Collections Evolution: Past, Present, and Future

[00:10] James Robinson:

My name is James Robinson. I’m the treasurer for Lhoist, North America. Just a little background about our company- we were founded in Belgium, about a hundred and thirty years ago. It’s a private company, closely family held and proud to be so. We’re a global leader in lime and limestone products. We manufacture lime by extracting limestone from the earth and then calcining it or burning it to make calcium oxide which is otherwise known as lime. Our headquarters are in Belgium. Our North American headquarters are in Fort Worth, Texas. The North American business makes up about a third of our business overall, so it is a very important business segment as far as the group goes. So with that, we gonna go around ahead.

[01:25] Alicia Geades:

Hi, I’m Alicia Geades, and I just wanted to give you an overview of our collections landscape today at Lhoist, North America. We have about 2000 active accounts, normally about $25 billion past due which is 22,000 open items or the invoice level items. And we’re working with about four and a half FTEs for collection. Primarily we use email for correspondence, but still, making phone calls is necessary. Bernardogoing to give you a little bit of background on the long term vision that we had.

[02:06] Bernardo Aguilar:

So for ‘the part’ about being at conferences like this is that we can hang out and meet other people and commiserate over our department collections and credit collections, right? So everyone, more than likely, people have the same goals of achieving more with less, improving the overall customer experience and then making collections more proactive, right? How do we handle the challenges in collections when our customers are requiring or requesting that we implement their invoices into the system? How do we handle more with the same amount of people that we have? Achieve more with less. That’s the idea of how we want to handle those different challenges. When I was hired, I was hired to be an A/R manager and credit analyst, reporting to Alicia and James. Initially, when I was hired, walking into the team, there were people who were utilizing Excel, you know, our best friend Excel and collections and we had different tools, we were using outside of SAP, and we were shuffling through a lot of information from a lot of different areas.

[03:30] Bernardo Aguilar:

How do we improve the overall customer experience? How do we move from the dial down approach? How do we collect more proactively to gain real-time visibility to the accounts that we’re managing? And one of the most important things I think for people who are gathered and want to know more about the solutions available. We, too, had that phase in our journey at the collections department. How do we make our team more proactive? How do we reach those customers before the 60-day limit? Or how do we touch them quicker and make sure that every customer who has a past due was being contacted?

[04:26] Alicia Geades:

So some of our key challenges as Bernardo was talking about, is that we were very reactive. A lot of that was because we just didn’t have the tools to be proactive. Our collectors were death by technology. I love that we know working on notepads on computer, handwritten note pads, working in email calendars with setting reminders. There’s creating their own correspondence outside the system and sending it with no audit trail, which led to poor customer experience so we were rarely contacting anybody with the past to balance less than 30 days beyond terms. You can imagine contacting a customer that’s already 60 days beyond terms and telling them that we’re going to place their account on hold while we’ve never contacted them before and that would upset them. So we had to turn that around and contact them more often and early and even become proactive.

So we were finding ourselves with the question- How to get to that point where we were proactive and contacting more often? And earlier, we would add someone to the team or we find a solution that would help prioritize and make the correspondence more standardized and easier to send out.

[05:51] Alicia Geades:

We have multiple company codes worked out of SAP. We have multiple operating companies and multiple company codes so we have different collection strategies for different industries. We have customers that cross different company codes and all that. So we had not only that but also the non-standardized correspondence as a big issue. So we looked at the transition plan.

[06:19] James Robinson:

So we looked at it and as we identified our problems, really how we were going to get to the problem accounts that we really weren’t touching at all. What can we do? Can we build something probably not feasible for us? Can we buy something off the shelf, the box perhaps of the cloud-based platform? Maybe we really had a strong desire to stay within SAP. So it’s a driving force for us. We wanted our architecture to be in one spot only. So we went through all the different scenarios and applications out there. Really combed to figure out and saw what our next phase in collections would look like. So with that, we looked for something that will move the needle, certainly, be great and just make our collector’s jobs easier. Really what we want to do is impact the dollars. We evaluated multiple solutions. We looked at countless vendors, all of their offerings, and then just started to pare it down. Really what was our core problem? And not trying to solve every problem at once. But really, what could we solve specifically that would actually move the dial above it?

