Credit & Collections Digital Transformation Workshop

[0:00] Bryan DeGraw:

Welcome, everybody. Thanks for coming today. I know there’s lots to choose from. I was overhearing a conversation when I was getting my badge this morning, some people looking at the agenda and saying, there are so many choices. So I’m glad you chose this one. Hopefully, we didn’t scare other people away with the word workshop in there, we’re not gonna make you do anything, there won’t be any homework. But hopefully, it’s gonna be a session that you get value out of. What I’d like to start with is, and this is gonna be our agenda we’re gonna talk about you know who back it is, I think most of you know who we are in the market. What we do, just give a quick overview of that. And then I’m going to walk you through top performance and customer to cash. So the way we’re going to unpack this and then bring it back together is to share with you first performance metrics and how you go about identifying what those key metrics are in the end and customer to cash process. Then we’re going to talk about how you evaluate where you are from a maturity perspective in your processes. And that’s a key factor of understanding where you are from a performance perspective. So there’s a strong correlation to the maturity of processes, the use of best practices that results in, from our perspective when we evaluate organizations that are world-class and the ones that are not that really exposes what the differences and I think it’s kind of fitting that we’re in a sports stadium a sports environment because I often use an analogy around sports to help bring that point forward is, you know, we all have our favorite teams, yours may play here, mine actually plays in New Jersey. So if you see a playbook laying around today, I lost it. That Dallas playbook, you give it to me, I’ll bring it back to my friends in the Meadowlands.

[01:40] Bryan DeGraw:

But the point I want to make about sports is you know, we all have our favorite teams, and the first thing you look at is the score. Who won and who lost in my team’s win? And, you know, also look at standings. What’s behind that though? Why are those teams that consistently win? What’s different about them, and that’s what’s exposed around the use of best practices and capabilities? They’re doing things differently and are driving that performance. And so whether that’s, you know, how they train, how they prepare, how they prepare for games, the use of obviously today the use of technology, legally, technology to evaluate others, not real-time. Those all go into those factors and make a difference in outcomes and performance. And then my colleague Robert, what he’s gonna do at the end is kind of bring that together. And then really obviously, part of this, you know, that we talked about in the description is, you know, what does a really an end to end transformation project exercise looked like and so Roberts gonna kind of bring that together the pieces that I’m going to talk about, he’s gonna set you know, really help you understand how would you do that? Okay.

[02:45] Bryan DeGraw:

So again, not a workshop in terms of, you know, we’re not going to break out into sessions. But there are going to be some areas that I’m going to go a bit slow, especially in the capabilities to help you understand how you would go about that if you were to do it back at your own organizations. So again, I think most of you know who we are. But we are a business process advisory firm, intellectual property is our Cornerstone and the value that we bring, I would say we have arguably the largest database of back-office performance metrics across finance, HR, IT, and procurement. So all the key metrics that we were just talking about, you know, everyone wants to know, and have data and understand how they compare to that data. And that’s what we have. The other important thing I’ll point out is you often hear, you’ll hear myself say it many times today, if you’ve seen Hackett research, you’ve heard about the concept of world-class. So that is not something that was created by our marketing team. It actually is part of our empirically-driven database engine that plots organizations in the illustration here that we call our value grid. Okay, so it looks at measures of effectiveness and efficiency. So it’s a balance there. Those organizations that in that upper blue right-hand corner, they’ve balanced cost with quality. Okay? And so organizations that we deem world-class are not the cheapest organizations. They’re also not the organizations that are providing White Glove service in terms of finance, HR, IT, procurement, so they’ve balanced the two of those. Okay. And of course, you can see in terms of who is who our clients are, who we work with, across those different, key components, their databases, global cross-industry, cross geography. And just a little bit more about our entire suite. Everyone knows us best for benchmarking, okay. And that’s what I described there.

[04:47] Bryan DeGraw:

What Hackett describes as a benchmark is actually a project many times when I talk with individuals about the interest they have in data and metrics, those words are synopsis, they’re the same, they’ll say, ‘Hey, I’m looking for a benchmark’. What they’re really saying is, hey, I want to know what the cost per unit is, or I want to know a key staffing metric. For Hackett, a benchmark actually is that exercise that we go through collecting all that data, okay. And then just, you know, sharing again, we have a traditional transformation, work consulting work. That’s where my colleague, Robert works, he actually what he’s gonna share is what he does with clients in terms of on the ground projects. We also have training as part of a hacking Institute. So again, just a little bit about who we are, and why we’re here. So now we’ll get into the good stuff that is world-class mean, and why is it making a difference? Okay. You can see again, a key metric is the cost of finances, percent of revenue. And that’s an outcome. And I’m going to share a lot today about outcomes versus what’s driving those outcomes, as I mentioned, but efficiency and effectiveness, I want to make sure that I drive home. That key point is world-class is not all about just being the cheapest but again. As a result of the decisions they’ve made, around how they organize the tools and technologies, they’re leveraging the process design, and have a partner in terms of sourcing and placement of the work. The outcome is having less cost, having a faster planning cycle time, fueled performance reports because they rationalize what we need to know and what’s, you know, what’s a KPI versus a metric. I often talk about using the dashboard of a car. You know, there’s information, and then there’s metrics. And then there’s KPIs. When my wife and I, you know, trade vehicles, so I have a Jeep that I drive around in, I get about 18 miles per gallon. If my wife drives it for a week, all of a sudden, it’s up to 21. So she drives differently, okay? The gas gauge tells me how much gas is in the tank and information doesn’t tell me anything about my performance. But when I look at that metric there about the miles per gallon, that’s a metric that’s telling me performance-wise, what’s going on? And then I compare how she drives through how I drive. And there’s a difference in how we do it. And she’s actually performing better.

[07:08] Bryan DeGraw:

So some key metrics and we obviously look at service, we look at cost, and we’re looking at cash. And really the challenge is how do you best balance those, and that’s what world-class organizations are able to achieve. We also look at obviously, over time, as I mentioned, we have a lot of data, we’ve been gathering data for a long time also. So there are trends in that information. And that’s really valuable to look at too. And of course, I’m sure when you’re looking at your metrics, you know, you’re only looking at it at a point in time, but you also want to understand it over a period of time to say, first of all, is the process stable? When is it not stable? And also, are we trending in a direction that’s the, you know, that’s aligned with our objectives. And so one of the things again, kind of pointing out the balance of efficiency and effectiveness. I always want to drive that home. That quality is equally as important as doing it fast and cheap. We’re also starting to see and kind of you see our forecast of results where we’re thinking things are going to evolve for world-class. And obviously, we are constantly looking at the questions we ask, making sure they’re contemporary, they’re aligned with how organizations are focused on their improvements and goals, and especially technology. We’re starting to look at it moving forward, kind of a slice of world classes, almost, what we’re describing is a digital world-class. And so, you know, and that’s an important question: what are these tools in the marketplace, actually providing in terms of benefits? So, you know, going forward, we’re actually going to start looking at a slice of world-class technology that is digitally enabled and what that does in terms of performance results. The question I often get is, you know, so when you talk about customers to cash, you know what’s included there and you may call it customer to cash. Sure. Many of you call in order to cash. When we work with our clients that are in the shipping and logistics industries, they call it to ship to collect, because that’s what they do. So what I like to always do is level set on what our scope end to end is. And so it’s looked at from credit all the way through to when necessary dispute resolution and dispute root cause eradication. What I do like to say is, for organizations that you know, do focus and some do just call it ordered cash.

