From the November 2008 issue of Treasury & Risk magazine

Silver AHA Award in Credit Risk Management

Many finance organizations have been there--investing in a variety of software solutions that promise insight into key metrics to drive decisions about strategy. So much data is then produced that determining what's working or not is daunting. Hussmann Corp.'s credit department, stymied in its goal to divine what was behind a key metric--days sales outstanding (DSO)--took matters into its own hands.

And just in time, too. With the financial crisis squeezing dollars for most U.S. businesses, getting a firmer grip on DSO would provide Hussmann, a St. Louis-based manufacturer of refrigeration and food merchandising equipment, insight into "our quality customers, rather than our marginal customers," explains Tom Croke, director of credit in Hussmann's climate control technologies division.

Previously, Hussmann confronted mixed results in analyzing DSO, causing it to consider whether the effort and resources devoted to the metric were worth it. "With dozens of processes and strategies employed, some in place for years, along with various information and software vendors in use, identifying the contributors versus the non-contributors was not as transparent as we would have liked," Croke notes.

He and his team in the credit department built a new intelligence tool using Excel as the platform to drive improvement in DSO. They call it The Grid. "We have 17 key initiatives in credit and are using The Grid to focus on them," says Mike Hourston, Hussman senior credit analyst. Among them are: "improve collections and reduce bad debt," "maximize level of operating cash flow" and "increase efficiency and productivity." The dashboard tool totals up monthly, quarterly and yearly results versus these objectives, color-coding those that are achieving the goal green and those not red.

In effect, the tool, unveiled in January 2007, identifies in a fair amount of detail what the credit department is trying to achieve, how it is going about this objective, who is responsible for its pursuit and whether or not it is being achieved. Since its implementation, The Grid has guided improved credit department focus and greater accountability, not to mention 15 consecutive months of improved DSO. "We're now planning on introducing the tool globally," Croke says.

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