Delivering More Value in a Shared Service Center

Posted by

Joel Roques, Managing Director EMEA and Asia at The Hackett Group, recently spoke at a SunGard hosted breakfast in London on the evolution of the Shared Service Center. While Shared Service Centers originally were seen primarily as a way to reduce costs, companies are now looking toward delivering value through service level excellence.  In finance and accounting Shared Service Centers in particular, they are standardizing processes and implementing technology for receivables, payments and treasury functions in order to gain visibility and improve operational efficiencies. 

During the breakfast, The Hackett Group identified a top tier of “world class” corporate that have achieved strategic business enablement through their Shared Service Centers.  Additionally, they discussed how the scope of the Shared Service Center management role has also changed, with the top tier organizations creating global process ownership positions. This offers a more holistic perspective of the organization as a whole, allowing them to function across business units and across functional boundaries.

You can read Treasury Today’s perspective of the breakfast discussion in their article “Taking Shared Services to the Next Level.”

vice president, product management, AvantGard, SunGard's corporate liquidity business

Cash Application – Why Is It Important to Speed Up This Process?

Posted by

In many companies, credit and collection teams are pushed very hard to meet their cash targets so that the days sales outstanding (DSO)/Debtor targets are met. Often there is a focus on ‘just getting the money in’. Teams are typically focused on applying the cash in the last couple of days of the month, which are considered dead collection days, leaving only a day or two before the A/R ledger closes for month end processing.

The quicker cash is applied; however, the better visibility managers have to the past-due status of an account/portfolio. Where real-time dashboards are used, the past-due numbers are skewed even if they show progress against targets if the cash is not applied in a timely manner. Many companies will immediately age the cash in a similar way to credits, but I have seen it the other way, where the cash remains in the current column thus amplifying the past dues. This serves as a great incentive to apply the cash as quickly as possible. The only danger is if the cash is applied just to keep the ledger looking good and is not based on customer instructions. This will lead to reconciliation issues further down the line.

A well maintained account that is sent to a customer in the form of a statement or list of outstanding items will encourage the customer to deal with your account first as they will view your company as easier to deal with. Customers who have less reconciliation issues and do not have to spend time telling collectors ‘paid on a particular date, etc.), can spend more time getting invoices approved. Everything that is done in the Order-to-Cash process must compel the customer to pay and a clean, a reconciled account is no exception.

One challenge that a credit and collections manager will have, in addition to making sure their team has the payment detail in order to apply the cash, is having the appropriate SLAs in place with the treasury or accounting teams that are, more often than not, responsible for applying the cash.

Technology however can play a key role in helping a company quickly apply cash and updating the collector’s calling queue freeing up their time to focus on actual past-dues. The solution should auto-apply as much as possible and suggest intelligent matches based on promises and disputes (for short pays). The less manual intervention, the quicker cash can be applied, giving the cash application person or team more time to investigate unidentified payments or to assist with reconciliations where appropriate.

Are you able to quickly apply cash? I’d like to hear from you.

evp, trade liquidity solutions, SunGard's AvantGard

The Dynamics of Internal Collection Agencies

Posted by

Every now and then you come across a best practice in B2B credit and collections that just make so much sense you are surprised that not everyone is doing it.  One such practice I have seen lately is setting up an internal collection agency.  The concept is pretty simple; you dedicate experienced collection personnel to form an internal collection agency within your organization.  Then, when your credit and collections team has worked an account through your normal collection process, but an open balance remains, you send that account to your internal collection agency.  This team of experienced collectors works the account as if they were a third party organization. 

There are some interesting dynamics that take place with this type of set up.  First, you are much more likely to send these “worked” accounts to the internal agency soon after the last step of the normal collection process.  Typically, we take too long to place accounts with third party agencies, which lessens the likelihood of collection.  The finality of sending an account to a true third party forces many of us to hold onto those account for 30, 45 or maybe even 60+ days with no additional follow up before we send on to the third party agency.  Almost all of the hesitation to send to a third party in a timely manner is removed when you are sending the account to an internal third party.

Additionally, there is a competitiveness that comes out in your normal collection team when they know they will be sending accounts to an internal third party.  This competitiveness is sometimes the needed edge when trying to collect on significantly delinquent accounts.  Knowing  that an account is going to go to someone else within the credit department seems to push the normal collection team to new performance levels related to collecting on their own portfolios.  Another added benefit of using an internal team is that all of the collection activity can take place in the same system.  There is no need to push information to a third party, and all of the past history is resident in the system used by the internal collection team.