[09:33] Bryan DeGraw:

A best practice is obviously don’t take an order until you’ve credit checked that customer as part of a standardized process. And also something that is very critical for organizations today is Master Data Management. So, credit, check that customer, get that customer properly set up in the customer master and then start taking all the orders. Okay. So this is a starting point everyone wants to know these metrics typically firsthand. I need to know a cost metric, I need to know a staffing metric, you know, that’s a top of my goals and objectives, whether you’re managing an organization for many years, or maybe you’ve just come into the role to take over the customer cash process, it’s a key area that you want to understand. Typically, the first question I get when I share this is not for 100% but a big majority of the audience I speak to is how is that possible. There’s a big gap there in terms of the FTEs per billion that are in these processes for class. And then the associated cost. And again, the, what’s represented here as process cost is going to be the fully loaded labor costs of those associated FTEs and then any outsourcing so if you’re leveraging any third party to help you with collections, with credit analytics, cash, application, work, and anything that’s with a third party, that’s also. included there. So what I want to do in this session here is kind of unpack this for you and start talking about what those world-class organizations look like, what are the characteristics that are driving these outcomes? Because, again, this is an outcome metric. And when you think about what you have on your scorecards, I’m sure you put them into categories. Whether you label them that way, you certainly think of them in terms of leading and lagging, you also should be thinking about them in terms of is this an outcome metric? Or is this a practice, you know, or compliance type of metric, that tells me to give me a gauge of something that I’m doing that may be positive or negative, that is resulting in an outcome such as your staffing or your cost.

[11:45] Bryan DeGraw:

So we’re gonna break it down quickly into each one of the areas and hit on some key areas. So when we look at credit, obviously, fast is okay, but you certainly want to be prudent. It’s really important that you’re turning them especially in today’s environment where the customer is really at the center today. It’s kind of ironic when I talk to individuals like yourself who own the customer to cash process, I mean, it’s part of, of our, you know, it’s in many of our titles. And finally, in 2020, organizations are starting to say, you know, what we’re gonna start with the customer needs and focus on customer experience and satisfaction, what’s always been there. So the balance here in credit is, you know, yes, there’s a customer involved. And you may not be the only supplier. So speed is very important to come back, but you gotta come back with a prudent answer. Part of how our class is able to do that you see is they’re leveraging technology, a much greater percentage of their scoring and modeling for credit has been automated, okay. And of course, you know, depending on who your customer base, there’s going to be a high percentage of available external information that you could put into a model and there may be less if they’re private. But bouncing that and looking at you know that kind of the 80-20 rule how much technology can we leverage in there. Another important thing now is more practice again. And it also may be cultural when the Connect credit team gets involved, okay? Are they an afterthought has the owner or been taken you know, has the train left the station and say hey, you need to set them up with a credit limit and system just so we can do you know, check off boxes that it’s done and you know, nothing gets put on hold. When we look at this question here around when does credit get involved? Okay, much earlier in the process, and then we did a correlation. So those organizations that do involve credit sooner in the process, what is their performance in terms of average days, the liquid, and there’s a significant difference. So credit is involved more and I always say credit is kind of your first line of defense, that you’re deciding whether you want to do business with it with a new customer or organization. You also need to define how you’re going to do that, are you going to extend terms or you know, do you need to risk a high knee and you need to offer them a different option to be able to do business with you, starting earlier definitely has a difference in performance outcome.

[14:15] Bryan DeGraw:

So order management, okay. Again, automation really is what we see here, a greater percentage of orders are coming in, in an automated fashion. Okay. And it allows world-class to be able to fulfill much quicker so there’s a correlation to automation, driving a key metric on efficiency on the cycle timepiece there. The other piece is the modifications. Okay. So again, it’s not just about you know, how fast can we get things through, but then you’re also doing rework. Are you doing model modification? So, again, what classes really looked at that process, identifying what is needed to again in their environment what is considered an accurate order, all the information can ensure that it’s fulfilled over time. And so we also look at modifications for classes, fewer percent of those orders that they have to go back and fix and modify. So customer billing, when you think about this process, and again, with the customer in mind, I mean, it needs to be timely and it needs to be accurate. Nine times out of 10 when we get to the dispute management process the person at your customer who’s interacting with you on an invoice basis, so that person in accounts payable, they’re not the same person that’s buying your services and products and you can have the best products and services in the market. But if you’re difficult to do business with that’s going to wear on that relationship over time. And over time that customer may say you know what, they do have the best product but they’re so difficult to do business with. I don’t get invoices accurately. I have to do A lot of you know, they’re causing a lot of work for us and our back office, maybe we’ll try that product that was second on our list. So when it comes to invoicing, it needs to be timely, it needs to be accurate. That’s for that accounts payable person. That’s how they know you. And that’s what they associate with in terms of customer experience with you, which is again, something that organizations are looking at from a measurement perspective. They’re starting to look at how we measure customer experience, movement, back-office interaction perspective, and not just our products and services that are, you know, front-facing in the marketplace. So timing is inaccurate. I’ll also make the point that when I’m working with clients, because I do wear two hats and Hackett supporting both customers to cash as well as purchase to pay when I’m talking with organizations that are managing their accounts payable process, we talked about the payment cycle time and you probably know this firsthand with some of your customers. As well, their clock isn’t starting until the ladder of receiving goods and services or getting that invoice. Okay? So the invoice date, you know that kind of you know that approach that ‘hey, you know, I know we didn’t deliver to the 15th but I’m going to date that invoice the first and that’s going to make sure they pay us on the 30th’. They’re not looking at that way anymore they’re looking at it is when I get the invoice that’s gonna start my payment clock.

[17:30] Bryan DeGraw:

So errors in disputes, okay, so few percentages of invoices that require correction, which we talked about, and then also a fewer percentage of those invoices that are resulting in disputes. Okay? And I’ll hold the talk about disputes when I get to that section, but, you know, there’s a big piece of measuring invoices that need to be corrected for any reason. And I’ll get into that in a moment. The other thing we look at again, I love to do correlations to kind of, you know, the what-if and so what of key metrics, and one of them is looking at automation? Okay, it’s a question that we often get, you know, 50-60% of our invoices are generated and delivered, you know, automatically, what would it mean to me if I could get up to 75 or greater? Okay, so one of the things that we look at is there is a relationship to your AR health, and we see it here, we broke the organization’s into three categories in terms of their level of invoice automation. And then we looked at those groups’ organizations from the lens of what their average days delinquent. And again, a significant difference from going low to high in electronic invoicing. We see a difference of six days in their average days to liquid. So that’s a significant cash improvement, cash flow improvement, working capital improvement for those organizations. So collections are so curious, I know it’s supposed to be a workshop. So maybe we’ll have a little interaction here. So, how many rooms love the measure of DSO? Can’t live without it? Okay, we got a few. It’s a good one. How many people in the room who own collections and love the measure DSO, also manage customer payment terms and dictate them? Okay, some of you, okay. Very often the credit and collections organization that, you know, the team who is managing collections has no control of payment terms. Okay, that’s managed by the business sales operations. And so if there are deals being done, in terms of being extended, DSO is going to grow. That’s just what’s going to happen because of the, you know, the weighted impact of those sales that are now going from 30 days to 60 days. If you’re purely looking at DSO, that figure is going to and someone’s gonna knock on your door and say, ‘What are you doing? You’re not collecting on time?’ And the answer is yes, those invoices aren’t due yet. So my long introduction is yes, you need to look at DSO. It is a financial market-facing metric that is looked at. But when you’re managing your collections and your receivables, you also have to be looking at your average days delinquent, you want to be looking at your percent current, that’s really an indication of how well your collections processes working, how well are you getting customers to pay you on time based on agreed-upon terms. And so these are two critical metrics that, again, if you’re only measuring DSO, I would highly suggest or recommend that you go the next low level down, and also be looking at these metrics.

