In response to the financial crisis, Omnicom Group, the New York City-based parent of more than 1,000 largely autonomous advertising and marketing communications companies worldwide, centralized, automated and beefed up its credit risk management. The company saw its accounts receivable past due by more than 60 days drop by $200 million, shrinking those delinquencies from 13.4% to 9.9% of the portfolio. Bad debt write-offs were held to 0.4%, the same level as in 2008 and earlier years.
"The program now entails a standard global approach to credit management, credit insurance and working capital reporting on a straight-through basis for Omnicom, its networks and its agencies, enabling more timely and comprehensive communication of financial risks," notes Maeve Robinson, Omnicom's assistant treasurer.
To oversee and enforce the new program, a working group was formed that included a chief credit officer from each operating network and representatives of corporate departments with credit-related responsibility. Omnicom's internal controls group developed a Web-based credit analysis tool and a process for disseminating credit alerts relating to the company's clients. The insurance group standardized and centralized the buying of credit insurance from a single carrier. Treasury enhanced the company's working capital data collection system to show detailed receivables aging and track collections progress throughout the month at the corporate, regional, network and agency levels. Omnicom drew on the resources of Code Technologies USA, a system development agency that it owns, to help build the solution.
"We used state-of-the-art business intelligence and portal products from leading vendors to develop Web-based global systems that could talk to each other and employ straight-through processing," Robinson says.
The more robust, automated flow of information provides more timely and continuous visibility into Omnicom's accounts receivable, its most volatile and risky asset type, she adds. "This allows more timely corrective actions."