7 Never Aging Collections Strategies

Lori Pinto:

Thank you. Good morning. I’m honored to be here. I’ve been a credit manager for 32 years. My first job was with household finances. Right out of high school and from there on I just stuck with it. And it’s been a great ride so far. And because of that, and because of how long I’ve been in the industry, they asked me to do the evolution of the collection process. So this is quite an interesting agenda and seven collection strategies and then we’ll talk about some questions if you have any questions after this.

The evolution of collections. Does anyone remember when the fax machine was invented? Because I was there and I’m glad someone else was there. But we’ll talk a little bit about that and how it first came into. However how collections first started. Right. So you would recall dialing for dollars. We would get our aging reports printed once a month. We would sit there and pick up the phone. Have we had our phone numbers, our customer contacts and we’d just get on the phone and start dialing for dollars.

And that was all we had. It was monthly aging. If we’re lucky and we call those customers. Next, we went nineteen ninety-three excel replace Lotus One two three. If I can take you to have a history class here and out went the green bar paper and in came Excel spreadsheets which were awesome. We’re able to slice and dice our data. We could take the aging and build metrics by business unit, we were able to pinpoint our customer data a little more clearly. No more like I said, no more green bar paper.

We were moving on and we’re going places than today after watching the demo yesterday. It blows my mind how far we have come as a sect of these companies. And now we have ERP systems that we can mold and build data from. We have software like a HighRadius. Right, which is huge. We have ordered Dunning the automated Dunning process cash posting, billing. We’re really going places now. But we still need to recognize the best practices. Right. So even behind all that automation- we still need to stick with our best practices and really understand them.

I’ll go on to that next. For me, I think one thing I’ve learned over the years is to really know your customers. That was really a key for me as we struggle for timeliness and reducing DSO. For me, it’s been important to understand your contracts, understand your purchase orders from your customers, really understand how and what they need from you to get paid. When I worked at partisan companies, we built a customer-facing internet site where our customers could get copies of invoices in their statements and they could save their payment data.

There was kind of like every time I went to a meeting, I said- I wanted to be like Amazon, I want our customers to be able to go to this portal and be able to pay it to save their data, make purchases, get their aging, to get their statements, to get their proof of deliveries- all of that. And they were also able to interact with their collector via e-mail and with their sales team. So take any opportunity you can to work with your internal team if you can really build a platform for your customers to be able to pay you correctly.

Because at the end of the day you really want to make sure that your customers know how and where and what method to pay you. So there are no questions. I think that was a very helpful solution. Next, I would say is build a strong credit collections team. I found it empowering, my team really was helpful. OK. If they come to you with a problem, support them and be engaging with them and try to lead them in the right direction and especially having them know how to have difficult conversations. I think those are always a stumbling block especially for new collectors coming in.

They’re not used to having those difficult computations confrontations. Teach them how to walk through that call without feeling like they don’t have the support from you. Communicate with your stakeholders and I define stakeholders as the sales team- your leadership team. Make sure you have no surprises. I used to send my agent reports back in the day and green by paper. You know we used to mail them to our sales team, I had a sales rep say to me once. Oh, I said, did you get your aging? Did you look at it?

Lori Pinto:

What’s going on with so-and-so in this. Oh, that thing you send me once a month. I use it to line my bird cages. I’m really, please don’t tell me that. But nowadays we have electronic deliveries- obviously, email, make sure that you engage what your sales team communicates with them, send agings, ask for one on one meetings on specific accounts and really keep everyone abreast. Nobody wants surprises, no sales team wants to walk into a customer and you know, tell them the story that you had a conversation with them about a problem they want to hear about it ahead of time. So for me- engaging in one on ones with your sales team leadership team in your internal staff with their assigned accounts is helpful. Inactive proactive enables a proactive collection process. So again, communicate with your team. Create cash application rules for managing short pays which is huge, right. So I’ll just go back to communicate with your team. I have one on ones with each team member at least every two weeks to review their accounts, have them report to me the status so I’ll sit with them and I’ll ask them you know, let me see your aging where are you and what’s happening, where you need help and let them tell you what’s going on and then you can kind of guide them on best practice of where you want to take them to the next steps but don’t assume your staff knows when and how to begin collections.

So if your terms are 30 days and you expect a call at 45 days make sure everyone is aware of that right internally and with your leadership team and sales team- make sure everyone is aware of what your expectations are. And for Allegro they create cash application rules for managing short pays we created a share point site and Allegro which is very simple too. Well, if you have a good I.T. team. So it was a challenge if you have business partners that will help you. But we created just a site where we could interact with business units on short pages and overpays, we would send a notification once we received the short pay and ask the business unit to pick it up from there, is it the pricing or is the customer’s P.O. inaccurate. Knowing what is the resolution really helped us get communications going better between the collectors and the sales team and the business units. So I would also try to utilize the ERP system as much as possible. Most people are on, you know, big ERP systems these days but some people have homegrown systems, don’t be afraid to use your homegrown systems to get that communication going. OK, that’s out there. Sorry I had a minute. So now that we have some poll questions so does anyone have a global collection policy. Do you have some? Majority yes. No. It looks like everyone does. OK. So I think we’ll talk a little bit about communication. So to establish a strong credit collection policy, establish, and implement standard credit scoring across models that we’re talking about that down see us today. So modeling can be anything from using a DMB report to setting credit limits. You know industry-specific or however, you have come to use those tools. But what I did was we had created DSO reports by the customer, we had to ask from leadership to analyze our customer base and we wanted to be able to say that customer-specific DSL.