With respect to the internal collection agency, some companies give this team meaningful names that they can use on their letterhead such as the Premier Collection Group.  Receiving a collection correspondence on different letterhead is sometimes all the impetus an account may need to make payment. 

Have you set up an internal collection agency within your organization or have you thought about doing so? I’d like to hear from you.

vice president, product management, AvantGard, SunGard's corporate liquidity business

Credit Limit Policy and Delegation of Authority:Part II

Posted by

Connectivity is a basic assumption, are we ready for mobile in the credit and collections world?

In part I of my Credit Limit Policy and Delegation of Authority blog series, I discussed the importance of distributing authority and responsibility.  In part II, I will touch upon the importance of mobile in our daily lives and whether we are ready to use it in our credit risk management processes.

Twenty years ago, the first month of my senior year, I connected my desktop to the university network via a local dial up number and was using Lynx, a text based browser.  WiFi was not yet in the human vernacular.  After graduation, a friend bought his first cellular phone the size of a small brick, paying $35 a month for 30 minutes of service.

Fifteen years ago, on my first day on the job at a software company, I was issued a laptop and a Nokia phone and I considered myself mobile.  Eight years ago, I was issued my first BlackBerry 7501t (with the side rolling wheel before the trackball and touchpad) and was blazing along on EDGE network.  In July 2012, I received my first smartphone, a Samsung Galaxy S3, riding on 4G LTE.  Each time I touched new technology I was in wonder and amazement. Each time brought a new definition of what it means to be “mobile”.

I often am in discussions regarding how mobile will influence the business processes surrounding credit and collections management.  In the consumer circles, we exist in a world where we make an online purchase and monitor the progress from time of order up to the time it is delivered to our front door…. all from our miniature devices which fit in my shirt pocket and which are more powerful than my twenty year old desktop.

Today, connectivity is a basic assumption of personal and business life.  In the near term there are some conventional associations we can make on how mobile can impact Receivables Management and the Order-to-Cash process.  A common one is:  how does the credit and collections team include and influence participation in the Credit Limit approval process.

In my previous article, we discussed how other folks such as a Managing Director or Financial Director participate in the approval process; especially if these roles are constantly on the move. Is it time to provide the visibility, the notification, and the actionable approvals via a smartphone?

Defining the Delegation of Authority in credit risk management and its associated routing is one endeavor; executing and ensuring participation from the people assigned to take action is another endeavor and one very much worth exploring and investing in.

Can you envision an environment where your organization can review, comment, approve, and request additional information on Credit Limit changes at the speed that business happens in?  I’d like to hear from you. 

vice president, product management, AvantGard, SunGard's corporate liquidity business

Credit Limit Policy and Delegation of Authority: Part I

Posted by

Distributing Authority and Responsibility…
 
In my previous automated dispute resolution workflow blog series, I discussed why dispute management remains a challenge, the importance of defined business process, and how technology can help drive efficiencies to in dispute resolution. Now I am going to discuss how a defined busines process can help with credit limit policies and delegation of authority.

A key focus within the credit team is to evaluate, recommend and coordinate credit line extensions to expand revenue opportunities. While this is well-known and understood, there are challenges in ensuring those credit line changes are in adherence to policy and are auditable.  Let’s take the following common scenario.

A credit analyst has been tasked with reviewing a customer account.  The credit analyst has captured the required data to be evaluated such as financials, industry trends, and that customer’s payment history.  The analyst subsequently makes a verbose analysis on his research and recommends an updated credit limit.

What happens next? 

  • In one business, it is possible that the analyst has the responsibility and authority to grant that credit line on his own.
  • In another business, it may be required that this credit line change be reviewed and approved by a credit manager, a managing director for the region of that customer, and a financial director based on the amount of the credit line.

In the latter case it is necessary that this Delegation of Authority can be acted upon consistently and efficiently.  Also, in many discussions I have had, an SLA (service level agreement) may also be in place with sales teams or customers to respond to credit line change requests in a specified time frame.  There is great opportunity without an auditable system to fall outside of the defined policy.  How does the credit manager get notified that he needs to take action on a review?  How does that credit manager acknowledge approval of that review?  Which managing director does this review now go to?  What response time SLA is he assigned?  Does a financial director now need to approve it based on the amount?  These are questions that challenge practitioners today.

By using defined workflows that leverage advanced BPM (business process management) for technology, companies have a clear sense that responsibility and accountability is properly assigned and can be audited. Instead of Delegation of Authority enforcement controlling you, you can cross over the line that puts you in control of your environment.

In my next blog article, I will discuss how mobile technologies can further help in this area.

