ACCOUNTS RECEIVABLE PROCESS DIAGNOSTIC

QUESTIONNAIRE

QUESTIONNAIRE

COMPANY INFORMATION

Company Name: ___________________________________________________________________________

Business Unit Name (If Applicable): ___________________________________________________________

Address:

Street _____________________________________________________________________________________

City _______________________________________________________________________________________

State/Province ________________________________ Zip/Postal Code _______________________________

Country ___________________________________________________________________________________

Telephone Number:

Country Code _________________ City/Area Code ________________ Local No. ____________________

Facsimile Number:

Country Code _________________ City/Area Code ________________ Local No. ____________________

Fiscal Year-End (Month/Day): _________________________________________________________________

Permission granted to Company X to include the company name, which will not be associated with any specific
data, on a list of benchmark study participants. Yes _______ No _______

Company Contacts:

Name: ______________________________________ Name: ______________________________________

Title: _______________________________________ Title: _______________________________________

Phone: _____________________________________ Phone: _____________________________________

INDUSTRY INFORMATION
Company X Industry Code

AAIC Code/Industry Name: ____________________________________________________________________

Currency: __________________________________________________________________________________

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All of the information that follows will be included in the knowledge base for comparison purposes. No company
names will be associated with the information. Please answer all applicable questions. If you cannot answer a
question or if a question does not apply to your company, enter N/A. Do not enter a zero unless the actual
value is zero.

Section A. General Information About the Business Unit

What is the total number of all employees at the business unit? (Include
both part-time and full-time employees in all departments.)
What was the total revenue for the business unit for the most recently
completed fiscal year?
What was the beginning accounts receivable balance for the business
unit for the most recently completed fiscal year?
What was the ending accounts receivable balance for the business unit
for the most recently completed fiscal year?
What was the value of the actual write-offs for the business unit for the
most recently completed fiscal year?
How many locations exist within the business unit? (Include all
operating and administrative locations having accounts receivable
activities.)

Section B. Staff Statistics

Complete the following questions in terms of full-time equivalents (FTEs). For example, a part-time staff person
who works 20 hours per week would be 0.5 FTE and a manager in general accounting who spends one day each
week on accounts receivable issues would be 0.2 FTE. Some management time must be specified in order to
calculate a leverage ratio. A staff person is defined as "someone who does not have supervisory responsibilities."
Question 1 relates to the remittance processing department and question 2 relates to the credit and collections
department.
Management/
Remittance Processing: Supervisory
Staff Total

Total number of FTEs directly employed by the

remittance processing department at all
locations within the business unit.
Total number of contributor FTEs not employed
by the remittance processing department at all
locations within the business unit.
Total remittance processing FTEs.

Management/
Credit and Collections: Supervisory
Staff Total

Total number of FTEs directly employed by the

credit and collections department at all
locations within the business unit.
Total number of contributor FTEs not employed
by the credit and collections department at all
locations within the business unit.
Total credit and collections FTEs.

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 Total accounts receivable FTEs.

Section C. Cost Statistics

For each of the following categories, indicate the total annual cost for the AR department, including all locations.
(Do not include one-time, extraordinary expenses.)
Remittance Credit and Total AR
Processing Collections
Accounts receivable direct labor (wages,
overtime and benefits).

Contracted services (temporary and contract

employee labor).

Operating expenses (supplies, training and

other locally-controllable expenses; do not
include rent, depreciation, audit fees or
allocated overhead expenses).

Outsourcing fees, including annual fees,

monthly charges and commissions
(service bureau, outside collection agency
[OCA] fees).

Indicate the total cost of data processing department support for the accounts receivable department. Include the
cost of providing computer processing, software, hardware and management information services (MIS) to the
accounts receivable department. Exclude one-time capital investments for hardware and purchased software.

Data processing direct labor applicable to AR

support (wages, overtime, and benefits, for
systems maintenance and
operational/technical support).

Data processing operating expenses

applicable to AR support.

Vendor software annual licensing/maintenance

costs.

Total accounts receivable cost. (Total of

questions 1 through 7.)

Section D. Customer Statistics

Enter the total number of customer accounts per year for the business unit.
Of these accounts, how many are active (have had activity in the past
year)?
How many customer accounts were referred to an outside collection
agency (OCA) in the past year?

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Section E. General Statistics

On average, how many accounts per year require credit activity? (Include
credit checks, hold orders processed, etc.)
How many accounts per year require collections activity? (Include collection
letters/notices, phone calls, etc.)
On average, how many accounts are written off per year?