[20:53] Bryan DeGraw:

Now, of course, you know, getting the next layer down of how do you really evaluate how well you’re performing in collections, you have to do a couple of key things, you’ve got to be very proactive and segment your customer base. It’s not a fun exercise, but it’s a necessary exercise and one that we would recommend at least once a year to reevaluate, look at that segmentation. And then evaluate your collection contact strategy, which again, it’s not, it’s not a one size fits all, you’re going to touch different segments of your customers in different ways to ensure they pay on time. That’s what we see here.

[21:31] Bryan DeGraw:

When you look at collection contacts, per FTP, this is one that often you know, I’ll get the question of what is world-class you know, doing too much, okay? The reason it’s not too much is it’s automated. It’s proactive, it’s strategic, okay. For certain customers, certain customers are getting three touches in their model may they may be getting an early touch that’s, you know, via an email, they may get a second email that’s, you know, on or right after the due date, and they also may be getting a call. So it’s three times, obviously not you can’t do that with every customer. But there is a segment that they’re doing that. There are other segments that they know that self-cure. There are other segments that they know, you know that the customer is creditworthy, they’re healthy from a financial perspective. But they always pay, you know, their payment arrives one to two days late, I’m not going to put my energy into that one, there’s no need to contact him. Now, the point is, that has to be monitored. Obviously, that’s where technology comes in, is to be able to evaluate and look at that performance over time. And again, in terms of practices and approaches, again, I’m hoping many of you in the room, if I asked, would raise your hand, say yes, these are things that we do. We’re very proactive in terms of how we touch, we’ve done the segmentation. We can tell you, you know what that looks like in that modeling. It’s something that is part of the collection process. And obviously, if you’re using a solution like a HighRadius, you’ve built that into the tool. Okay, a key capability of the tool is, is being able to, you know, enable and automate your collection context strategy. So dispute management. So when we look at disputes, and we first define what they are and what we measure and look at, I mean, obviously, it’s tied directly to managing receivables, okay, so it’s any reason that a customer is not paying an open invoice. There are obviously other touches that your customers have with you. There’s going to be complaints, there could be inquiries, we see organizations that are standing up teams that are really you know, starting to measure customer experience collecting that other information. But again, for the purpose of what we’re measuring in our customer to cash process, it is tied directly to the management of receivables. The point I made earlier about that metric on the billing, rework or error rate. When I talked to individuals who own that billing process, and we talked about, you know, the way Hackett asked that question and the data we collect, it’s often a kind of a spirited discussion from their perspective because not every rework in billing or dispute raise has anything to do with the billing process. But when you’re putting together a scorecard for an end to end process, it’s a critical metric because it is exposing where there’s a problem somewhere in your end to end process. So again, if the customer was set up incorrectly in the master with incorrect pricing, that pricing flows into your invoice process, the invoice process does everything right in terms of inputs and outputs, but the customer gets the invoice and says this is incorrect. Nothing that could happen is just simply you know, deliver or provide the wrong product or service. And again, the customer saying you know the invoice wrong, I didn’t get what I ordered. I’m not going to pay it yet until we get that corrected. Those are critical to be collecting and capturing. It is a reason for rework in the billing process. But it’s obviously a key part of your dispute management process. So again, going around the wheel here, most organizations are doing pieces of this. World-class organizations are doing it all. And of course, if I asked, ‘Does anyone you know, does anyone in the room have disputes?’ I expect all the hands to go up if, if anyone in the room says ‘hey, we never have a customer to a customer dispute.’ That’s, I’d love to talk to you because it’d be a case study I’d like to write, okay, it happens. It’s a reality. Again, when we look at percent current, and you know that the key metrics of World Class no one’s 100%. No one is 100% current.

[25:54] Bryan DeGraw:

And that small percentage that the world-class has that’s that past student being worked is typically tied up in a dispute, something is broken down in the process, they need to fix it. The key difference though is they’re really focused hard on understanding the root cause. Things are always going to happen. But they’re really focused on looking at ones where they can make changes to process improvements to information sharing integration of the process to make them go away and minimize them. Okay. So again, well classes looking at that. They have an escalation process in place. They’re looking at eradicating and focusing on root causes. And they also put teams in a place where they’ve identified, hey, this is something we really need to fix. It’s not going to fix itself, it’s not going to go away. We’ve put out the fire, but we want to make sure this doesn’t happen again, they put those teams in place to make that happen. So again, two key things, they’ve got a smaller overall population of disputes. And they’re also working them faster. They’re resolving them much quicker. Okay, again, when you look at a scorecard, for example, here’s an example of key things you want to look at: understanding disputes by volume, by value at those reasons and root causes, okay, two different things. So the reason is what you’re hearing from your customer, root causes are what you identified that actually went wrong. Very often, they’re not the same. As I mentioned, typically that lens that the accounts payable has the relationship they have is just the invoice and they’ll say invoices wrong. We’ll get the question often on what’s the right mix for a number of reasons. There’s no simple answer. I couldn’t say ‘hey, you just need 10’. Okay, obviously has to be meaningful to your organization. What we do see-through, is if you have too few, you’re gonna be missing some of the key reasons okay. If you have too many, often, someone’s you know, if I have a look at a list of 50 very often I’m gonna pick the easiest one. Okay, so then also then again, You don’t get really good information. So really need to bounce that it’s iterative, you need to look at, you know what those reasons are. And you need to align them with what the root causes are. And the key thing about looking at it from the lens of, you know, what’s open and what’s closed, is if you are working a process improvement initiative, you should start seeing changes in that data. Okay? The ones that you’re focused on to make improvements, they shouldn’t be constantly the same ones that are open, hopefully, they’re starting to reduce. And then the last one is a cash application. Okay? Again, a lot of times when we talk about these different processes here, we expect some to be easier than others. Some that you know, kind of say, ‘hey, everyone’s got this it’s not a challenge anymore.’ But it continues to be each one of these sub-processes and C2C each has its challenges. Things that are being done better and more efficiently and effectively and things that are still a point of pain for a lot of organizations.