How are you managing Delegation of Authority and coordination of approvals? I’d like to hear from you. 

vice president, product management, AvantGard, SunGard's corporate liquidity business

Harnessing Credit and Collections Productivity to Generate Financial Results

Posted by

The traditional credit and collections department is often mired in manual tasks that sap the productivity of its personnel.  It is really eye opening when you begin to measure the amount of time that is lost in a day to deal with non-value oriented administrative tasks.  Let’s look at inefficiencies associated with prioritization, preparation, and follow up as an example.  Depending upon the company and sometimes the industry, it can be anywhere from 2 to 4 hours per person, per day.  

Imagine a collections analyst makes an average of 20 calls per day.  Traditionally, they would first consult an aging report either in MS Excel or on paper.  Let’s assume it takes 2 minutes to determine who they are going to call.  Once they know who to call, the next step is preparing for that call.  Reviewing the account, looking at individual invoices and previous notes, consulting payment history . . . that might take 4 minutes?  Now the call is held and that results in follow up activities including invoice reprints, proof of delivery, communications with a customer to confirm details of discussion, communicating to internal groups regarding account status which might take about 3 minutes? 

If we add all of that together (prioritization = 2 minutes, preparation = 4 minutes, follow up = 3 minutes) the sum is 9 minutes for one call.  Based on 20 calls a day, that is 180 minutes, or 3 hours per day, per person.  These are tiny little slices of inefficient time that really add up across the day.  Add to that any credit risk responsibilities, dispute management and deduction management activity, order hold release processing or assistance provided to the cash application department.   It is no wonder that the call volumes are often less than desired when chatting with people managing these groups.

What if you could reduce the three hours to one?  How might that impact the results of the team?  If a credit and collections department has 12 staff members and each of those 12 saved two hours per day on average; that would increase the productivity of the team by 24 hours per day which is the equivalent of 3 full time people.  

Providing your existing staff with the equivalent productivity of 3 people has a much greater impact than actually going out and hiring 3 additional staff members.  New hires would have to learn your systems, your customers, and the who’s who of your internal network of individuals that sit outside of the collections department but play a role in the overall process.  Giving that same productivity to the existing staff is like cloning three additional well trained staff members that can maximize every bit of that time toward achieving better financial results.

How do you get your credit and collections staff to save two hours a day from administrative tasks?  You can do this by eliminating manual prioritization and implementing automation technology that uses a strategic automated rules engine which takes into account things like order holds, amount delinquent, credit risk changes, and statistical collections dollars at risk to automatically present a daily work queue to your staff.   You can also improve productivity by significantly reducing the preparation by consolidating all of the important information into one central repository for exceptionally fast retrieval of data.  Finally, you can improve productivity by automating the follow up process with standardized templates and leveraging the consolidated, centralized data to automatically populate those templates.  Harnessing your credit and collections team’s productivity frees up their time from focusing on accounts that are already going to pay to those accounts that really need to be contacted for payment.  It has a direct impact on generating financial results and increasing cash flow.

How do you go about harnessing your team’s productivity? I’d like to hear from you?

evp, trade liquidity solutions, SunGard's AvantGard

To Write Off or Not Write Off

Posted by

I have seen companies write off accounts before they are sent to third party collection agencies, and I have seen companies keep them in the A/R balances until the third party collection agency has exhausted their activities.  I think the best approach is to keep them in the A/R balances until the agencies are done.  Now this approach might be against policy, so you need to check on that first.  If your internal policy allows for it, then I say fully reserve on these accounts, but do not write them off until you are completely done with all internal and external collection activities.  If not, then I would suggest you try to change internal policies that require writing off the accounts before they are placed with an agency. 

The number one reason I like to keep the accounts on the books is because you have to look at them regularly.  If they are written off, you forget about them.  The only time you think about them is if there is a recovery from the third party.  By keeping them on the books, it may force you to think about that account every now and then and even ping your agency about them.  I am a strong believer in the squeaky wheel axiom, so calling up your third party every now and then isn’t a bad thing.  Also, by keeping them in the A/R balance you can always see the history of collection activity that went into these accounts. A little analysis on that history might be all you need to understand why the account went so delinquent in the first place.  You can also analyze and compare these “placed” accounts to determine if maybe you need to change your collection activity. 

Many of you may use credit and collections systems as well.  For these accounts to be tracked and analyzed in your credit and collections system, you will typically need to keep them in the A/R.  This may also allow you to send these accounts to your agency in an automated fashion since the leading edge credit and collections systems allow you to place accounts to third party agencies with the click of your mouse (provided you have the proper authority level).  Once at the agency, the third party can update you on any activity or status change on the account automatically through the collection system – again, provided that the accounts are still in the A/R balance. 