Section F. Processing Statistics

Per Year
How many remittances are processed per year?
On average, each month, how many remittance errors are detected? Per Month
(Include remittance discrepancies, mismatching, etc.)
Per Month
On average, each month, how many remittances are matched first time?
On average, each month, how many remittances are credited on the same Per Month
day to the customer account?
On average, what percentage of remittances is received on or before the Percent
due date?
What is the average elapsed time, in hours, from submission to acceptance Hours
or rejection of a credit application?

Section G. System Statistics

What percentage of customer remittances are sent via electronic data

interchange (EDI), based on the number of transactions (volume) and the
Percent
total amount (value)?
• Volume
• Value

Thank you for completing this questionnaire. To become a part of Company X’s knowledge base, please
fax this questionnaire to (XXX) XXX-XXXX.

QUESTIONNAIRE INSTRUCTIONS

OVERALL PERSPECTIVE
Overall objectives for processing the Accounts Receivable Diagnostic Tool:
• Optimize cash flow
• Increase customer focus

Accounts Receivable Diagnostic Tool usage objectives:

The right performance measures, used effectively, create a powerful link between strategies, resources and
processes, and provide companies the insight to identifying problems.

The comprehensive family of measures in this tool provides powerful insight into general accounting performance.
The performance measures allow companies to:
• Focus on the customer to increase customer satisfaction

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• Improve receivable processes so that problems can be anticipated and prevented
• Understand and reduce costs
• Encourage and facilitate change by understanding current AR processing and identify opportunities for
improvement
• Set realistic benchmarks for comparison

Note, however, that this tool is intended as a high-level diagnostic; it may not provide the detail necessary to
perform an in-depth project review to support specific recommendations for improvements.

Output generated by the tool:

• Benchmark Group Profile Report

Summarizes key demographic information: industry, location, revenue and number of employees for
companies in the benchmark group selected.

• Comparison Charts
Comparison charts show how the company's performance compares to the range of performance for others in
the benchmark group across the performance measures.

ACCOUNTS RECEIVABLE PROCESS DEFINITION

Accounts receivable is defined as money owed to a business by customers who have bought goods or services
on credit. It is a current asset that continually turns into cash as customers pay their bills. The following activities
are included in the definition of accounts receivable:
• Receive and post customer remittances to customer accounts
• Investigate and research over/under payments
• Implement actions to re-bill customers or forward account to collections
• Process AR adjustments for errors or omissions, including credits/debits to accounts
• Maintain AR system
• Review receivables and specific account balances to ensure timely receipt of payment
• Produce AR reports for management review
• Establish and update company credit and collections policies
• Compile credit information pertaining to new and existing customer accounts
• Evaluate and authorize credit limits
• Maintain, evaluate and analyze credit and collections accounts and trends
• Review and monitor customer payment histories to identify delinquent or late-paying accounts
• Research and contact delinquent customers
• Transfer and monitor delinquent customer accounts sent to outside collection agencies
• Process collections adjustments

APPROACH TO USING THE ACCOUNTS RECEIVABLE DIAGNOSTIC TOOL

The diagnostic tool consists of a questionnaire and instruction sheet, diagnostic software, and output, as
described above. This tool is intended as a high-level diagnostic to highlight possible opportunities for
improvement. It does not provide the detail necessary to perform an in-depth project review to support specific
recommendations for improvements.
• A survey has been developed to capture accounts receivable data for input into the diagnostic tool.

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• This instruction sheet provides definitions of terms and activities, likely sources for the data, and suggestions
for using estimation or sampling, should the client not track the information requested.
• To run the diagnostic and generate results, select the data entry option called "Enter New Questionnaire." It
follows the same format as the survey and automatically enters the data into the diagnostic tool.
• A series of output graphs will plot individual company results against the results of other companies in the
database. Graphs can be viewed on screen or printed.

General Instructions:
• Answer all applicable questions. If you cannot answer a question or if a question does not apply, enter N/A. Do
not enter a zero unless the actual value is zero.

Sampling Considerations:
• In determining the number of months to sample (should the company not track the required data), balance the
degree of reliability desired with the amount of time required to perform the sample. Consider using three
months as a general guideline. Keep in mind that the more limited the sample size, the greater the risk data
may not be representative and conclusions may not be appropriate.
• In determining which months to sample, determine if seasonality affects transaction flow. Select months both in
and out of the peak period(s).

