IQPC London June 2009
- 1. Creating Relationships that Pay Moving Your Bill to the Top of the Stack Presented by: Jerry Ashton CFO advisors, inc. June 20, 2009 IQPC London June 2009
- 2. Let’s Determine Your Understanding of the Value of Customer-Centric Operations The ACSI affects MVA by as much as… 5% 20% 50% 100% And the answer is…
- 3. Customer Care translates into Big Returns 100%. What does this mean? ACSI stands for American Consumer Satisfaction Index which allows companies to measure customer satisfaction from 1-100 MVA stands for Market Value Added, comprised of stock price and ROI. The top 50% of ACSI scorers generated $42BB in shareholder wealth, and the bottom 50% created only about $23BB. Bottom line: One point of customer satisfaction is worth almost $1BB for the “average” International company Why? Because sellers compete for buyer’s satisfaction, and satisfied customers reward companies with repeat business, higher retention, and larger purchases
- 4. A Wake-Up Call Customer service – especially in a down economy - is now priority #1 and must run seamlessly through sales, credit and collections This is both an outbound and inbound process Frustrating the customer is expensive – relationships take on a new dynamic and immediacy which can only be satisfied within a “social media” context High Tech, High Touch, High Time
- 5. Upgrade from Credit to Credit 2.0 We are still bound by the experiences of the past What you know got you to where you are (Dead Guy, Old Guy, New Guy) What you don’t know is keeping you there The time value of money vs. the revenue value of a long-term relationship The future in mind in every calculation Creating that “Customer Relationship” profile Get all the details and agreements up front Establish a personal contact relationship It’s Relationship Management, not Credit Management
- 6. It’s All About CONTEXT The New Thinking to Apply Collection Management is dead; its successor is relationship management Calls, contacts are seen as a “sifting, sorting and separating” process Slow-pay is the symptom, not the disease. Become proactive, not reactive The prime directive for any intervention: Motivate , not Alienate!
- 7. The Problem is Serious, as America’s business last year… Wasted countless hours, telephone calls and postage in fruitless pursuit of non-responsive accounts Assigned $200 BILLION DOLLARS to collection agencies Only 7 cents on the dollar from such efforts were returned to the creditors Only 1 account out of 12 is collected Not just dollar losses -- customer losses
- 8. The Importance of People and Partnerships in Your Order-to-Cash Process Put New Thinking to Work... Call it a Relationship Profile, not Credit Application. Incorporate a “It’s not about the money!” attitude Mutual Exchange of information; e-mail addresses - Open, honest, reciprocal Allow Client Access to selected A/R data and encourage self-correction, feedback Partner and strategize with the errant client; It’s about recycling, not waste management
- 9. Time to Invoke Your C.O.R.E Principles Pillar #1 – Become Partners; no one can go it alone The key: Collaborate (but, with whom?) Pillar #2 – Make Sure the Client is touched affordably; and be ready to bring in the Outsource troops; (but, to whom?) Pillar #3 – The Customer is not a “debtor;” Recycle Pillar #4 - Go Outside your own box; Educate Your job: stimulate customer-centric practices and approaches from the point of sale on through to the check clearing the bank
- 10. Pillar #1 - Collaboration Scores of Traditional Partnering Resources NACM - or other such industry resources FECMA, MACM – many local and world-wide associations And then, there’s that mystery of Social Networking I have to join Facebook? I can’t even keep up with my email – and now, this? Exactly how much time and attention – and the reward? Can this be made easy? SMMI (Social Media Marketing Institute) is created in May, 2009 – the “Priest Class” is showing up CFO advisors , inc
- 11. The “New New Thing” Social Media and Social Networking Between 28-29% of people’s free time is spent on the Internet 66.8% of Internet Users worldwide use “member communities” compared to 65.1% using email Twitter – 140 character “updates” – and is all about “getting attention” It is all about YEO - You Engaging Others The battle is over, Twitter is coronated – evidence the front cover of Time and Iran elections
- 12. What’s the “Buzz” on Social Media and Social Networking – and why? Social Networks overtaking traditional web gateways such as Google, Yahoo, etc. Old goal: organize the world’s information BIQ (Biz Intelligence) vs. Old way: hub and spoke Focus on P&P (Preserve and Protect) customer contacts Facebook, LinkedIn, Twitter draw well over 100,000,000 unique visits a month New goal: organize the world’s people WCQ (Web Culture Quotient) New way: spiderwebs Focus on Strategic Alliances and partnering