So go ahead and fully reserve those accounts before you place them with an agency, but don’t write them off until after the agency has performed all of their activity.

vice president, product management, AvantGard, SunGard's corporate liquidity business

Automated Dispute Resolution Workflow: Part IV

Posted by

Gaining Control Over Your Dispute Environment…

In Part I of my Automated Dispute Resolution Workflow blog series, I discussed why dispute management still remains a challenge for many credit and collections departments. In Part II, I explored the benefits of automating dispute resolution workflow. In Part III, I described the eight critical components of rule-based dispute resolution workflow. In the final part, I will discuss how you can gain control over your dispute environment.

Like any other tool, automation software can only fulfill its potential with skillful use. While properly designed automated workflows deliver productivity benefits out of the box, it is the data they generate that ultimately generates the most value. In the case of dispute resolution automation, root cause analysis provides the intelligence that will enable you to gain control over your environment. Because many disputes represent recurring issues, the most important thing you can do is to identify the root cause of each dispute type. That done, in most cases you will be able to implement improvements to your order-to-cash systems or work out solutions with your customers to prevent their reoccurrence. By eliminating disputes at their source, you reduce your back-end processing burden.

A key measure in this regard is invoice accuracy. By increasing invoice accuracy (the percentage of invoices that are paid without a deduction) you not only reduce deductions, but also improve cash flow. On average, clean invoices are typically paid within a week of stated terms while invoices containing discrepancies are paid 30 to 60 days late. In addition to root cause analysis, front end transaction reconciliation, which matches customer expectations, as evidenced by their PO, other order details, and/ or their vendor compliance agreement with your order processing data and sales agreement, to identify discrepancies before the order is shipped and billed, can positively impact invoice accuracy.

Even so, there will always be disputes and other payment exceptions, especially with firms that create deductions scenarios through their sales promotion planning process. So while front end prevention of unnecessary disputes is a major part of the solution, so is efficient back-end resolution processing. Automated dispute resolution workflows, especially in a sales promotion planning environment, delivers a compelling return on investment because of their overhead savings and cash flow enhancements. Furthermore, the data they generate is a catalyst for reductions in profit dilution when it is used to both reduce the volume of recurring disputes and to make iterative improvements in the resolution process.

By using automated dispute resolution workflows that leverage advanced BPM (Business Process Management)technology companies can transform themselves. Instead of dispute handling controlling you, you can cross over the line that puts you in control of your environment.

Are you finding that dispute management remains a challenge for your organization? I’d like to hear from you.

vice president, product management, AvantGard, SunGard's corporate liquidity business

Automated Dispute Resolution Workflow: Part III

Posted by

The Eight Critical Components of Rule-Based Dispute Resolution Workflow…

In Part I of my Automated Dispute Resolution Workflow blog series, I discussed why dispute management still remains a challenge for many credit and collections departments.  In Part II, I explored the benefits of automating dispute resolution workflow. In part III, I will describe the eight critical components of rule-based dispute resolution workflow.

To realize its maximum potential, rule-based dispute resolution workflow must achieve a very high level of process definition. After all, the goal is end-to-end automation. A failure in any area essentially creates a detour from the prescribed dispute resolution road map that in some respect will necessitate traversing it manually. That slows things down, creates added opportunities for errors, and breeds inconsistency in terms of both process and customer interactions. Accordingly, here are eight critical components that need to be incorporated within any rule-based dispute resolution workflow solution:

  1.  Automatic assignment of processing tasks: To ensure compliance, only one handler should be working on a dispute at a time – all others are locked out. When one handler completes their task, there is an automated pass-off to the next handler. In addition, some tasks may be handled automatically in the background such as notifications and electronic document retrieval. It is also vital that when necessary, task assignments be driven through the sales/ customer service portal. Rule-based dispute resolution workflow cannot be confined to just the credit or accounting departments. It must transcend the receivables area to incorporate participation by all other internal and external partners.
  2. Enforce user verification to certify all required approvals: Another compliance feature needs to be built around user security and approval authorities. The system should proceed to the next step only if the appropriate data has been entered or otherwise captured and it is consistent with the user’s selection. Selections or approvals that fall outside of predetermined parameters should be immediately flagged for correction or for verification based on the acquisition of updated data or documentation.
  3. Ability to define parallel paths: There are two situations where this is necessary. Because multiple disputes can be related to a single item (e.g. both a pricing and quantity deduction taken on a single invoice line item) there need to be parallel workflows. Multiple reason codes on a single item will require multiple resolution workflows. The other scenario requiring parallel paths occurs when no action is taken by a handler. ‘Action’ taken advances process. ‘No action’ taken within cycle time parameters initiates a parallel process to ensure there are no delays in resolving open issues.
  4. Provide decision routing: In most situations, only two way decision trees are required (e.g. true/false). However, an advanced system also needs to handle multiple decision scenarios. For example, there will be times a handler will not be able to rule a claim as either valid or invalid, but must also be able to choose that additional information is required before a decision is made or that the work completed so far requires correction. In those cases, the capability of backing up the workflow a step or two so the additional documentation can be acquired or previous steps corrected needs to be built into the system.
  5. Capable of interactive required actions: Sometimes there will be a need for a handler to interact with what otherwise would be an automated action. A common scenario involves the sending of any sort of correspondence. In most cases the system will generate and send emails and faxes automatically, but sometimes the handler will need to add a note or otherwise edit the message. Another frequent situation involves data capture. In most cases, the system should be able to automatically acquire electronic documents such as a Proof of Delivery from a carrier, but on the occasions it cannot the handler will need to acquire the POD manually.
  6. Enforce resolution state: The system needs to not just drive the resolution process to a final determination (Valid or Invalid), but it also needs to complete the task associated with that determination. For example, if the final resolution state for a deduction is that it is an invalid claim, then the system needs to return to it to an appropriate status in the collection process workflow. Conversely, if the claim is valid the system should process the appropriate credit or adjustment.
  7. Provide a comprehensive audit trail: One of the benefits of automated processes is that they can provide ‘evidence of control within the system’ – a key point auditors look for and whichis difficult to document with manual processes. The components of a comprehensive audit trail is every action date and time stamped as well as associated with a user ID. Claim status is also tracked along with any notifications made. With that done, reporting software can provide auditors with all the documentation they require as well as giving the process manager the tools necessary for performing root cause analysis.
  8. Provide a conceptual model of each distinct exception process: Because designing comprehensive and efficient dispute resolution processes is a major challenge, the software needs to contain tools that allow you to build automated workflows using a graphic interface.

The ability to choose process components from drop down menus and then to be able to visually work with the scope and sequence of each workflow is very important. By working with a conceptual model, it is also much easier to make iterative improvements to your workflows, something that you will need to do periodically as a result of the ongoing root cause analysis of your dispute environment.

Stay tuned for Part IV of my automated dispute resolution workflow blog series in which I will discuss how you can gain control of your dispute environment.

Are you finding that dispute management remains a challenge for your organization? I’d like to hear from you.

vice president, product management, AvantGard, SunGard's corporate liquidity business

Automated Dispute Resolution Workflow: Part II

Posted by

Part II: Automated Dispute Resolution Workflow A New Language
for Complex Dispute Process Workflow

In Part I of my Automated Dispute Resolution Workflow blog series, I discussed why dispute management still remains a challenge for many organizations. In Part II, I will continue to explore automating dispute resolution workflow. Until recently, automated dispute resolution has focused on identifying dispute types and providing the dispute handler with data, documentation and communication tools. Although there was some workflow automation, such as automated escalation, the primary focus of dispute management software has been information capture and sharing. These tools provided a quantum leap compared to the largely manual processing they replaced, but remained constrained by the experience and effort of the dispute handler, and the amount of time that person could allocate to their workload.

In order to boost productivity to a new plateau, dispute resolution now requires a highly automated workflow environment that can be easily configured to match complex scenarios outlined in internal operating standards. So what has changed? The emergence of XPDL (XML Process Definition) as the language of BPM (Business Process Management), and BPM is the key to developing a rule-based workflow that can address the needs of the dispute resolution process.

A flexible, but rules driven exception handling process is needed to address the complexity of vendor compliance agreements, the distinct resolution processes necessary for each type of dispute and the variable components that must be included in each dispute resolution workflow. This is the promise of XPDL applied within the context of BPM. In terms of dispute resolution, there are four primary needs:

  1. Easily configurable to handle all contingencies, which often change
  2. End-to-end automation to eliminate operator interference in process completion
  3. Rules defined for the entire process to ensure next steps are actually taken
  4. Support by a matching engine (usually associated with auto-cash solutions), which facilitates the identification and coding of disputes during the cash application process as well as periodic (at least monthly) automated matching operations to clear off related adjustments and balances.

Stay tuned for Part III of my automated dispute resolution workflow blog series in which I will discuss the eight critical components of rule-based dispute resolution workflow.

Are you finding that dispute management remains a challenge for your organization? I’d like to hear from you.