[29:11] Bryan DeGraw:

When we look at cash applications, you know, the focus is hands-free. Okay? How many of those transactions can just flow through our system, post, and match, and we just get a nice report at the end that says everything’s working fine. That’s the goal here. You can see the automatic remittance per match rate for world classes up to 80%. Now, okay, and it continues to grow. They’re really pushing the envelope there. You know, several years ago, probably more than several, when the real focus was on automation and electronic payments. That the thought was electronic payments is going to solve our cash application processes. Okay. And obviously, I’m probably preaching to the choir here. You know, getting the cash to you electronically is only one piece of the puzzle and for many organizations I’ve talked to some, they said, Man, it was easier when we had paper. I had that check. I had the remittance advice. I knew what they paid before I posted it. Yes, it was paper-based and it was manual. But it wasn’t as bad as what we’re going through now. The money’s in the bank. We can’t apply it yet. It’s been applied. We’re trying to find what that remittance advice is. How is the customer giving it to us if they’re giving it to us? Okay. So that’s a key point we talked about when we’re talking about the relationship between buyer and supplier. Understanding what’s needed from both sides and a key piece for us a supplier is to understand Okay, what do you need for me to be placed on your invoice so you can pay me accurately, that’s a key piece. But the other thing you want to communicate is what you need from them in terms of the information that should be associated with their payment. So you can also have an efficient cash application process. And again, to that point here, when we break out data and look at the automation. So electronic cash remittances. And just because you go electronic doesn’t mean it’s going to solve everything. So we did the same thing in our database, broke it up into those categories of automation, on remittances, and then looked at is there an impact on the cost per unit, and they’re certain is the organizations that are receiving a high percentage of electronic payments. It’s obviously much more efficient. But the key is when we again peel back and look inside their process, they’ve worked really hard to understand how to get that remittance advice, work, where they’re their customers to identify how it can come in. And of course, when necessary, they’re leveraging technology to be able to pull it from different places, because it’s not coming in from one place. Right, so maybe a good time. You know, certainly are there any questions so far about the measurement perspective, so really what we want although there is you know, The first step is getting your baseline, what are your key metrics? So any questions? And if there’s someone that can share, mike, that we get.

[32:21] Christie:

Hi, my name is Christie, I’m from Sony electronics. I wanted to know in your view of customers to cash here. Do you consider processing trade spend claims as any of this or is that something that sits outside of this process?

[32:41] Bryan DeGraw:

It sits outside in terms of what we measure for many organizations if you know, maybe and it may be part of your team. But in terms of our measurement, we don’t include those transactions.

[32:21] Christie:

Yeah, I think I’m very interested in benchmarking and we have participated in Hackett benchmarking. In prior years, but one challenge we have is, you know, fitting our organization into, you know, these kinds of standard buckets since for us the same people are doing collections, claims and disputes and it’s, it can be hard to break them out. And for us, we spend a lot more time on the trade spend claims than the collection. So it’s just, but anyway, Thanks for clarifying that.

[33:32] Bryan DeGraw:

Yeah, absolutely. And it’s a good question around methodology. Because obviously, that’s one example of many different activities that organizations may have coupled in what again, they call customers to cash. So you know, one of the good things Hackett has been benchmarking since 92. And what we’ve done a very good job of as well. Again, I mentioned we look at staying contemporary in terms of what we ask, you know, around questions. We have really maintained that methodology in terms of what’s in what’s out. So we really look to maintain apples to apple comparison. So, again, in that good example there, if you were measuring with us, and we’re looking at the collections process, you know, we have a set of activities that we’ve defined as part of it, that’s in the benchmark that’s in the database. And, you know, those activities would be excluded. And essentially, when we’re collecting staff time, and staff costs, that would be separated out. So it sounds like it’s more than 50%. But if to make it simple, if 50% of the time was on traditional, quote, unquote, traditional collections that are in our description, and the other is focused on the claim work, we would only capture 50% of those, those FTEs and 50% of the cost. Okay, for comparison purposes, and obviously you have through a lens, you know that there are additional costs in your operation, but from a comparison perspective, you can say how are we doing relative to an external benchmark? Okay. Yes, I have a question.

[35:07] Maria:

Maria from Anheuser Busch, I have a question about the team organization. Where is the borderline between the credit and collections department and order to cash process versus logistics versus customer service? When do you look at your benchmarking? In our case, it was very difficult to separate finance versus commercial versus customer experience and who’s responsible for what, especially when it comes to disputes management? What is your experience with that? And what is your let’s say, a general recommendation based on the benchmarking?

[35:43] Bryan DeGraw:

Sure. So, our experiences probably very few of you have the same organizational structure, you could probably all you know, share your org charts and they’re all going to look different. Okay. Again, the way Hackett approaches from a data collection and comparative perspective is our benchmarks are process-based. Okay. So I mentioned that set of activities. So, you know, we can pick on credit for example. So we look at that definition of credit activities. And we would look at you and what we would say to you is, okay, we’re going to capture the staffing the costs, we have a set of key performance questions we’re going to ask, especially on the staffing and the cost piece, which you’re asking about the organizational approach. What we’re asking you to capture is those activities regardless of where they’re performed. So essentially, when we do this exercise of collecting the data. If you walk in the room with an org chart or a budget report, we basically say that’s nice, but we’re not using that. It may guide you in terms of where you need to look, but we want to collect the staffing for credit activities or collection activities, dispute activity. This one’s a tricky one. I’ll talk about that in a minute. Anyway, that ‘s happening. So if you’ve got, you know, and credit is actually a good one because what we typically see is we see some credit activities that are centralized at a headquarters organization, that’s typically policy setting policy, reporting out metrics compliance part of the credit process. We see some activities for credit that have been put into a shared service center, either regionally or globally, that are actually performing credit reviews, modeling and then scoring. And then, you know, again, depending on the organization, we often see some credit activity or credit responsibility that’s down at a business unit level, close to the customer, maybe country-specific, business-specific. And so there are three different places from an organizational perspective, that credit activities are taking place and again, in our exercise of collecting that stuff and costs were captured in all three spots. Okay. So I hope that helps. It’s looking at again, not from not so much, you know, organizationally where it is, but where is it being performed? Okay. Great. Yep. Another one. Questions are good.

[38:22] Mamta:

Hi, this is Mamta from Medtronic. I have a question regarding customer billing. We talked about automation and how the automation and the touchless process can increase the cash flow and DSO improvement. However, while doing that, we miss many pricing errors or any billing discrepancy because we are in a touchless environment, which creates unnecessary evil in doing dispute management. So what’s the happy back between the two?

[38:53] Bryan DeGraw:

Okay, so let me make sure I heard you correctly. So when you’re automating your billing process, you’re creating various pricing problems, pricing errors.

[39:04] Mamta:

So this is the main pain point in my environment, dealing with the healthcare industry. There’s a lot of pricing issues that come in, but being into the touchless environment, we don’t catch that. And we go through the billing and later on, of course, the dispute gets created. And for a $100 dispute $100,000 for an invoice will keep on a limbo, then we invest multiple time and resources in getting those corrected. So yes, touchless automation is today’s and tomorrow’s way of going. It does bring more efficiencies and the desired state, but at the same time, it does create evil of dispute also. It’s a contributing factor. So what is a happy path because all the disputes The longer they sit, it’s an impact on any company’s cash flow strategy. So, is it like marrying the two and bringing some kind of tool or technology in the middle, which may intervene to cash these errors or to keep the automation and still deal with the dispute? What’s your recommendation in your experience?