INSTRUCTIONS FOR COMPLETING THE DETAILED QUESTIONNAIRE INFORMATION

The following instructions should be used as a guide to completing the questionnaire. Questions on the survey
form are referenced to the left of the appropriate instructions.

Note that the tool asks a series of questions in order to derive the number of FTEs for the accounts receivable
process. This is done in order to mitigate the potential omitting of any personnel who may perform activities
related to this process. Only the total of all FTEs is actually used in computing the performance measures. Note,
however, that management and staff distinctions are utilized to compute leverage ratios.

Note that this tool analyzes activities of the accounts receivable process only. For the purposes of this tool, the
accounts receivable function includes credit and collections activity and the remittance processing activity. The
billing process is not analyzed by this tool. Please refer to the Accounts Receivable Process Definition section for
activities related to the accounts receivable function analyzed in this tool. Note that the Finance and Accounting
Diagnostic Tool provides a limited number of performance measures for the billing function.

Company, Industry and Engagement Information

• Determine the business entity for which you want to use the diagnostic tool. Depending upon the nature of the
process, you may want to select the entire business organization or just one operating business unit (division).
Based on this selection, all data collected in the questionnaire should be limited to only the business unit (the
entire organization or single division) that this tool will be analyzing. All locations within the business unit
should be considered when gathering data.
• The remaining demographic information requested should correspond to the selected business entity, as
above.
• Select the currency you will use for the survey. The tool contains a currency conversion routine to allow for
comparison across countries/currencies.

Section A. General Information About the Business Unit

Complete this information for the business unit (division) selected.

• The number of employees is not limited to those in the accounts receivable area, but should include all
employees at the business unit.
• Revenues should be the total revenues of the business unit. This includes operating, non-operating and any
other type of revenue reported for the most recent fiscal year.

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• The beginning receivable balance should be the total beginning gross accounts receivable balance.
• The ending receivable balance should be the total ending gross accounts receivable balance.
• Review the detailed income statement for the most recently completed fiscal year to locate the bad debt
expense.
• A location should include the site(s) within the business that process their own accounts receivable. A site is
any operating or administrative area performing this process.

Section B. Staff Statistics

Full-time equivalent (FTE) is equal to 40 hours. Determine which employees work less or more than 40 hours a
week and calculate their full-time equivalent (FTE). For example, a part-time person who works 20 hours a week
would be 0.5 FTE. Furthermore, an employee that works 60 hours a week would be 1.5 FTE.
• Determine which employees are management and which are staff. A staff person is defined as someone who
does not have supervisory responsibilities.
• If a person is deemed to be an FTE of more than the accounts receivable process, the total FTE would be
further broken out based on the approximate percent of time spent in the accounts receivable process. For
example, if a staff person works 40 hours per week and spends 20 hours performing accounts receivable
activities and 20 hours per week performing accounts payable activities, then this person would be a .5 FTE.
• Please refer to the Accounts Receivable Process Definition section for descriptions of the types of activities
that may be performed by an FTE in determining if the person qualifies as an FTE for this section. These can
be found at the beginning of the instructions prior to Section A.
• The AR supervisor should have a current list of all employees in the central AR department, but may not have
such lists for employees in outlying AR locations. If not, the local AR supervisor(s) should have the information.
• Enter the number of FTEs that perform activities of the accounts receivable process and that are employed by
the AR department. All locations for the business unit for which this tool is being completed should be
considered here.
• Enter the number of FTEs that contribute to the accounts receivable process but are not directly employed in
the AR department. All locations for the business unit for which this tool is being completed should be
considered here.

Section C. Cost Statistics

• Direct labor is the labor dollars associated with supervisors and employees whose activities consist of those in
the accounts receivable process. Labor costs should be "fully-loaded," covering wages, overtime and benefits
for full-time and part-time employees. Convert all FTEs into their fully loaded payroll dollars. If a person is
deemed to be a direct labor cost associated with other departments, the labor dollars input in this section
should only be based on the approximate percent of time spent performing duties related to the accounts
receivable process.
• Contracted services include fees paid to agencies for temporary employees.
• Operating expenses should include direct controllable expenses such as charges for office supplies, training,
telephone, travel, etc. Exclude capital expenditures, rent, utilities, depreciation and allocated overhead
expenses.
• If certain AR activities are outsourced, include service bureau fees along with monthly operating charges.
Include fees paid to outside credit and collection agencies here.
• Estimate the labor costs of the data processing department that are representative of the AR processes usage
of the data processing function. Labor costs should be "fully loaded,” covering wages, overtime and benefits
for full-time and part-time employees. Convert all FTEs into their fully loaded payroll dollars. If all data
processing support costs are not allocated or tracked by the AR department, the MIS supervisor may be able
to provide this information.
• Estimate the operating expenses of the data processing department that are representative of the accounts
receivable department usage of the data processing function. Operating expenses should include direct,