Lori Pinto:

So that was important for us. But speak with a leadership team. Ask them how you can get this information in front of them, how do you know what you want to say. How do you want to see it? We can slice and dice it however you want to look at it. Always keep it organized- regular meetings with leadership to discuss account strategies. Always keep them informed. Again, nobody likes surprises or bad calls or games that people want to be especially the sales team. They want to be advised of strategies and how we are communicating with their customers and ensure you have bought into from stakeholders for credit limits and customer communication you can set a credit limit whatever you feel is appropriate for that customer. But if your leadership team and your sales team aren’t on-board, it’s not going to make a difference. So communicate them you are really the person who knows best and just stick by the knowledge that you have and the information you’re getting from your sources to help you make those decisions. I have another poll question. So I think this is how many of you come across Post Audit deductions in your organization. This is talking about short pays, overpays. The thing that surprised me more is that we have more overpays than we do short pays which are kind of interesting but pricing is pricing if it’s wrong it’s wrong. Right. So do it. Does anyone have a lot of short payers and deductions? Yeah, have it. I’m not selling HighRadius but they have a great product for deductions management that you could sit in on and watch, it’s amazing. But if you can’t do that, you know if you don’t have access to, you know, getting the modules from HighRadius, you could do your own internal strategies. We worked closely with our sales team to ask them to help us with the pricing issues that we were having.

So we again use the Share Point site in other situations. We were able to create an automated response to the sales team to get them the information they needed to get out with the customers to ensure that three-way matches were working with the pricing coming from all of that. So ensuring an early dispute identification establishes a standard process for handling disputes captures claim documents and gathers all a centralized repository and proactively prioritizes research and recovery of invalid deductions to avoid write-offs. That’s a lot of words but basically what we did was work with Cash Apps team. I mean, they are the people that are managing and processing these short pays. So ensure that the expectations are set with them, that this is the step, this is what you need to do right. If there’s a short pay make sure the payment is applied accurately by what the customer’s paying. But what I had them do was just screenshot the payment where you can see the short pay the customer information there. We saved it on a Share Point site that the whole credit team had access to save the customer, save the invoice, had the cash applicators get a copy of the invoice that is there. They sent the screenshot email to the collector, notifying them that there was a short pay, then from there the collector could just go right to that folder and attach it to an email to the business unit and everything was there for them. So that collectors didn’t have to do a lot of research but they were notified immediately of when there was a short pay and that work-flow just worked seamlessly.

Lori Pinto:

So we were able to stay on top of those short payments timely and really get the information out to the stakeholders who needed to fix it and fix the price going forward which is always the goal to make sure our pricing and your pricing are accurate. Optimized credit management, so work with your leadership team to define approved appropriate credit limits for your organization, automated credit limit review for smaller accounts and utilize the internet, again HighRadius- I just sat through the collections portal yesterday and it’s amazing right. So there is a lot of dashboards reporting there. But if you can’t do that. Some of this you could do on your own and really use your ERP systems again but you can set your own credit limits up. I use Microsoft, I’ve taught my team to use Outlook for reminders that they have the task option. But I also will just set up meetings at like 7:00 in the morning off from 8:00 to 5:00 and use them as those reminders. So when they come in the morning there’s a list of people that they have to contact. So there are ways around not having great software that you can find your own tools internally.

Finally, automate invoicing and bill and payments bill electronically. If you can get those emails to get those invoices out to your customers via email. And the days of faxing is usually over. Everything is being emailed nowadays, it enables self-service payment portals for your customers. That can be done pretty quickly and easily with some help from your I.T. team. And most of our customers have their own portals nowadays if you’re dealing with large accounts- utilize their portal, there’s a lot of information out there that will help and guide you to getting paid timely on their terms. If you have large customers it’s different, if you’re bigger than your accounts and your customers. But if you’re smaller than your accounts and customers you are forced to use their portals. But it’s there’s a lot of information out there and it’s just balancing all of that to be successful. So in summary and if anyone has any questions you can open this up to questions that I think I went through that really fast. But I don’t know if there are any questions about this, for the room. But, I’ll open it up now if anybody has anything.

Lori Pinto:

Yes.

Audience:

Hello!

Lori Pinto:

Hello!

Audience:

Hi! Good morning. This is Ruda, A business researcher. My question is if you want to implement the collection stretch and you want to strike the right balance between calls and emails. What would be the best practice according to your experience?