[40:21] Bryan DeGraw:

Recommendation and experience would be that you don’t want to abandon the technology, but you want to understand what is driving that limitation? What is driving the exact scenario that you just described that something is coming in late or something is changing, that he then obviously is creating a dispute? I mean, working the root cause, what can you do in your process to minimize that? And, you know, it’s not abandoning the technology, but how can you leverage the technology, at least to be an early warning? Are there you know, if you were to look at that data, are there certain scenarios that are consistent with a certain product service, customer category, region, that’s always happening. And, again, focus on is there a way to mitigate it or minimize it? And healthcare is a good one. I mean, shipping I mentioned shipping and logistics, that’s another area just talked with a client about a month ago where a similar situation they’ve got, you know, they’ve got rate tables for shipping, okay, things that we, you know, UPS, FedEx, you know, when we ship something, we go in they, they weigh it, and they look at where it’s going. And there’s a specific, you know, charge based on weight and distance. Now, in a B2B environment, okay, we’ve got contracts, okay. And the real-life example that they share with me is, you know, the salesman goes in to renegotiate the contract, okay. Everyone’s happy. They agree on different rates. But those rates don’t go into the system. So that’s a real-time issue that they need to look at don’t abandon the fact that you’ve got electronic invoicing that’s being driven off there. You’ve got to work on the process. And that’s just simply a process issue. I mean, as soon as that rate is renegotiated, they’re working on putting in a process that can automatically quickly get that into their system. That’s an example. Okay?

[42:23] Mamta:

Thank you.

[42:26] Bryan DeGraw:

There’s one more upfront here, Morgan. I’m sorry. That’s not Morgan. Is it? Okay. Get the name right.

[42:35] Christie:

I promise it will be fast. It’s my second question. But my boss asked me now so I guess but, or but just to respond to her. She’s leaving. But anyway.

[42:45] Bryan DeGraw:

She loved the answer. And as I’m worried.

[42:48] Christie:

I was gonna say at Sony if we had pricing discrepancies, we would consider that in order management problems and you need to validate your pricing before you ship anything or anyway, the question is For your credit effectiveness measurements, do you consider bad debt write-offs at all, or just the currency and the average days delinquent that you mentioned?

[43:11] Bryan DeGraw:

Yeah, we capture bad things as well. And we capture it both. I think the wording we use is we also capture write-offs that are considered not bad debt. And what that means that we also capture a metric for, you know, discounts. Okay, short payments. So we’re also looking through the lens of what does that process look like and how much you’re writing off this associate with that versus true, customers, gone bad customers bankrupt, true, true write-offs. So we look at both of those, those are important as well. Okay, so the next piece we’re gonna, we’re gonna get into is talking about the capabilities. Okay. And hopefully, I wanted to make this a little light. We’ve been talking about life about data collections metrics, I wanted to make this a little more lighthearted. I’ve used this a couple of times there’s only been one instance where there was not one person in the room who has been fishing. But hopefully, there are some people in the room who have been fishing or enjoy fishing. Anyone? All right, we got a couple good. Okay. So what the picture is here is from last summer, that’s my son on the right, going out and going after targeting his first swordfish, so we actually caught us first swordfish with a captain we go up with off of the Gulf of Mexico, okay. The reason I’m bringing this in, kind of to make it a little light-hearted is your house world-class, customer cash capabilities, similar to catching a swordfish. Okay, I know there’s a lot of jokes about fishing, you know, what is the secret to catching a fish knowing where the fish are? Well, part of that is true. Okay. So the captain here that we worked with said, okay, we want to go out fishing, but we really want to go and try to get swordfish, so we actually went on an overnight trip. We also went after other fish; we went after red snapper, grouper amberjack. But the real goal was we wanted to catch swordfish. Okay, so, there’s a couple of things that we had to know. I mean, where are the swordfish? When did the swordfish feed? What do they feed on? Okay, time of day? So there’s a lot of elements that had to go into understanding how we’re going to catch that swordfish. And the way of exploiting you know, kind of using the analogy in the past is, there’s a lot of things you need to know to make sure a customer is gonna pay you on time. It’s not just by luck. It’s very strategic in terms of knowing and working to ensure that the customer pays you on time. So you’re leveraging techniques, process. Obviously, we use technology. We knew where he was going because he’d been there before he knew where the fish were. So there’s a lot of elements that went into capturing that fish. The other point I’d like to make for owners of the customer to cash process is you know, that’s actually the captain on the deck with my son. So it also takes teamwork and training and skills he actually showed my son, you know, a different, you know, a technique that the belt he was using and some that actually assisted with bringing the fish in. And the captain was there helping and I often use that as an example of, of talent management and training is that when you’re the leader of this team, and you’ve got collectors, people new to the process, you’ve made people who have been in the process a long time, but they’re needing to learn new techniques and new tools. You’ve got to be the person who actually gets down there and helps out. Okay, so that’s a key element as well. Now, the reason I’m showing the other fish there, which is also a cool looking fish, is that it’s actually an African Papineau that we also caught on that trip. But as I mentioned, we were going for swordfish, red snapper, amberjack, and grouper. Okay, so, the reason I put this on here is again talking about you know, the theme I was just saying about you know being very strategic and how you do collections. That would be an example of doing collections, dialing for dollars. That would be an example of I’m collecting off of a spreadsheet or an aging report because that was not a fish we are targeting and we just got lucky and I got it. Okay. So that’s what I wanted to show that one as well.

[47:18] Bryan DeGraw:

So, capabilities. When we talked about world-class, okay, this really gets into a framework a world-class is looking at we call the service delivery model. All these components are being assessed when you’re looking at how you’re delivering your services. And again, you may be delivering your services both internally and externally. Only internally you may be known as a leader in a shared services organization. Okay. And you need to think about that in terms of business. Okay, and, and holistically, what do you do? How do you evaluate how you’re performing and where you need to make improvements? So it’s looking at your service design. It’s looking at your org structure, the information that you have elbowed the information you need to assess your performance. I mentioned skills and talent. So you need to be looking at your team. Are they skilled up in terms of what you need for them from a performance perspective? And of course, technology. Okay, how is that technology an enabler? Okay. And again, sometimes we put things in a strategic order, sometimes not. I will say technology is the foundation, it’s at the bottom, but it doesn’t lead. I mean, you really have to evaluate and have these other elements in place for that technology truly to be an enabler of your process. So 10 characteristics and others, there’s a lot of slides in this deck. If I was to pick one out and say I’m gonna put it on the fridge, in, you know, back at work for everyone to kind of look at, this is a really good one, 10 characteristics of World Class organizations. The numbers are there really just so you know, I told you, I would give you 10 there are 10 they are not in any priority order. But ironically, when you do look at it, there are some things that are foundational that if you’re not doing and putting in place, it’s going to be very challenging to be successful. So the policy is very important. Master Data, super important. Standardizing and simplifying your process and creating consistency there. I mean, those are one, two, and three. And they really are foundational. But again, when you look around this wheel, it really highlights key characteristics that we see world-class organizations doing. And what this is driving is those outcomes that we saw at that very first slide. It’s driving staffing and cost levels, which again, are the measurement of the efficiency side of that value grid, but it’s the quality that they’ve put in, that’s also driving the effectiveness side. So again, what we’re trying to do here is bring together what a transformation project or exercise looks like if you really want to evaluate your organization and to end it. We talked first about the measurement. Okay, getting that baseline, snapping the tape of how you’re performing today and understanding where your gaps are. That’s a key piece of it. The other piece of the exercise is then looking at capabilities in terms of the lens of the maturity of your organization. Okay, how mature Are you in key processes, okay. And the exercise we go through is looking at where you are today, and where you desire to be through these four stages lagging, achieving, seeding and leading. And I will say a couple of things when you go through an exercise like this. No one is going to be lagging in everything. There’s definitely going to be definitely some things that you’re doing. There’ll be pockets of it when you’re looking at it. You want to look at as I mentioned, across your enterprise where the activities are being performed. What we often find is, especially in a regional model, some regions are doing things differently. There isn’t standardization yet. And things are doing differently. They’re actually having success with it and it’s just an opera, you know, the exercises, let’s emulate that and make it more consistent.

[51:17] Bryan DeGraw:

The other thing is not everyone is leading, as I mentioned before about World Class. World-class is not the cheapest, they’re not delivered. You know, they’re not the utopia of service, they’ve got a bounce there. So in the same thing, from a price perspective of the capabilities and maturity, there’s a mix there, I will say obviously, they’re going to be the majority of they’re going to be in the two and a half three with some fours, but a world-class organization is not across the board leading in every single capability. Okay. So the exercise we go through, okay, and if you know if we were actually doing this together with you, with your team, this is the exercise that you would go through is huge. actually look at the description of the capability and then evaluate based on the stages. And it’s actually, you know, really described out in words, what those different stages are if we were doing this 10 years ago, we, you know, we actually had a tool that we’ve evolved here, it was just, you know, key best practices. And you check the box, you know, yes, we have this. So, the example I like to use is customer self-service. So if I said, Do you have customer self-service? I would expect almost all of you would say, Yep, have it, great. But what does that look like? Is it just the ability to get dated information all the time? I can. I can go back and look at history. I can see what you built me, you know, the past 12 months. I can see when I paid for it. And you can say Yeah, well, that customer’s self-service is looking for that. Not very mature, though. That would be in a lagging category. But if you told me Yeah, we’ve got you to know real-time information, they can go on there they can see invoices, they can pay invoices, they can do line item, deductions disputes, they can actually click and do a live chat with somebody or go to an FAQ, that’s self-service at a different level now, so that’s going to be moving into your you’re exceeding and leading category. So that’s what this exercise is to really look at it through the lens of where we are today. How mature are we? And then where would we like to be? The other element is, you know, how important is this to us? You know, part of that is evaluating from going back to the metrics, okay, is this an area that’s going to drive a metric that’s going to be a significant gap in? So we really look, you know, the reason we have that gap in the performance is that we’re lagging in terms of the maturity or use of this capability. So yes, it’s very important to us and we want to see in the next 12 months if we can move it, move it up the chain in maturity. So that’s the exercise that an organization goes through to evaluate its capabilities. Now, again, to make this obviously, in a setting like this, it’s you know, we’re not rolling up our sleeves and actually, you know, filling things out. But what I wanted to share with you here is just a couple of examples across each of the processes that you would look at. And, again, hopefully, you know, everyone in the front can see it, I know there’s TVs back there, but if you were to look at this, again, not looking for anyone to you know, actually get up and, you know, share, but the exercise would be to look at this and say, okay, where are we? So, you know, and some of them are foundational, and some were very specific, but you know, simply, you know, do you have a company-wide view of exposure for your customers, okay? Now, some of you may or may operate in a very simple environment you’ve got, you’ve been blessed with one ERP. across the enterprise, you’ve got one view. For others, I expect that you may have more complexity when it comes to being able to do that. So again, this is saying, you know, where are you today, where you desire to be? And the other thing is when Hackett does this, will we be really okay? We’re not, you know, saying, you know, this is this, it’s not pie in the sky, it’s on a wish list. We also are very, we acknowledge the fact that there are complexities that can’t be changed. Okay, so yeah, the point is when you look at these and say where you are today, there’s also an area where you can put comments there very often there are reasons, there are limitations, okay? And that’s the same thing when we look at performance metrics mean that you may be operating in a part of the world where it’s always gonna take three days to generate an invoice and the reason is that invoice requires certain key elements that a customer requires. Obviously, there’s also parts of the world workout still on paper. And so, you know, I know there’s, you know, best practices to eliminate a paper invoice but this is the reality that we operate in, you know, Hackett doesn’t, you know, discount that is part of our evaluation.

[55:53] Bryan DeGraw:

So, again, in terms of looking at this, it’s again, trying to give you a chance to kind of look at these things and, you know, again, not share with the group and say, ‘Hey, okay, when I look at this, you know, the extent that I have credit scoring and monitoring use I mean, do I have that?’ You know, obviously, lagging is for many of these lagging is it doesn’t even exist. Okay, so hopefully the majority you are somewhere in that stage two, three or four. Okay, when you look at these, some more in the area of credit management and again part of this is really to share some of the capabilities but also give you exposure to what we consider the stages of maturity, a systematic review of customer accounts, and believe it or not, some organizations don’t do it. When we go through that evaluation of the credit process, some say, you know, we just have a threshold. If an order comes in under that threshold, we’re good. We may look at it periodically, but we’re kind of winging it. Some organizations do that, believe it or not they’re hoping for the best I would say okay, and when something does come up, then they deal with it.

We would prefer something a little more disciplined, okay? prefer to know that you’re good versus just getting lucky especially in these areas. Okay? No area that’s, you know, online credit applications. Again, that’s another thing that organizations are looking at the ability to do that not only with new customers but be able to, you know, again getting back so it’s kind of a form of self-service from a credit perspective, but again, that customer experience managing the customer master the ability for customers to provide some information in there that is necessary for you to maintain the credit evaluation for them. And you also see that there’s a mix here some we call out some things or process design, or things or technology, other things or a combination. So yes, you know, you want to be able to offer that but you know, you obviously don’t want to be created in a paper environment and you also have tools and technology that are enabling it to be more automated. Customer billing, okay. Again, one of the here is the ability to combine both goods and services into one system and be able to give one invoice. Okay? You may all have personal experience from working with different companies where you had multiple services and you got multiple invoices that most of them have solved that problem, but not all. So the ability to be able to deliver one invoice again, a key element of customer satisfaction, and customer experience. So where are you in that area? Again, electronics is a big piece. There are many different ways that you can deliver an invoice today electronically. So how are you able to do that? And some of it again, you may have to look at it through the lens of an 8020 rule. Okay, not all your customers are going to be digital yet or have the ability to do EDI receive something electronically. So it’s, again, it’s that segmentation component and where can you get the biggest leverage of the technology that you want to put in place. Cash application, again, some key things here that are both process design and technology. So, you know, a best practice is to look at, you know, the short payments, don’t have your team, you know, chasing down a small dollar amount, obviously you have to look at this through the lens of your data, what’s meaningful, what’s not acceptable, risk in the culture of your organization to set what that threshold would be. But again, when you do the analysis, very often, you’ll identify that you know, the time and effort associated with chasing down a $5 short pay are not worth the effort.