[07:56] James Robinson:

IT dependency was a big thing for us as well. Minimal IT resources really focused on other parts of the business. Keeping the wheels on, getting our product to our customers, keeping our customers happy, but not much appetite to really invest in the A/R space. We’re lucky to have, what we think are great customers, but they may not pay us exactly as terms are described. So there was at least some room to be had there. Then the other thing we looked at was the ease of transition and how could we actually, within our work or regular workspace, could we tackle a project and was it feasible for us? So with all the considerations, we went to the technology that was available. As we went through and talked to different vendors, we actually let our process kind of morph and not knowing what our ultimate answer was going to be, we knew that we wanted to get to our accounts sooner and get to all the work we knew we hadn’t achieved. Again, like Bernardo was saying earlier, we always got to the big dollars, we were always dialing for dollars, trying to get the big check-in but never touched the little guys. So that was a key movement for us.

[09:30] James Robinson:

And then, as we sort of kind of morphed our scope and objective, it became clear what the solution might look like. So I encourage you to sort of be flexible with what you think the solution might look like. We started with wanting the world and ended up with a little slice. That’s actually turned out quite well for us. So, as I stated, we were looking for something that would actually move the needle and not just make our lives easier. We wanted to do the work that we thought needed to get done without adding headcount, so we knew we had to be more productive. We wanted to be able to see it all in one place.

[10:27] Alicia Geades:

So James was just talking about is that, you know when we walked in to identify the problem with collections and we knew that there were many accounts we were not getting to. We wanted to add an objective to reduce DSO and to achieve higher satisfaction with our customer base and with our employees. As a matter of fact, we wanted them to feel like, at the end of the day that they’ve made a difference and done what we asked them to do. We looked at a very big picture. What we do and why do we go to a full cloud-based collection system and move outside of SAP, or if moving outside of SAP know wasn’t gonna be right for us? But what we’ve focused on was the ease of sending the correspondence or contacting the customer and the professionalism. So as you can imagine with four or five FTEs all working in their own manner and creating their own correspondence, there’s a lot of room for error, there’s a lot of room for mistakes. We had plenty of times where customers received emails that were misspelled or even with someone else’s invoices attached to emails, which is a cumbersome process in itself. So we were able to adopt the correspondence accelerator which is just an add on inside the collections piece and SAP and very easily standardized letters of correspondence documents and packages. And those go out to the customers with very ease– two clicks, basically a drop-down and then click the send button and all invoices are attached and anything else you want to set up with your correspondence package.

[12:07] Alicia Geades:

So it sounds very easy and that was a quick brief of what it is but what we achieved once we implemented that was– we no longer had those small-dollar accounts that were sitting out there untouched for 200 days that we had to send to a collection agency so we ended up saving $10,000. This is in the first year of use, that $10,000 in collection agency fees were reduced over time. We now limit overtime to almost nothing and we eliminated the need to hire an additional FTE. So, we had total savings and just pure dollars in the first year of $70,000, which meant exactly what or exceeded actually what we had published in our business case originally. We saw a DSO reduction of two days and obviously once you’re able to contact your customers more quickly, you’re able to identify credit risks. So this uncovered a lot of things that we had missed before. Customers telling us that their standard terms were 60 or 90 days and that that’s how they always paid us. Well, we didn’t really notice that before because we weren’t contacting them until well after. And then they would tell us they were mailing the check and we said okay thank you and moved on and the cycle repeated. So now we’re able to identify that at 45 days instead of 60 or 90 or even earlier and deal with that and talk to them about what our credit terms are and have these negotiations. So obviously, we improved the count coverage and we were able to touch all of our customers within 15 days beyond terms, and the team saw five times productivity increase.

[13:49] Alicia Geades:

So within just the first 40 days of use, we had seven users on the system so the whole team, beyond collectors, we were able to send out correspondence packages to over 1200 accounts. They are actual emails so 6300 emails approximately, and that would include a first notice, a second notice and that type of thing. So it’s a continual follow through and with a sort of elevated communication or you know reminders.