Lori Pinto:

I think it depends on how your customer is expecting to be communicated with. Right. So currently my customers are in Taiwan, Japan, Malaysia. I can’t pick up the phone and call them. So my business is dictating my communication method. So right now a lot of emails my past life I couldn’t email one of those customers they would never answer an email. So it really dictates your business unit. And I think what your customer’s expectations are for your method. But just I would just be well versed in all of the methods that you need. If it’s sometimes, it’s you know sending the remember the days of the postcards who would send like postcards. You may still have customers that are expecting a friendly reminder in the mail. Then you may have customers that you know want an automated statement every month and that’s all they want. So we set up internally to send automated statements once a month that to the email address that’s getting the invoices. So I think it really there’s every single method out there to communicate with someone or a customer or a huge corporation be aware and well versed in all of them because you’ll probably be going to need them all to be successful.

Audience:

Good morning.

Lori Pinto:

Good morning.

Audience:

What would be your advice for, I have an international customer that tends to not respond to my emails until their account is like 60 days beyond their 60 days terms. How would you recommend that I manage that customer on an ongoing basis?

Lori Pinto:

I found get getting your stakeholder involved. So if you have a sales office in that area if you have a sales team, pull the contract. You know understand the account. Ideat a lot with the international side. And if I’m fortunate to have the sales team in those locations so I really work with them. But having said that, they don’t have the same expectations as I do. Right. So I would have Web-Ex meetings with them with the customer to try to get the customer on a Web-Ex with your sales team to kind of help you with that conversation. But most companies you should have a support team with that account. I assume no sales team.

Audience:

We do I just have never engaged.

Lori Pinto:

Yeah, I would definitely. I mean you know talk to some companies it’s like sales are here collections are here. Right. I found over the years I’ve been able to merge the two and been very successful with it. One of my positions, I actually traveled and went to sales meetings and I was able to get in front of the sales team because nobody wanted to talk to the credit manager. It was like being called to the principal’s office. Right. So being able to bridge that gap a little bit and have that not been so scary. I held educational seminars with the sales team explaining to them what aging is you can sentiment aging but if they don’t know what it is then they’re not going to be helpful you know, just explain it we’re not the bad guys. We’re trying to help you with your sales. Right. We’re trying to help you establish growth for the company but we need to be paid. So how can we bridge that gap? How can we work together to you know, have a successful reduction of DSO and successful delinquency? I would definitely reach out to a sales team. You know you don’t have to start at the top maybe call the sales guy that manages the account. But, sometimes you know I was going above people is not the best way to manage it but send him an email saying look I’m having these problems. How can you help me? Just be honest and don’t be afraid to ask for help. I found that they really were willing to work it’s their bread and butter. They don’t want to shut the counter.

Lori Pinto:

Yes.

Audience:

Regarding measuring the collections. Just to think that DSO is still relevant for measurement nowadays, so do you have other metrics for measurement. How do you see the measuring the collections activity?

Lori Pinto:

I love analytics so I have a plethora of reports right. So I have the DSO by customer. I look at the aging balance buckets I look at it by a division of the company I have the top 10 accounts of the highest balance, I have the top 10 most delinquent accounts. So I think DSO is relevant. If that’s what your leadership team wants to look at for once you know how are you going to bridge that communication with your leadership team. So it’s really what they want to see but we, as credit managers, should be looking at it slicing and dicing it in multiple ways. So you’re not going to always focus on your most delinquent accounts, you’re going to focus on your highest balance accounts to stay over their credit limit. So, I think when you’re coaching your team to you know- to come on Monday and just like what’s her name on the automated. Frida, just like Frida is afraid is coming in the morning she’s going to you know, give you your top 10 accounts to hit. But don’t forget about the small accounts that you know are running delinquent but it’s not I had balance do that on Tuesdays you know. So I think taking a little bit of each category and looking at it is helpful because it kind of helps you manage the whole portfolio at the same time. Good question though.

Audience:

Yeah. I’m Don Hamilton I am V.P. of credit for more international. For years I was with Lawndale Brazil. This question is we calculate DSO, so we also calculate average selling terms to Delta’s over what I call average collection days. My team’s bonus is based on the average collection dates right. I can’t control selling terms but my team can control the back-end piece of the collection fees. So that’s the metric we share with management every month and we can break it down by region sells etc. But we really focus on the back-end piece of that because I keep control DSO but I can control collection time so it might be something you want to look at and as I say for years I’ve used that as part of our bonus calculation.

Lori Pinto:

That’s like collect and collection effectiveness.

Audience:

Yeah, we share different management. But like you said, the other piece it puts the burden on sales that suddenly start seeing the average selling terms creep up management comes in and says, what do you do? Right. So it’s an effective metric for both sides.

Lori Pinto:

It makes a difference if you’re in a company that pays commissions when the sale is paid or they are paying commissions at the time of sale. Anyway, you know there’s a million, not a million but there are several finance metrics out there that you can utilize to look at your data. It’s nice that you’re giving your staff bonuses to you know, that’s helpful if you can have some bandwidth even if it’s a Dunkin Donuts card or you know something to recognize awards and recognition is huge that’s a whole another PowerPoint. Well, thank you so much. It was great to be up here. I wish you all good luck and your future endeavors. Thank you very much.