Digital B2B Credit Best Practices Agenda Introduction Credit Management and How It’s Changed Fundamental Credit Best Practices Digital Automation Enablers Case Study Benefits Conclusion Questions Introduction The Covid 19 economy has raised the level of Credit Risk to levels not seen in the global economy since the Great Depression

1. Digital B2B Credit
Best Practices
December 3, 2020

2. • Introduction
• Credit Management and How It’s Changed
• Fundamental Credit Best Practices
• Digital Automation Enablers
• Case Study
• Benefits
• Conclusion
• Questions
Agenda

3. 3
Introduction
• The Covid 19 economy has raised the level of
Credit Risk to levels not seen in the global
economy since the Great Depression
• It has greatly reduced revenue levels of many
companies, threatening their survival
• As a result, the need for fast, effective Credit Risk
Management is critical to the survival of many
companies

4. 4
Introduction: Today’s Urgent Credit Challenges
• You will be exposed to more customer
bankruptcies than in the past
• You will have to sell on credit to uncreditworthy
customers to generate above-break-even revenue
• Your credit ratings from Q1 2020 or earlier are out-
of-date and inaccurate
How will you generate adequate revenue, and avoid
severe cash shortages and catastrophic bad debt?

5. 5
Credit Management & How It’s Changed
• Work from Home:
• your team needs full functional capability
• management needs full visibility to operations & results
• Elevated Credit Risk & Workload
• need to update most credit limits more frequently
• beware new customers
• order hold volume & customer negotiation increases
• Accelerated Shift to e-commerce
• expectations for fast, easy order process
• slow credit evaluation will impair the customer experience and
discourage repeat orders.

6. 6
Credit Management & How It’s Changed
– How to Cope
• Ensure fundamental Credit Management Best Practices are in
place and being executed well
• Automate/Digitize manual and semi-manual operations to deal
with increased workload and intensity

7. How will your organization use Trade Credit to maximize profit and cash flow?
7
Fundamental Credit Best Practices: Trade Credit Strategy
Trade Credit Optimization Strategy
• Extreme Strategy 1: use credit as a customer financing tool to be a competitive
advantage. Sell to everybody regardless of credit risk to maximize revenue. Use best
efforts to control bad debt and delinquency loss. Usually used for high gross margin
products and services
• Extreme Strategy 2: sell only to carefully vetted, low credit risk customers to
maximize cash flow and minimize bad debt, delinquency loss, and the cost to manage
AR. Usually used for low gross margin products and services
• Common Strategy: somewhere in between 1 and 2.
It is important that the Trade Credit Strategy is articulated, so appropriate Credit &
Collection processes can be designed
Trade Credit Strategy guides everyday actions & decisions which are too numerous to
address in a Policy document

8. 8
Fundamental Credit Best Practices:
Credit Policy
Managing Credit Risk is accomplished with a
clear written Policy defining the company’s
risk appetite, and robust processes to control
the risk
The Credit Policy is the foundation of Credit
Risk Management

9. 9
Credit Vetting = Research to Set Credit Limit
• Credit Limit quantifies tolerable amount of risk exposure for a customer
• Financial strength & payment history – financial statements, Credit Bureau, trade & bank
references, industry Credit groups, public financial filings, liens, judgements
• Weighting of factors Credit score Credit Limit
• Profit margin & customer purchase requirements
• Initial vetting vs periodic update (payment history)
Fundamental Credit Best Practices: Process
The Credit Limit is the foundation for Credit Risk Control

10. Controlling Exposure to Credit Loss
Effective Collections - managing AR to the lowest possible level reduces exposure to bad
debt loss. It also enables a company to accommodate its customers credit needs
Order holds – require quick response
• minimize with adequate credit limits and tolerances
• exclude disputes, deductions, unearned prompt pay discounts, finance charges
from calculation
• include customer specific inventory with view of pending orders
• route to Collector to resolve with customer
10
Fundamental Credit Best Practices: Process
The Order Hold is the key to controlling Credit Loss
(especially in the pandemic economy)