- 13. SalesFuel.com Trigger Events – only of interest to sales? Increase/decrease in earnings Funding and financing Grants M&A Job postings Layoffs/restructuring Management changes New business deals New product announcements Credit people need to think like sales people CFO advisors , inc
- 14. Pillar #2 - Outsourcing Time to bring in the specialists It’s their core competency, not yours The staff is held to two standards, and the outsource provider’s standards are higher This does not mean you are outsourcing responsibility Train your provider to understand. It’s not about the money – it’s about the relationship Drill this in: the co$t of a lo$t relation$hip If this fails? Have a contingency plan in place
- 15. The What and Why of Outsourcing Outsource non-value added activities Outsource for quality/expertise Outsource for economy Outsource to keep up with technology Outsource to reduce reliance on Collection agencies Outsource to stay ahead of the competition Outsource on the basis of 80/20
- 16. Receivable Realities How Money Due Depreciates an average of 10% in collectability lost per month! (U.S. Dep’t of Commerce) Aging cycle over a year period $ Dollars
- 17. Accounts Receivable Portfolio Average Number of Active Accounts 5,500 4,000 – CFO Advisors 1,500 - Client Average Accounts Receivable $450,000,000 $XX,000,000 – CFO Advisors $XXX,000,000 - Client 4000 Accounts Outsource Company 72.7% 27.3% 1500 Accounts client Client 87.8% 12.2% Outsource
- 18. Results Year “X” Outsourcing Year-End Goal = 25% Reduction in Past Due Percentage From 39.8% to 29.8% Actual = 24.4% Reduction in Past Due Percentage From 39.8% to 30.1% Outsource Accounts Percent of $$ Past Due
- 19. Pillar #3 - Recycling What is the end game – Revenge, or Re-Boot? Each contact is to preserve a relationship, not end it Intend to get the customer back on track Involve The Sales Force They are the key to collections and, ultimately, keeping the successful relationship Problem: Credit and Sales (a) don’t understand team approaches; (b) are not trained to work as a team; or (c) they aren’t getting total management support YOU GET THE BEHAVIOR YOU REWARD
- 20. Sample Best Practices* Credit Consolidate balances across Parent/child accounts, location and business units – identify total company risk Invoicing Include due date on invoice and/or utilize pre-due date(vs. actual) Collections Develop an automated collection activity matrix Dispute Management Internet based dispute escalation protocol Metrics Incorporate relevant DSO metric into sales compensation formula
- 21. Credit Professionals Chip In… To quote Josef Busuttil of MACM: “The credit function does more than just crunch numbers and make collection calls. The credit function is becoming a more integrated business unit within the business organisation. It needs to be innovative and forget the inherited CM methods as they may well be obsolete to meet today's market needs!” Everyone is able to reduce DSO with no rocket science CM strategies, but what would be the effect on: The turnover? The long-term profit? The long-term customer relationship? The internal relationship between credit and the other departments?
- 22. Abe “Walking Bear” Sanchez Zapata Corporation/Founder B2B Credit To quote Walking Bear, “Any…business manager not focused on improvement as measured by profitability becomes an administrator at best and a bureaucrat at worst.” DSO and the energy given this out of date "performance measurement" is a distraction from the goal of achieving profitability and will adversely effect both short and long term profitability The best way to do (improve the bottom line) is by meeting or exceeding expectations, at a profit
- 23. Benchmark your operation Gather data across all functional areas Credit, Cash Application, Collections, Dispute management Compare internally and externally Other companies in and out of industry Identify the Gaps Where are your biggest opportunities for improvement Calculate and prioritize the benefits $ benefit, degree of implementation difficulty, time and cost
- 24. Exactly What are We Measuring …and More Importantly, Why? As an industry, Finance people are adept at using terms like DSO, KPI, etc. “What gets measured gets done” To measure different results which reflect your effectiveness at Relationship Management, you need to locate and track: Increased sales Repeat sales Customer satisfaction on the “far end”
- 25. Applying this to the Order-To-Cash Chain – Turning Stumbling Blocks into Stepping Stones The sales force is the key vector – creating a Bigger Picture relationship The way you sell it, deliver it, bill it and service it are clear delineators – personal follow-through points The “sale after the sale” – how you collect on it – determines either customer retention or customer loss. What is your policy governing this process? How do your processes support this goal? Where does education begin/end – and for whom?