[59:39] Bryan DeGraw:

So, you know, take the payment, write off the $5, establish that threshold in the system. So, again, we talked about the automatic post-match rate, integrating that algorithm into that. So when it does see that event, it flows through and no one has to touch it. But what I will say is, again, the data is powerful. The information is powerful, you do want to be looking at patterns, you do want to be collecting that information. So on a periodic basis, you can connect with that customer from the point of data and information and say, ‘Hey, you know, you’re always short pay me, and I’ve kind of looked at it and there really isn’t a good reason for it. Let’s talk about that.’ So the data is powerful to collect, but the efficiency of the process, you also need to look at, okay. Again, we talked about the matching as a point down here, I didn’t make that point, but I will, customers will try to game the system. Okay. And you probably all may have a story about this, you know, so I’m going to send an invoice and I’m going to short pay by $5 let’s see what happens. And they took it. Maybe try it a couple of times, and maybe I’ll make it $10 next time, so they will try to game the system, you know, game the system to see what you know, what is your threshold? That’s the question we often get is what is the grace period on a payment and you know, is there any kind of you know, acceptable short pay?

[01:01:03] Bryan DeGraw:

The answer is no, there should be no grace period to pay me on time. They pay me the amount that you owe me. But again, people are always trying to see, you know, are there some secrets in there in the system that we don’t know about? So collections, of course, the word Dunning is a bit dated, but again, it’s any type of different contact. And we know, there was a metric that we shared, though there are contacts, you know, per FTP. Today, it’s all different ways. So yes, it’s going to be electronic. So emails, it’s still could be traditional in the mail, okay. But it’s going to be called both inbound outbound. And with certain industries, we’re also seeing text messaging. So it could be a text touch as well. Okay. So I want to make sure that I give my colleague a minute left. But, again, I want to just have you think about this. So you’re looking at your performance, you’re looking at the maturity of your process, the two of those combined is gonna start to give you guidance in terms of where you want to focus your improvement efforts, because that’s a big challenge for organizations is, you know, and leaders of this process is where are the opportunities for me to improve? How do I know I’m doing good? You need to, you know, do that exercise around benchmarking and looking at collecting your data, having a scorecard. Okay. And then as you know, where are my opportunities to improve? And going through this exercise really helps you narrow down where you’re at, set your initiatives and your goals for improvement. So that’s why I wanted to go through a couple of these and share them with you. I mean, we talked about disputes, everyone has them. The key around here is done you have a process to assess it, identify it, assign it to somebody, escalate it. Now all that Sounds Sounds easy. With a tool. It’s very difficult and many organizations we talked to, they’re doing this with email goes into a black hole, so I send Robert an email saying, ‘Hey, you need to look at this. How do I manage that? Now? How do I know when to get back?’ It’s very challenging without a workflow tool in place. So the technology piece is really critical to success in dispute management and resolution. And the last one is, you know, again, the foundational here are scorecards, do you have a scorecard in place? Are you measuring? Okay. Consistently measuring, and you’re looking at it over time, and you have goals set in place. Okay, that’s, again, a key element of maturity in this process. In terms of what the exercise looks like, the output, okay, so when you go through an exercise like this, you’re going to see your gaps where are you in terms of current feature maturity, where you’d like to be where the biggest gaps, there’s additional slides that include the importance that we then correlate that with what you said was important. And then also that you know, the key comments or the limitations that you shared in the exercise. So I’m going to pass it to Robert, who has been patiently hearing me. He’s going to kind of bring this together in terms of what a project looks like and you know, actually ending with what a roadmap would be to improve your process. I’m going to pass it to Robert now.

[1:04:11] Robert Haas:

Thank you, Bryan. Just in terms of time check, and how much time do we have left? Okay. All right. So I gotta bring my heart rate up. These seats are quite comfortable. So as Bryan mentioned, I’m a management consultant in the transformation practice of ours. So the way that we two different terms of what we do, Bryan sits on top of what we call the intellectual property management group. So he has customers that actually subscribe to services and when they encounter particular challenges, they might query him and he might provide the information that’s tactical that they might apply for themselves to solve a particular problem that they face. I, however, am under the transformational group where we’re a tactical team. on the ground that is called when a company is facing a particular problem or one and petite, achieve a particular goal in a set amount of time, like we deliver results, we’re paid to deliver results. And if you might not have the capacity and the time pressure to deliver these results with your own team, and might not have the expertise on the ground, we’re the ones that you call that come in, do the assessment and deliver that work to you up to high standards. So in this presentation of my bit, I wanted to walk you through a little bit as to how does a transformation project looks like that we do, how we structure it but also what how the technology element influences that in this day and age because everybody’s talking about that and we would really like to blend that in that discussion today. Okay, the down buttons? Okay. I’m used to pushing up. There we go. So let’s kick this part off by some market insight that we’ve gathered from our customer base in terms of how their transformation landscape looks like in the day and age of technology? So we asked our customers. We find out that 88% of our customers are currently undergoing a transformation program in the finance practice. I’m kind of curious about the people that are sitting here, raising your hands, are you currently working on an initiative to transform a piece of your finance function? Okay, so actually quite a bit that almost looks like 70%.

And then we found out that 96%, we’re actually looking to do one in the next 12 to 14 months. What does that mean? It means that everybody is at least doing it or thinking about a project to transform the finance function. However, we find out that only under 50% either meet the expectations needed or exceed the expectations of the desired outcomes of that initiative. So what it tells us is that there are still quite some challenges in that space. What are some of the key drivers that are pushing us to move towards more of a digital-focused transformation initiative? So for one, it’s definitely the new emerging technologies that we’re seeing. It’s sort of like the feeling of missing out, right. So we know that RPA is quite hot, we know that cognitive AI is on the market, we are competitors doing it. So if we don’t do it, we might fall behind. And to be frank, that is something we should be thinking about, just because of that reason, because it’s all about being more competitive. So that’s definitely a key driver. And the second one is, in the cost aspect, that we’re all still familiar with these continuous pressures to improve the effectiveness and the efficiency of the finance function by optimizing the cost factor. I don’t think that should be anything new. But the other one that’s maybe more interesting is the expanding role of the finance function. So it’s moving maybe a bit more outward from a mere back-office function that administers the accounting, the finance and so forth, to more of an advisory role to the highest functions of the organization. So taking on more of an advisory role, and I see that on my products as well, I find that it’s often asked about, okay, where do we stand here with XYZ to help to make tactical decisions. So we also seek to get more information from that team. And that’s why we’re looking to shape up that function. So the fact is important when we look at the organizations that 67% of companies have more than $5 billion in revenue, where they have a full-time executive Daggett dedicated to guiding these types of finance transformation initiatives. And with smaller companies, it’s about 35%. So it’s definitely a hot topic. So we asked another question to find out, what are the key things that are different now in finance transformation projects? So one definitely is the technology element that I mentioned, right? When we do finance transformation initiatives, we will try to involve some type of new technology to stay ahead of the curve. And then these projects are also a little bit more intuitive. So instead of I mean, in my opinion, I feel this new state that we’re trying to achieve, it’s sometimes a little bit vague. It’s something that we’re still trying to figure out as we’re going along because digital is developing very fast, the products are becoming a lot more intuitive. So instead of saying, okay, we’re going to do a, we’re going to do B, we’re going to do C, we’re going to maybe do a and b at the same time. And let’s maybe shoot for a small goal really quickly to see where we’re at and then figure out when maybe we need to adjust this project along the way, based on how the things are shaping, right. So finance, engagement, or transformation, engagement can go anywhere from minimum three months to six months to 12 months, again, multiple years. So that’s a key element that needs to be kept in mind.