[14:27] Alicia Geades:

Does it have fax capabilities and also do you have print capability? Obviously we only had five different packages which are a good thing as we don’t want to spend time mailing on the regular postal service but occasionally it’s necessary. And then the big one for me is, we had 22,000 invoice copy sent. A lot of times my team says that they’ll reach out to a customer and find out that the customer has no record of the invoice, to begin with. Either it didn’t arrive from us or it was misplaced in their company internally. So I found that one of the biggest benefits is having those invoice copies attached to every email so that’s no longer an excuse. And that removes a touchpoint. If they’re in the first communication, then they can come back and tell us, “Well, I didn’t have them but I have them now and they’re being processed,” and it’s just so much faster. So, obviously the team has a much easier time. I don’t know how many SAP users there are in here, but the old standard collection reprinting an invoice and attaching it was pretty horrible, you had to spend you know 100 clicks to print an invoice in the first place, then you have to save it as a PDF and then drag it all into an email. This is just such a huge time saver because the system automatically pulls them in that attachment. So that is how we were able to get such a great productivity increase.

[16:00] Audience Speaker:

So where do we go from there? We at Lhoist have eliminated the on-demand cash applications, and then the accelerated correspondence. But we’re here to grow. We’re part of the audience to try to learn and see how we can grow within the department. We are familiar with artificial intelligence and after the keynote speaking of the associate’s presentation, we were very enthused about the product. We are definitely always trying to look and see what’s available for us to take the current amount of FTEs or variable constraints to try to utilize and maximize our department.

[17:08] Alicia Geades:

So reactive versus a proactive approach. That was a definite lesson learned. We really thought there would never be a day that we could contact the customer before an invoice was due. That would be crazy. But we’re there and we were there so quickly that we were amazed. Prioritizing the customer experience over dialing for dollars– our executive team and our sales groups, our operations folks, we’re all very customer-centric but we’re risk managers and we’re worried about turning over the A/R as fast as possible but we’re able to think of that in a whole new approach and include customer service which is very important to improve the customer’s experience. Improving the collector’s productivity and really improving their daily work life by giving them a great tool that’s easy to use. I have team members that came up to me after we used it for a little while and said “I love it. I love my job. This is so much better.” We don’t have excruciating ways to talk to our customers anymore. And we gained end to end visibility through the whole process with standardization. So that’s pretty much it and we’d like to open it up for questions.

[18:39] Audience Speaker:

Take me through dispute resolution.

[18:50] Alicia Geades:

So dispute resolution is also part of this. We didn’t touch on it but that was another sort of forgotten animal in our company. Things that were just sort of left, unless they were huge dollars, they got left behind. The great thing is we were able to create correspondence packages to directly deal with disputes. Those go into the dispute management queue and then the person responsible for that worklist goes back and works through the collections worklist to keep the notes and the follow-through and all that. So you’d be able to attach the back up for invalid disputes and then attach the back-up to the correspondence package that’s sent to the customer. So it’s been a great help with that as well. It doesn’t work directly in the dispute dashboard but we were able to utilize this to help with disputes as well.

[19:55] Audience Speaker:

Hi. Just keen to understand, maybe a little bit more about how your customers have given you feedback or any experience that they’ve shared with you in terms of the revisions of the processes you’ve optimized?

[20:00] Alicia Geades:

So beyond the team being thankful for the tool that they had, I think the sales team was appreciative and we get a lot of feedback in that manner. We can copy a salesperson on this correspondence or this communication if necessary. So the customer who is talking to the salespeople and comes back to us about how they appreciate our partnership, helping them if they have a reason for which they’re not paying. For instance, they needed some other documentation or proof of delivery. We have received feedback that we’re much faster at responding and much more thorough and able to get them an answer that’s meaningful and they’re able to the process. Our customers want to pay. They don’t want to not pay us but they need the tool to pay us or they need documentation so it’s been great for that.

[21:00] James Robinson:

Also what we saw was that our sales force now knows what to expect. It’s not a one-off communication that’s driven by an individual, it’s more of a packaged solution. So they know if their customers are 15 days past due then they’re going to get ‘X’ letter and it’s going to have everything they need to pay and hopefully that’s all they need. But it is not they are unknown, they’re much more comfortable with that communication. The collections effort then it was– in the previous state, where you might have a misspelling or you might be too forceful, at least now we can drive that and really manage it.

[21:52] Alicia Geades:

Are there any managers in the room? It feels awful to receive a phone call from the salesperson who says, “I cannot believe your collector just contacted my customer and said we’re going to put them on hold. That’s my most important customer,” — so a lot of that has gone away with being able to utilize this standardization because that verbiage just isn’t there. So that’s another point.