- 26. Pillar #4 - Educate Your Internal Staff is under pressure; and for good reason Outnumbered by the numbers Are lucky to be “trained” once a year Have no career track Only noticed for what they didn’t collect Have you noticed the economy? You can fix that Swap Sales People for Credit People – great cross-training Reward innovation – what “win” is to be celebrated? CFO advisors , inc
- 27. How Can I Put Relationship Management Into a Finance Department Setting? Stimulate creative practices and approaches! “ C” – Communicate “ I” – Innovate “ R” – Re-Invent “ C” – Collaborate “ L” – Leverage “ E” – Engage
- 28. What “Stumbling Blocks” Show Up Lack of communication Issue identification Regularly scheduled update meetings Lack of Strong Champions Resolution of issues “ Bonus” the responsible management Defeat by Silo Partner with upstream departments Mesh with downstream departments Complicated or incorrect performance metrics Focus on results Be alert to the “unintended consequences”
- 29. Thank You Jerry Ashton President (212) 982-2152 CFO advisors , inc www.cfoadvisors.com
- 30. Executive Bio – Jerry Ashton Jerry Ashton has a 25-year background in the credit, collections and outsourcing industry and is a nationally respected speaker and educator as well as pioneer in the field of outsourcing. His onsite people in a number of states have handled over ¾ billion dollars annually, ranging from outsourcing an entire credit department to providing a targeted “clean up” of accounts scheduled for write-off. In addition to his writing credit/collection-oriented articles for industry publications such as Credit Today and Financial Manager, Jerry has delivered internal workshops for some of America’s finest companies, such as Gannett, Johnson & Johnson, Hearst and the Belo Corporation and a number of associations. Jerry, now retired, was a founding member of the Outsourcing Institute and an early member of the American Financial Association. He was also an active member of the International Newspaper Financial Executives (INFE), the Turnaround Management Association, and the New York Institute of Credit (NYIC). He is a resident of New York City.
Editor's Notes
- #2: Welcome Background on Jerry and Dexter Get around the room intro’s
- #5: is needed to establish a baseline How many of you are doing it now System generated or Manual Same reporting measurements for years? Your industry is good, but other industries are ok to. It can depend on whether your selling Main Frames or servicing Credit cards So your in the bottom Quartile – remember it’s a frame of reference – it does not make you look bad, it shows you where you can improve Small benefit but a quick hit – gets the team motivated The project might be too difficult for your group, technology, budget to do
- #7: You're obviously thinking about it since you’re attending this conference You might be told to do it soon - Your boss might be telling you to do it when you return from New Orleans You can do it all or in pieces
- #8: The next few slides will be centered around the concept of Outsourcing It’s new to some, we think we pioneered… and invented….. Jerry to do
- #10: What’s Broken, What needs to be fixed Where do you stand in and outside your industry Hackett and others What are you doing know, What can you implement in the short run, What can’t you implement even if you had a majic wand Why not outsource these functions – don’t want to let go, fear of mistakes - You probably outsource some now – bank lock box You cant make any chages until you measure ansd establish a baseline You can use the metrics to show accomplishments and identify the next area of improvement Monitor your outsource provider Don’t keep measuring the same thing – move on
- #11: Partnering means giving up on trying to go it alone. Who would want to – your company couldn’t possibly have all the talent and resources you need to do your job. OUTSOURCE. And, be willing to share your company’s knowledge and talent with your partners. Win-Win!
- #14: Any argument here? If an outsource firm is going to hit high marks, it has to be in respect of the tough job that has already been put in by your client’s staff. You are here to give, not to take. The forklift driver gets better training.
- #15: How many outsource one function Now? How many multiple functions? How many planning How many fearful? Fearful of What? What has changed over the last 10 years……… Does this function contribute to the overall company mission Do we have or can we hire the right people Are our costs too high (in comparison to other companies Do we want to invest in new Software and technology Do collection agencies give us the right level of customer service and return?
- #16: How many outsource one function Now? How many multiple functions? How many planning How many fearful? Fearful of What? What has changed over the last 10 years……… Does this function contribute to the overall company mission Do we have or can we hire the right people Are our costs too high (in comparison to other companies Do we want to invest in new Software and technology Do collection agencies give us the right level of customer service and return?
- #17: One form of education – the reality of accounts receivable and losses that occur inexorably, month after month. Any client holding onto an account after 90 days had better have some very good reasons. Other than, “I’ll do it myself,” that is.
- #18: A sample CFO account, showing our work for them in the year 2000. They outsourced 70% of their accounts to our staff. As these were “small balance” accounts (you are kidding me, of course), this freed their staff up to work the larger and more complicated cases. We didn’t really replace personnel, as much as free them up.
- #19: The bottom line is always the bottom line – did or did we not help our client. Considering that our goal was to reduce their outstanding A/R under our control from 39.8 days by 25% -- or a reduction to 29.8%. The graph speaks for itself. From January and a high of 39.8 days, to December with a DSO of 30.1 days, it was obvious CFO was capable of hitting client-set goals. I regret to say…we did miss the goal by .02% Gratefully, the client allowed for this aberration.
- #20: The CFO Advisors guideline for its collection intervention/customer service specialists is to “get the money, and keep the customer.” Seldom is a past due account there because of a customer’s desire to steal from our client. More often than not, there is some area of dissatisfaction that needs to be discovered and resolved. Amazingly, when a relationship is back on track – so are the payments! Sales Reps? The source of the problem so much of the time – and logically the source of solutions as well. Education, remember?
- #27: Any argument here? If an outsource firm is going to hit high marks, it has to be in respect of the tough job that has already been put in by your client’s staff. You are here to give, not to take. The forklift driver gets better training.
- #30: My appreciation to the Thomson Financial people for inviting me to attend and present at this audience, and to you attendees for taking time to see what is “outside the box.”