11. Credit Insurance
Advantages:
• protection from many catastrophic bad debt losses
• access to insurer’s extensive credit risk expertise in many markets
Disadvantages:
• individual high risk customers may be excluded from coverage
• many low risk customers may be required to be covered
• costs can be high
11
Fundamental Credit Best Practices: Process
A careful cost benefit analysis with modeling/simulations is required

12. 12
Digitalization of the Credit Risk Management Process will deliver the
accuracy, efficiency, speed & effectiveness now required
• Customizable Credit Application that customers can complete & submit on-line
• Automatic, real time import of Credit Bureau information and payment history (for existing customers)
• Automated, customizable credit scoring
• AI powered credit decisions based on pre-defined rules to assign credit limits
• Full featured Approval Workflow guided by Delegation of Authority policy
• Automated periodic credit limit update process
Digitized Automation can automate 70-80% of manual work in Credit Management.
It is the Only Way to Meet the Requirements of Increased Credit Risk & E-Commerce
of the Covid 19 Economy Without Adding Staff
Digital Automation Enablers

13. Digital Automation Enablers
13
Digitalization of the Credit Risk Management Process will deliver the
accuracy, efficiency, speed & effectiveness now required
• Automatic order hold capability integrated with Collections
• Configurable Credit Scorecards to track activity, status of credit applications, backlogs, etc.
• Credit Risk Analytics to measure overall credit risk of an AR portfolio
• Highly automated “touchless” collections that can automatically contact ~ 80% of customers:
a. auto prioritization, Collector Task List & Workbench
b. digitized document storage & retrieval
c. Dashboards for activity levels & results
Digitized Automation Will Also Accommodate Work-from-Home Requirements

14. 14
Case Study - American Heart Association (AHA)
Problem Overview
AHA launched eCommerce site ShopCPR to sell CPR equipment and
classes online. Credit Processing cycle time was over 2 weeks. They needed
B2B digital credit solution to accept more customers and do more business.
Customer Value
• Deployed Emagia Digital Credit Solution - Mobile and ADA compliant
• Digital signatures, digital trade and business reference checks
• Integrated with Experian, AHA custom score-card, automatic credit limit
decisions enabled.
• AHA reduced B2B credit approval process from 2 weeks to 24 to 48 Hrs
• Now processing over 200 -300 credit applications per month
• Scalable foundation for digital ecommerce growth

15. 15
Case Study - Leading Building Materials Dealer
Client Challenge
The client is a fast growing supplier of building materials selling to a customer base highly
dependent on vendor financing. While they sought to provide this financing quickly while
managing credit risk, their manual systems could not keep pace with growth. They needed a
B2B digital credit solution to evaluate more customers quickly and increase their revenue.
Customer Value
• Deployed Emagia Digital Credit Automation Solution (thecreditapplication.com) with Mobile
capability
• Digital Credit Application with digital signatures, digital trade and bank reference checks
• Integrated with Experian & Netsuite analytical tool; automatic credit limit decisions enabled.
• Automated resale certificate verification process
• Automated > 80% of Credit Vetting process
• Now processing increased volume of credit applications on timely basis
• Scalable foundation for digital ecommerce growth

16. Benefits of Fast, Effective Credit Management
Increased Productivity: accommodate much higher
volumes of Credit Control work
Maximization of Revenue with Controlled Credit Risk
Straight thru Processing of E-commerce orders
Enhanced Credit Effectiveness
Ability to successfully navigate
Covid 19 economy
Improved Customer
Experience/Satisfaction
Controlled
Credit Risk
Greater
Cash Flow
Increased Revenue
& Profit

17. Conclusion
• The Covid 19 economy has:
Heightened the Credit Risk & workload substantially
Driven a much greater customer demand for E-Commerce
• A fast, effective Credit Risk Management and E-Commerce capability is
required for survival
• Digitalization and Automation are the key enablers for that capability

18. If you have any questions or comments
about this session, please let us know
in the chat box or write to us at
info@emagia.com
Next Emagia MasterClass Session:
Topic: Five Best Practice AR Metrics You Should Track
Date & Time: Thursday, 17th December, 10AM PST
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Orders
Credit
Cash
Application
Collections
Deductions
Payments
Invoicing