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 controllable expenses such as charges for office supplies, training, telephone, travel, etc. Exclude capital
expenditures, rent, utilities and allocated overhead expenses.
• Add in the pro rata share of any charges from outside vendors related to the annual licensing or maintenance
of AR software.
• Enter the total cost associated with the AR department. This should be the sum of questions 1-7 above. This
total will calculate automatically in the electronic version of the questionnaire.

Section D. Customer Statistics

• Enter the total number of customer accounts for the business unit for the entire year. This number should
include accounts with zero balances or credit balances. If the number of accounts fluctuates dramatically
throughout a typical year, consider utilizing an average number of customer accounts.
• Enter only the number of customer accounts, from question 1a, that have had activity in the past year.
• Out of the total number of customer accounts requiring collections activity that will be input in question 2,
Section E, input the number of accounts that were submitted to an outside collection agency for collection.
Only consider the number of accounts, not the number of occurrences, when determining this number. For
example, if one account that required collection activity was referred to an outside collection agency 12 times
during the year, it would be considered 1 for purposes of this questionnaire.

Section E. General Statistics

• Out of the total number of customer accounts per year listed in question 1a, Section D, enter the number of
accounts that require credit activity per year. Include accounts that have received initial credit checks within the
year as well as accounts that have had interim credit checks and other credit-related activity throughout the
year. Only consider the number of accounts, not the number of occurrences when determining this number.
For example, if one account has a credit check performed 12 times during the year, it would be considered 1
for purposes of this questionnaire.
• Out of the total number of customer accounts per year listed in question 1a, Section D, enter the number of
accounts that require collections activity per year. Collections activity includes collection phone calls, notices of
overdue balances, setting up payment plans, etc. In some cases, AR personnel may be responsible for all of
the AR activities, including credit and collections, associated with several accounts. In other cases, there may
be a separate collections department responsible for the collections activity of all customer accounts. Only
consider the number of accounts, not the number of occurrences, when determining this number. For example,
if one account has collections activity performed on it 12 times during the year, it would be considered 1 for
purposes of this tool.
• Enter the number of customer accounts that are written off as bad debt on average per year. This number
should include accounts actually written off as a bad debt, and specific accounts that were reserved for via an
allowance. Do not double count accounts as both an allowance and a write off. Accounts written off or
reserved then re-established due to a payment should not be included.

Section F. Processing Statistics

• A remittance is defined as the customer payment and the supporting documentation which is typically the
returned portion of the customer’s bill. Determine the number of remittances received on an annual basis,
including cash, check, credit card, as well as electronic data interchange (EDI) payments. In some cases, the
AR system may track the number of remittances processed annually. In other cases, there may only be
monthly processing totals. Note that a remittance may be payment for more than one invoice.
• Estimate the number of remittance processing errors that occur in an average month. Remittance processing
errors are defined as anything that prevents a first-time match. For example, discrepancies in the amount paid,
problems matching invoices to the payment, errors that are kicked out of lock boxes (i.e., outside of predefined
tolerance levels), etc.
• The remittances that are a first-time match is the inverse of question 2 above. In theory, the sum of questions 2
and 3, when annualized, should approximate the number of remittances processed annually (question 1).
• A remittance is considered to be credited on the same day, if the remittance is received by company personnel
and applied against the customer's account balance on the same day.

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• Estimate a percentage of remittances that are received on or prior to the due date for full payment.
• Define elapsed time in terms of an eight-hour day. For example, a credit application submitted to the credit
department on Monday at 10:00 a.m. and accepted at 4:00 p.m. on Tuesday would have elapsed time of 14
hours, not 30 hours.

Section G. System Statistics

• "EDI" (electronic data interchange) is the electronic linking of the company and the customers’ accounts via a
computer network. EDI linkages allow for customer payments and their related remittances to be transmitted
from the customer computer terminals back to the company terminals.

