D&B helps Xerox reducing risks
Marco Meijboom, Risk Manager Leasing, took charge of the implementation of a system for customer acceptance in order to restructure its own lease company for the sale of its document technology. He integrated the company data of Dun & Bradstreet (D&B). ‘It is only now that we really know our customers.
Xerox is the world market leader in document management, both in technology and in service provision. Think of digital printing presses, multi-functional equipment and network printers, and of the ways to distribute documents and knowledge between employees of companies more efficiently. Xerox is so well known in America that the brand name has become synonymous with copying, a fine example of branding. The international company also takes care of the funding as well as the supply of systems. Customers can for example lease a printing street or a printing press.
Meijboom was closely involved in the set-up and implementation of iLease in the Netherlands and Scandinavia, the module that links the risk management of the lease operation with ERP. ‘That system had to be built up completely from scratch.’ NAW-data is in iLease, as well as data from the Chamber of Commerce and own company data about payment history and exposures. ‘We had another business information supplier, but on testing it appeared that their data only covered 45% of our customers. I knew from my experience that D&B could raise that score enormously.’ This was a reason for Meijboom to begin talks with D&B. He wanted standard requests (called small tickets at Xerox) below 75,000 dollar to be processed automatically by a scoring model. Meijboom: ‘If a request is rejected by the system, then as a credit manager and risk manager you dig deeper into the information.’ For larger amounts Meijboom uses the data from the D&B system to determine the risk profile of the customer and then to advise the management.
With the data of D&B connected to iLease, Xerox gets answers to questions like how old is the company, how big is it, how long does the company exist, what is its payment history and cash flow? Xerox also obtains information via an external link in order to know if the company is on the US export trade list. Meijboom: ‘The advantage is that with D&B we can introduce our own definitions. What data do we find important in the assessment of the request?’ In the acceptance policy, Xerox considers for example the creditworthiness rating of D&B, its own data on days sales outstanding of customers and the current exposure to the company concerned. The degree of cover of the information about the customers is now 85%, where it was first 45%. Meijboom: ‘A concrete plus: we now know our customers better than ever.’ This can in some cases save a false note, but it also helps in the negotiations with customers. Meijboom: ‘Perhaps we can still do business by means of an adapted payment ruling. With this data, the account manager has the possibility of beginning the talks. He can look at what is permissible and reasonable within the limits of our payment policy.’
Xerox sent its customer database with 6,000 records to D&B in order to have it enriched with specific company information. Both parties then added credit limits per customer. D&B automatically sends a tailor-made update to Xerox every quarter. Meijboom: ‘All new customers go through a scoring model, whereby they get more points according to their creditworthiness. The system gives a signal about the new customer to D&B. They come back to us with data that is read directly into our system via an xml-file.’ In this way Xerox quickly has the newest information about companies. Meijboom: ‘Some branches, for example notary offices, do not reveal their turnover or annual figures. It is then important for us to be able to make a sketch of the circumstances in which the branch and the specific company are found.’ Xerox also supplies printing presses to the graphic industry. This sector is under a lot of pressure because of strong competition. Meijboom: ‘It sometimes involves a huge amount of money. We then want to know if we are dealing with a reliable company or if we have to ask for payment guarantees.’
One of the biggest requests was for a printing press costing 2.5 million dollar. Meijboom compiled, amongst others on the basis of company information from D&B, a report about the risk profile of this specific customer, after which the CFO of Xerox in America made a decision. Meijboom also used the D&B country information to assess international customers. Can the customer from China, Azerbaijan or Kazakhstan pay? What is the business climate like in these countries? What securities have to be arranged? Meijboom: ‘This information is very specific. To give an example: there are no addresses in Saudi-Arabia. A company is then reported exactly in the database: ‘the road between two towns, turn right after the second lamp post. This is how detailed this database is.’ Xerox divides its customers into nine customer profiles, which vary from high to minimal risk. ‘Customers are placed in one of the profiles on the basis of the scoring model. In this way we give our credit policy hands and feet, without using an army of employees.’
A look in the kitchen
Financial insight and a look in the kitchen of the customer’s payment behaviour. Meijboom sees these two points as the biggest advantages of the cooperation with D&B. ‘At the correct moment and with the correct data we can make a correct judgement about the acceptability of the customer.’ Meijboom also wishes to obtain lists with prospects from D&B. Who is the best target for our sales?’ Companies that represent a lower risk would then get better conditions. ‘Risk reward pricing is what this is called’, explains Meijboom. It has not got this far yet, but Meijboom sees the possibilities. ‘D&B helps us efficiently to minimise the risks of doing business.’