91 ABC Customer Analysis

This chapter contains these topics:

Section 91.1, "Objectives"
Section 91.2, "About ABC Customer Analysis"
Section 91.3, "Analyzing Customer Account Activity"

91.1 Objectives

To rank and analyze customer sales activity and review the average number of days that it takes each customer to pay

91.2 About ABC Customer Analysis

ABC Analysis is a well recognized method for classifying objects according to their level of importance based on the criteria that you specify.

In Accounts Receivable, the ABC Customer Analysis program is used to group customers based on two different criteria:

Aggregate sales
The average number of days to pay

Understanding the relationship between these two groupings, helps you manage your customers and cash flow.

One example of using ABC Analysis is derived from the 80/20 rule, which states that 80% of sales are derived from 20% of your customer base. By identifying this group of customers and reviewing their ability to pay on time, you can analyze your customers' performance.

91.3 Analyzing Customer Account Activity

Navigation

From Accounts Receivable (G03), enter 27

From A/R Advanced and Technical Operations (G0331), choose ABC Customer Analysis

To calculate and rank customer sales activity and the number of days it takes them to pay, run ABC Customer Analysis (P03602).

ABC Customer Analysis generates information based on the parameters that you define and allows you to analyze a customer's activity according to your business requirements.

You can run this program in proof or final mode. In proof mode, the system:

Calculates the sales percentages and ranks each customer accordingly
Retrieves the stored value for the number of days to pay
Assigns a code (A through D) for the sales percentile based on the parameters defined in the Data Dictionary
Assigns a code (A through D) for the number of days to pay based on the parameters defined in the Data Dictionary
Generates a report

In final mode, the system updates the ABC1 and ABC3 field in each Customer Master record (F0301) with the code that it assigns and displays on the report.

91.3.1 Before You Begin

Run Recalculate Average Days Late (P03830) to update the AVD field in the Customer Master record that the system uses to assign the A, B, C, or D code on the report.
Set the sales percentile values in the Data Dictionary for data items A1A, A2A, and A3A.
Set the average days values in the Data Dictionary for data items A1C, A2C, and A3C.

91.3.2 How the System Determines the Codes to Assign

When you run ABC Customer Analysis, the system calculates two ABC categories based on percentages you set up in the data dictionary.

Category	Description
Percentage Sales (ABC code 1 - %S column)	You set up percentiles in the Data Dictionary for items A1A, A2A, and A3A. The system categorizes each customer by the percentile in which it's total sales falls. For example, if you set the first percentile (A1A) to 80, the system assigns A to all of your customers whose aggregate sales make up the first 20% of your total sales. If you set the second percentile (A2A) at 60, the system assigns B to all of the customers whose aggregate sales fall between 21% and 40% of your total sales. If you set the third percentile (A3A) at 40, the system assigns C to all of the customers whose aggregate sales fall between 41% and 60%. The system assigns D to any customers whose aggregate sales are less than 60%. The system does not assign codes E and F; they are available for you to manually assign to the customer through Customer Master Information program (P01053). When you run the program in final mode, the system updates the first ABC field (ABC1) in the Customer Master file (F0301) with the assigned value.
Average Days to Pay (ABC code 3 - AD column)	You set up categories in the Data Dictionary for field names A1C, A2C, and A3C. The system performs a direct comparison between the number of days defined and the number of days to pay. For example: A1C = 30 (0 - 30 days)/A rating A2C = 60 (31 - 60 days)/B rating A3C = 90 (61 - 90 days)/C rating 91 or more days/D rating For example, if the average number of days for customer 1 to pay its invoices is 22, the system assigns them code A because it is in the 0 - 30 day range. The system does not assign codes E and F; they are available for you to manually assign to the customer through Customer Master Information program (P01053). When you run the program in final mode, the system updates the first ABC field (ABC3) in the Customer Master file (F0301) with the assigned value.

Category

Description

Percentage Sales (ABC code 1 - %S column)

You set up percentiles in the Data Dictionary for items A1A, A2A, and A3A. The system categorizes each customer by the percentile in which it's total sales falls.

For example, if you set the first percentile (A1A) to 80, the system assigns A to all of your customers whose aggregate sales make up the first 20% of your total sales.

If you set the second percentile (A2A) at 60, the system assigns B to all of the customers whose aggregate sales fall between 21% and 40% of your total sales.

If you set the third percentile (A3A) at 40, the system assigns C to all of the customers whose aggregate sales fall between 41% and 60%.

The system assigns D to any customers whose aggregate sales are less than 60%.

The system does not assign codes E and F; they are available for you to manually assign to the customer through Customer Master Information program (P01053).

When you run the program in final mode, the system updates the first ABC field (ABC1) in the Customer Master file (F0301) with the assigned value.

Average Days to Pay (ABC code 3 - AD column)

You set up categories in the Data Dictionary for field names A1C, A2C, and A3C. The system performs a direct comparison between the number of days defined and the number of days to pay. For example:

A1C = 30 (0 - 30 days)/A rating
A2C = 60 (31 - 60 days)/B rating
A3C = 90 (61 - 90 days)/C rating
91 or more days/D rating

For example, if the average number of days for customer 1 to pay its invoices is 22, the system assigns them code A because it is in the 0 - 30 day range.

The system does not assign codes E and F; they are available for you to manually assign to the customer through Customer Master Information program (P01053).

When you run the program in final mode, the system updates the first ABC field (ABC3) in the Customer Master file (F0301) with the assigned value.

The following report is an example based on the following settings of the Data Dictionary items:

A1A = 85
A2A = 70
A3A = 60
A1C = 5
A2C = 60
A3C = 90

03602 JD Edwards World

Customer Analysis

Final

. . . . . . Address . . . . . . Year to Date % A/R % A Rank

Number Name Sales Sales Days S D

-------- ---------------------------------------- ------------- ----- ---- - - ------

4242 Corporate Office Systems Company 766,788 42.1 703 A D 1

1500 Plant Are Us 346,705 19.0 38 D B 2

22201 Ericson Corp. 226,650 12.4 5 D A 3

1001 Edwards, J.D. & Company 114,385 6.3 374 D D 4

4175 Abernathy & Hitch 80,141 4.4 110 D D 5

701 NLS Test 76,765 4.2 147 D D 6

7003 Euromart 49,695 2.7 6 D B 7

7001 JD Edwards World Europe 36,582 2.0 10 D B 8

6736 Tattered Books 35,480 1.9 19 D B 9

631000 SBC - Sociedade Brasileira de Computação 24,931 1.4 2 D A 10

1514 Weavings 19,587 1.1 127 D D 11

1314 PD Manufacturing Co 16,351 .9 46 D B 12

6613 Pizza Guy 14,625 .8 45 D B 13

91.3.3 Processing Options

See Section 116.1, "Customer Analysis (P03602)" for more information.