INDUSTRY CLASSIFICATION

Segment/Subsegment AAIC Code/Industry Name

Manufacturing

Fabricated Products A01 Furniture and Fixtures

A02 Metal Products
A03 Machinery & Equipment
A04 Household Appliances
A05 Recreation & Luxury Goods

Automotive Products A06 Automotive

A07 Automotive Components

Chemicals & Process Manufacturing A08 Chemicals

A09 Rubber & Plastic Products
A10 Metals – Steel
A11 Metals – Non-Ferrous
A12 Glass & Other Building Materials

Aerospace A13 Aerospace & Defense

Forest Products A14 Paper & Forest Products

Industrial Construction A15 Industrial Construction

Technology A16 Computer Systems

A17 Office Machines
A18 Electrical Equipment
A19 Semiconductors/Components
A20 Software
A21 Telecommunications Equip.
A22 Consumer Electronics
A23 Precision Instruments

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 Segment/Subsegment AAIC Code/Industry Name
A24 Medical Supplies & Equip.
A25 Biotechnology

Textiles A26 Textiles

Consumer Products

Wholesale Distribution B01 Wholesale Distribution

Food Processing B02 Food Processing

B03 Consumer Packaged Goods
B04 Beverages

Pharmaceuticals B05 Pharmaceuticals

Food Distribution B06 Food Retailing

Retailing B07 Retailing: Department Stores

B08 Retailing: Discount Chains
B09 Retailing: Specialty Chains
B10 Eating & Drinking Places
B11 Drug & Proprietary Stores

Transportation B12 Airlines

B13 Railroads
B14 Trucking
B15 Transportation Services
B16 Water Transport

Apparel Production B17 Apparel Production

Agribusiness B18 Agribusiness

Commercial Services

Printing & Publishing C01 Printing & Publishing

Advertising C02 Advertising

Entertainment C03 Entertainment

Professional Sports C04 Professional Sports

Professional Services C05 Business Services

C06 Professional Services

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 Segment/Subsegment AAIC Code/Industry Name

Energy & Telecommunications

Oil & Gas D01 Exploration & Production

D02 Oil Field Services
D03 Integrated Petroleum
D04 Refining & Marketing

Gas Transmission D05 Natural Gas Transmission

Mining D06 Mining

Electric Energy D07 Combination Gas & Electric

D08 Electric Utilities

Telecommunications D09 Telecommunications

Gas Distribution D10 Gas Distribution

Water & Waste Processing D11 Water & Waste Processing

Financial Markets

Banking E01 Banking

Savings and Loans E02 Savings and Loans

Finance Companies E03 Finance Companies

Brokers & Investor Svcs. E04 Brokers & Investor Services

Futures & Commodities E05 Futures & Commodities

Asset Management Svcs. E06 Asset Management Services

Mortgage Bankers E07 Mortgage Bankers

Leasing E08 Leasing

Real Estate

Real Estate & Construction F01 Real Estate

F02 Residential Construction

Hospitality F03 Lodging

F04 Amusement & Recreation Services

Insurance

Agents & Brokers G01 Agents & Brokers

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 Segment/Subsegment AAIC Code/Industry Name

Life and Health G02 Life and Health

Property and Casualty G03 Property and Casualty

Healthcare

Hospitals H01 Hospitals

Long Term Care Facilities H02 Long Term Care Facilities

Physician Practices & Clinics H03 Physician Practices & Clinics

HMOs H04 HMOs

Nonprofit/Government

Federal Government I01 Federal Government

State & Local Government I02 State & Local Government

Educational Services I03 Educational Services

Nonprofit Enterprises I04 Nonprofit Enterprises

Unspecified

Unspecified Z90 Unspecified

PERFORMANCE MEASURES

Cost Statistics
Total Accounts Receivable Cost as a % of Revenue
Staff per 1 Million in Revenue
Total Accounts Receivable Cost per FTE
Total Remittance Processing Cost per Remittance Processed
C&C Cost per Account Requiring Credit Activity
C&C Cost per Account Requiring Collections Activity

Cost Structure
Accounts Receivable Cost Analysis

Receivable Statistics
Bad Debt as a % of Sales
% of Write-Offs to Total Receivables
Average Write-Off Bill

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Accounts Receivable Turnover
Days Sales Outstanding
Span of Control

Workload Statistics
Annual Volume of Remittances per FTE
Number of Active Accounts per FTE
Credit Application Turnaround
% of Customers Requiring Credit Activity
% of Customers Requiring Collections Activity
% of Collections Customers Referred to OCAs

Remittance Processing Statistics

Average Remittances Processed per Day
% of Remittances That are a First-Time Match
% of Remittances with Errors
% of Remittances Received on or Before the Due Date
% of Same Day Credit to Customer Account

System Statistics
% of EDI Utilization

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