IQPC London June 2009

Creating Relationships that PayMoving Your Bill to the Top of the Stack

Presented by:Jerry Ashton

CFOadvisors, inc.

June 20, 2009IQPC London June 2009

2CFOadvisors, inc.Receivables and Relationships™

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…


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


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


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


It’s All About CONTEXT

The New Thinking to ApplyCollection Management is dead; its successor is

relationship managementCalls, contacts are seen as a “sifting, sorting and

separating” processSlow-pay is the symptom, not the disease.

Become proactive, not reactiveThe prime directive for any intervention:

Motivate, not Alienate!


The Problem is Serious, asAmerica’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 collectedNot just dollar losses -- customer losses


The Importance of People and Partnerships inYour 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!” attitudeMutual Exchange of information; e-mail addresses -

Open, honest, reciprocalAllow Client Access to selected A/R data and

encourage self-correction, feedbackPartner and strategize with the errant client; It’s

about recycling, not waste management


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;” RecyclePillar #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

CFOadvisors, inc.Receivables and Relationships™

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

CFOadvisors, inc


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


What’s the “Buzz” on Social Mediaand 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


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

CFOadvisors, inc


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


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


Receivable RealitiesHow Money Due Depreciates

0

10

20

30

40

50

60

70

80

90

30 60 90 120 150 180 210 240 270 300 330 360

The Value of Money

an average of 10% in collectability lost per month!

(U.S. Dep’t of Commerce)

Aging cycle over a year period

$ Dollars


Accounts Receivable Portfolio

4000 Accounts

Outsource Company

72.7%

27.3%

1500 Accounts

client

Average Number of Active Accounts5,500

4,000 – CFO Advisors

1,500 - Client

Client87.8%

12.2%

Outsource

Average Accounts Receivable$450,000,000

$XX,000,000 – CFO Advisors

$XXX,000,000 - Client


Results Year “X” Outsourcing

Year-End Goal = 25% Reduction in Past Due PercentageFrom 39.8% to 29.8%

Actual = 24.4% Reduction in Past Due PercentageFrom 39.8% to 30.1%

34.734.1 33.9

30.7

33.2

32.432.9

30.731.4

30.1

34.6

39.8

3031323334353637383940

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

Outsource Accounts

Percent of $$ Past Due


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


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


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?


Abe “Walking Bear” SanchezZapata 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


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


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”


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?


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?

CFOadvisors, inc


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


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”

Thank You

Jerry AshtonPresident

(212) 982-2152CFOadvisors, incwww.cfoadvisors.com


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.

IQPC London June 2009

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