[22:17] Audience Speaker:

I wanted to understand how was your journey in terms of establishing the parameters by which your worklist gets created, in terms of the different payment arrangements that you have with your different customers?

[22:43] Alicia Geades:

So the rules were established before and we were able to tweak it with the implementation of this correspondence accelerator. We did have a workflow for working the worklist priorly but as you can imagine, they were never completed and they could never get to the bottom of that worklist. So we were able to reset the follow-up rules so that we’re hitting them at seven days beyond terms or within seven days of no response from the customer. So the journey was pretty easy. That’s for a standard SAP configuration and this kind of sits on top and makes the whole process easier.

[23:49] Audience Speaker:

You calculated a ‘savings per year’ that was a yearly amount. Have you calculated a radio return on how quickly did you pay out this investment?

[24:06] James Robinson:

It was under six months. And especially with the DSO savings, it was a no brainer for us.

[24:18] Alicia Geades:

We looked at a much more broad solution and that’s harder to sell. More dollars you’re spending for looking at the rate of return. So this was absolutely a no brainer, just like James said it was. The cost was right and that sort of instant benefit was there and we can see that.

[24:39] Audience Speaker:

Hi. I have actually two questions. How large is your receivable customer base? You have 4.5 FTEs and 22,000 transactions and now you’re cycling through your receivables. How many accounts do you have? And then secondly you said in your correspondence you’re sending out invoice copies of everything that’s past due with your correspondence. Are you running into issues where the email becomes so large for an email that it fails to be received by your customers?

[25:20] Alicia Geades:

The first question about the sizes– it will zip the file. At a certain size, it can zip the file or at your request, you just check a box and it will zip all the invoices. So that part is not an issue. But I think that 250 invoices in one email, was our highest number. So you can imagine the time that was spent to save each one of those as PDF but your other question was– we have about 2000 active accounts and our revenue is just about a billion dollars. So 22,000 was the number of open invoices past due approximately anytime.

So that answers all your questions? Our average monthly A/R is about ten hundred and fifteen million.

[26:22] Audience Speaker:

So basically it works with SAP? It’s like a watching module sitting on top of the ERP?

[26:34] James Robinson:

Correct. It’s a solution by HighRadius. It’s built directly into SAP and looks exactly like SAP. I think the cloud solutions are turning out to be a great alternative and we would look at going to a cloud-based solution in the future as our process kind of matures and morphs. Certainly, we’re the leader as far as process goes within our larger global company and we were looking for solutions that will better fit that total footprint. Currently, we’re only using this in North America. But it is available in different languages as well.

[27:38] Audience Speaker:

How was it during implementation? How long did it take?

[27:40] Alicia Geades:

Implementation was about 30 days, I believe, maybe slightly more. As far as IT, there was very little IT involvement necessary. All the main time spent from our internal IT was to write the file or the script or whatever to send our A/R and our sales data over so that it could recreate the invoices. They look exactly like our invoices so it’s not pulling from saved invoices, it’s recreating the invoice every time to match what our invoice looks like. And then as far as creating the correspondence and the packages– that was all done by me personally. It’s editable by me at any time or I can create/delete all that. I don’t need IT at all, which I love. In our organization that’s a real problem. So it took me probably no time, a few days just to write everything, but then after that tweaking it and really figuring out took a couple of weeks.

[28:46] Audience Speaker:

30 days in total or is it 30 days after implementation?

[28:50] Alicia Geades:

We were right on schedule. Exactly what they said.

[29:03] Audience Speaker:

Hi. Is it only the collections module you’ve implemented so far? If you were to implement any other HighRadius module, what would they be on top of the collection modules?

[29:17] Alicia Geades:

Well, we also have cash on-demands or Cash Application group using a HighRadius product that’s cloud-based as well. And the next thing I’d like to look at is the credit management cloud. That’s one of the things we’re really looking at trying. To figure out if there’s a return on doing that or not.

Our credit management is sort of in the same boat that collections were in.
We’re working on standard SAP. We don’t have FSCM or anything implemented in SAP for that. So we’re not able to link in real-time credit scoring and any of that. And it’s harder to set up our worklist based on the risk because we’re working off from a simple risk category, instead of real-time updates from a third party. So that’s what I’m hoping for, fingers crossed.