At Sigma-Aldrich Corp., the accounts receivable (AR) department has made big strides by getting back to the basics of reducing Days Sales-Outstanding (DSO) and write-offs from bad debt. The secret weapons employed by the $1.2 billion company, which supplies chemicals to research laboratories, were simple enough: Segment your customers and then focus on those that really make a difference to DSO and write-offs.

And, the results were impressive. By May, domestic DSO was down 34% to 38 days, from 58 days at the end of 2000, while write-offs fell to 0.29% of sales from 1.02% in 2000. In December 2000, 15% of receivables were more than 120 days old; as of May, only 1.15% were that tardy.

Besides this progress, what's also remarkable is how relatively easy and inexpensive the new system was to implement since it required more of a change in the thinking than in software. The attack plan was simple: The AR department divided its customers into categories based on how much business they do with Sigma-Aldrich, looked at the credit tendencies of the various groups and then dealt with them accordingly.

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