Automated Alerts Earn High Marks at McGraw Hill

If you attended school in a U.S. PreK-12 district or enrolled at a higher-education institution, then your learning experience very likely included tools or materials developed by McGraw Hill. After more than 100 years of steady growth, the company supplies educational products to 98% of U.S. primary and secondary schools and 86% of U.S. universities and colleges. In all, McGraw Hill has reached more than 61+ million learners and educators worldwide with its student and professional learning solutions. 

Because educational product purchases tend to be seasonal, ordering activity generally occurs in advance of fall and spring semesters. This creates some unique circumstances for the company’s sales and finance teams in terms of pipeline management and cash flow. In recent years, this situation has been further complicated by growing interest in rentals of learning resources, along with the demand for digital subscriptions instead of traditional printed textbooks and materials. 

Subscription-Model Growth Inspires Re-Evaluation of Credit Risk Strategy 

The increase in subscription-based purchases of digital educational materials resulted in no tangible product being shipped, so service and value were often delivered and consumed before payment was received. That meant the finance team’s credit risk and collections strategies — which have been based traditionally on sales of physical, printed materials — needed to be reviewed and adjusted.  

“Our digital business model heightened the need for more stringent credit management practices to minimize risk,” explained Catherine Lugo, McGraw Hill’s manager for credit and collections. “If an account becomes delinquent on payments, or defaults altogether, we have no way to recover physical products or suspend shipping. We needed more rigorous and continuous credit evaluations for all core customers, which include private, for-profit schools, charter schools, and private colleges and universities.”

Lugo and her colleagues determined that automating credit assessments was a key requirement, as was generating in-depth financial reporting for the company’s executives. Given McGraw Hill’s large network of salespeople working across multiple platforms and cross-distribution channels, the finance team realized they needed an automated, centralized credit risk management solution that would successfully integrate with both the company’s enterprise resource planning (ERP) and customer relationship management (CRM) platforms. 

Optimizing Resources and Accelerating Decisions

Through extensive conversations and due diligence with Dun & Bradstreet’s risk management and solutions experts, McGraw Hill decided to implement D&B Enterprise Risk Assessment Manager (D&B ERAM). D&B ERAM has automated credit decisions with a scoring model that uses Dun & Bradstreet’s data as well as McGraw-Hill’s own first-party customer data. The scoring model includes data from key Dun & Bradstreet analytics, such as D&B PAYDEX®, Failure Score, Delinquency Predictor, and Customer Past Due. 

According to Lugo, the Dun & Bradstreet solution has proven to be invaluable in helping the finance team better evaluate and manage credit risk. The integration of D&B ERAM with McGraw Hill’s ERP is helping the sales and finance teams evaluate and process orders more efficiently, particularly when order exceed customers’ assigned credit limits.

“Our sales team adds thousands of new customers every season,” said Lugo. “Now, the orders from all those new customers are automatically reviewed through API calls between our internal credit management system and D&B ERAM. This combination is helping us optimize our resources and achieve desired results without adding headcount.” 

Lugo noted that the daily alert summary tool in D&B ERAM has been particularly valuable. “The automated daily email alert lets us know of any major changes in companies’ ownership, partnerships, financial information, suits, and judgments and similar findings,” she said. “In addition, we are using the D&B PAYDEX® score to identify potential bankruptcy risks or other significant changes in delinquency. That has helped our credit team be significantly more proactive instead of reactive with our account management and collections approaches.”