projects

from IT
Emagia Cash Flow Performance Management Solution
Example of Specialized Working Capital Solution

Corporate
Finance
Corporate
Treasury
CFO
Cash Flow
Performance
Management
Cash Flow
Performance Dashboard
Credit
& Collections
Accounts
Payable
Cash Flow Forecasting Engine

Cash Inflow
Manager
Accounts
Receivable
Cash Outflow
Manager
Shared
Services
Outsourcing
Providers
Cash Flow Management Data Server
Enterprise Application Integration Layer
ERP 1
ERP 2
Legacy
Systems
Cash Flow
Process
Automation
Emagia Cash Flow Management Platform

Emagia Application Engines
Specialized
Technology
Platform
Working Capital
Optimization
Spreadsheets
Case In Point: Solectron Corporation
$12 Billion Global Electronics Contract Manufacturer

A/R Shared Services spans across 3 continents and across multiple
disparate systems
CHALLENGES
No single system for global A/R and cash flow visibility
No automation of country-specific A/R processes

No decision support tools for cash flow management and cash
forecasting
Solectron: Mastering Global Cash Flow
Corporate Oversight
& Governance
Shared Services Performance Management
Global A/R Process Automation
Emagia Working
Capital
Management Solution
Global A/R & Cash Flow Data
Consolidation Platform
ERP 1
Baan
SAP
North America
ERP 2
Baan
Leqacy
Other
Systems
MFG
Pro
European
Legacy
Legacy
Asian/Pacific
Solectron: Sustainable Value
ROI Component
Benefits
ROI Value
Interest Expense Savings from

Improved Cash Flow
Acceleration of collections
Reduction of DSO by 15 days and
compressed Cash-to-Cash cycle
Improved cash forecasting
accuracy
$14 Million
Direct Cost Reductions
Consolidation of direct costs

Wider support with fewer resources
Reduce SG&A and overhead costs
$1 Million
Common Business Processes

& Shared Services Enabler
Streamline invoice-to-cash
System used by collectors at over
45 sites on three continents
Estimated $20 Million
We now have a powerful working

capital platform that allows us to
make better cash flow decisions,
empower our Shared Services teams
and maintain focus on maximizing
profitability.
- Perry Hayes, Solectron VP &
Treasurer
Case Study: Mastering Global Cash Flow
Syngenta - $3 Billion leading global manufacturer of Agricultural

Chemicals spun off from Astra Zeneca and Novartis
Over 15,000 U.S. customers including agents, distributors, retailers

and end users
Agricultural cycle drives seasonality and unpredictability in

Syngentas cash forecast
Manual customer-to-cash processes adversely impacted

Syngentas cash conversion efficiency
Key Success Factor: Cash Flow Visibility
Point of
Collection
Distributor
Dealer
End Consumer
Agent
Point of
Collection
Goods Flow
Payment Flow
Syngenta deals with

multiple types of customer
roles who can all sell directly
to end consumers
Distributors can also be

agents in some cases
Collections may be done by

Syngenta or agent or etc
Customers have multiple

levels
Global AR visibility requires

aggregating portfolio and
exposure across different
customer roles at different
levels
Improved Cash Forecasting Accuracy
Mean Absolute
Percentage Error
5%- 55% before Emagia
Emagia
Go Live
Mean Absolute
Percentage Error
2%- 20% after
Emagia
Improved Cash Flow
ROI Component
Benefits
ROI Value
Interest Expense
Savings from Improved
Cash Flow
- Acceleration of collections
- Reduction of DSO by 4.5 days
- Average Deductions balance
decreased from $2.9 mil to
$1.1mil
- Improved cash forecasting by
up to 30% in some cases
$3 Mil
Direct Cost reductions
- Redeployment of excess
resources
- Reduce overhead costs
$100K
Also attained Well Controlled rating for internal SOX audit
Working Capital Platform has given us the

consistency and control needed in our cash
flow processes. As a result, we have seen a
decrease in DSO, and a dramatic
improvement in cash forecasting accuracy.
- Bert Cuiston, Head of Credit and
Receivables Management, Syngenta
Selected Customer Success Stories

Customer
Industry
Business Challenges
Results
$12 Bn Electronics
Contract Manufacturer
Needed global A/R

visibility across Shared
Shared Services Centers
High financing costs
$14 Mil Annual Interest

Savings
$1 Mil Direct Expense Savings
Infrastructure for Shared
Services
$3 Bn Agricultural
Chemicals Manufacturer
No A/R visibility into

customer network and
wide swings in cash
forecasting accuracy
$3 Mil Annual Savings

Reduced DSO by 5 days
Improved Cash Forecasting
Accuracy by up to 35%
$2 Bn Staffing Services
Company
Six Sigma initiative

focused on credit &
collections
Little A/R automation
$750K reduction in bad debt

$150K reduction in direct
expenses
Six Sigma based automation
$500 Mil Enterprise

Software Company
High DSO with no

collections or dispute
resolution tools
25% reduction in DSO within 6

months
$800 Mil Consumer

Packaged Goods Company
Chargebacks &
deductions negatively
impacting revenue by
over $17M
Reduced deductions backlog

by 75%
$12 Mil in bottom line savings
For more information, please contact

Veena Gundavelli
President & CEO
Emagia Corporation
veena.gundavelli@emagia.com
408.492.8811
www.emagia.com

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Transforming Financial Back-office

Processes to Optimize Working Capital

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Leading Provider of Working Capital Management Software Solutions to

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Leadership in Working Capital Management Solutions

In Business Over 8 years

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Working Capital A Key Competitive Advantage

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Transformation of Role of Finance

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Top 3 Areas of Finance Focus

1. Performance Managing enterprise-wide performance to

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Top 2 Challenges in Finance Departments

1. Structural Complexity Multiple Disconnected Operations,

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Roadmap to an Agile Finance Organization

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Components of the Working Capital Cycle

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Unlock Working Capital From Your Financial Operations

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Impact of Better Working Capital Management: Case Study

Hi-tech Company with over $500M in revenues

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Impact of Better Working Capital Management: Case Study

Increased stock price

Source: Parson Consulting

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Cash Tied in Financial Operations

Working Capital Improvements In Receivables, Payables and Cash Flow

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Close the Short-term Liquidity Gap

Regulate Cash Outflows

Accelerate Cash Inflows

OPTIMIZE WORKING CAPITA

Barriers to Working Capital Excellence

Impact on Financial Performance

Disconnected A/R Systems and

Disconnected A/P Systems and

Inaccurate Short-term Forecasts

Limited Consolidated Visibility

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL

OPTIMIZE WORKING CAPITA

Transforming the Enterprise to Drive

Cash Flow Transactions Management

From Working Capital Vision

EMAGIA CORPORATION 2005 PROPRIETARY AND CONFIDENTIAL