[01:09:39] Robert Haas:

Another thing that’s also new is that the cultural elements are definitely being more considered, right, because we’re moving the organization. We’re creating a lot of change. We’re not saying we’re creating a new company, I mean, the business model stays the same, but we’re changing the way that we’re doing business. So we’re in effect creating a new organization within the firm. So management really needs to look at recognizing the cultural aspect of it. Who can I put in the driver’s seat to run this new organization? Who is maybe a shining star? Who has been waiting for their chance to shine? And could maybe do that for the initiative? And give them that opportunity? And then lastly, I mean, you would think that that is the given you want to measure success. I spoke to some companies yesterday at the speaker’s reception, and it was striking to me, or some said, Okay, we’re starting to measure success now. I mean, I’m used to it from being an implementation resource, but it’s definitely something now with the enablement of technology that we’re more able to do and definitely want to need to do more in the future. So let me maybe start off from a high-level view of philosophy when we do a finance transformation. One of the ways that we want to look at it in different stages is first of all, are we doing the right things right. So from a strategic point of view, we want to understand where we want to get to and what is it that we need to get there. And one of the things that we need to do once we figured out what it is that we need to do, we want to do the right things the right way. So that goes across in eliminating complexity, simplifying things standardizing then automating kind of goes back to the question, the lady answered about the health field. So you might have automated particular parts of your processes. But if the process underlying it is not working effectively, you might be automating things that might actually be causing you more problems, right.

So that’s why the code is said here. There’s nothing so inefficient to make more efficient that what should not be done at all right. So I have another example. I had a client lately, or a lady she was scanning. And she was in sketches, photocopying checks and then milling into the bag and I asked her, okay, well, what are you doing? Then she said, Oh, photocopying them, so I can send them to the bank and then the bank and process the mail that we wouldn’t want to automate. We wouldn’t want to automate sending out letters. In fact, what we would want to do would be to simplify and eliminate the having a scanning solution right that maybe you just put in the check the scales, it automatically puts it into data, the data can be sent to the back bank processes automatically boom. Right? So that would take you through the complexity reduction where you gauge the effectiveness and efficiency. Then assuming the process is, you know, performing to a level where we’re happy with this the additional consideration, well, well, do we want to keep this process in the house? Can we maybe consolidate multiple business units across different geographies? Then once I’ve consolidated the process? Do we keep that in the house? Do we maybe want to move to two different locations where this may be some labor arbitrage that is better and labor fees? Or do we even not want to be in the business of managing these back end processes and give it to an outsourced provider such as jam-packed that I’m sure you’re familiar with and who’s also here today? Now talking in terms of what these implementations that we do are trying to achieve, I just want to level set on two key aspects, right. There are two key benefits that you would achieve from a finance transformation in his initiative. One is what’s on the effectiveness side, and that’s really focused on cost optimization. So think about it, okay, you have multiple locations doing the same thing. Can I maybe rationalize that by putting that into an effective Global Business Center of Excellence to serve multiple locations at the same time, such as a shared service center? And at that point, you’re really asking, you know, do I have the right amount of people, and from an organizational point of view is my FTE cost as a percentage of revenue and the transaction volume per FTE account at a level that I’m happy with? But then there’s also the efficiency aspect, right?

[01:13:32] Robert Haas:

That’s really more focused on cash flow generation that leads to their accounts receivable space. So this is really about giving you the tools, the methods, the policies, the procedures to ensure that you’re doing the right things the right way with the right amount of people that you have. So in that sense, we’re looking at the gap or the gap between the best possible what’s my percentage currently is to drive that benefit. So we might have projects like I mentioned, where only one of the two is of interest. But I would always caution, right? So you might have one situation where you only want the cost piece. But if you’re if your process is not good, you’re basically lifting and shifting a process to a different location. There are definitely dangers involved in it. Right? I had a biotech company, they lifted and shifted their processes to Costa Rica, the transition didn’t go well. The process systems are very robust. And the chat, right, so we got the cost-benefit. But then what happened, the DSO went up, and they lost it on the AR side. And then we came in to fix on the efficiencies but we ran a rapid reduction initiative to get the car the cashback in. I mean, ideally, from my perspective, I would recommend or from hackers perspective would recommend that you drive the efficiency first, you understand what’s the art of the possible where is it that we need to get the process function to level that you feel as effective, efficient, and then maybe look at getting the effectiveness out by looking can’t reorg organize it? Are we good so far? Do we have any questions in terms of what I’ve walked through? So at this point, okay. So I’m going to keep this at a very high level. So given how much time we have here, it’s just too much to walk you through what engagement of the hacker group would look like, right? So we have a minute focus on the phases here with about four phases right. The first one is assessing where you are in terms of your processes from an organizational point of view, what are your cost levels and cash flow levels and benchmarking that. So assessing the current state, and that usually his own face where we are solving the project to potentially do an implementation, right, we want to see what we’re proposing to do with moving over to the next phase where we do an implementation. So if once you’ve passed that point, then that usually comes with a little bit of initial review. Cade limitless fact-checked some of the findings more and built up the initiative. Put together a road map and then we move over to an implementation phase. So the first bit that I mentioned, it could take a couple of weeks, up to maybe a month or two. But then the implementation, as I mentioned, it could take maybe anywhere from three to six months to multiple years, depending on how large your organization is, and how much complexity we’re facing. And then the last bit, the ongoing monitoring and continuous improvement, again, also depends on the size of the organization and complexity, if that’s desired to do. And oftentimes, the clients like to take that over for themselves. But here, we’re just really measuring and tracking if all the initiatives and benefits that we quantified are really occurring as we wanted them to.

[01:16:36] Robert Haas:

And then as binary mentioned, when we dig into the phase one, our assessment that we’re looking at where you are right now, in terms of the best practices, but then also where is it that you would like to be in the future, right? So those are, where we really determined the gaps. But we also want to understand how important it is for you to be there in that future state. And then once we have these insights, we’re able to generate actionable initiatives that we can then put together a roadmap instruction initiative for you. So one interesting thing in terms of talking about digital transformation, the hacker group has actually engineered a tool that we use to do our project. It’s called a quantum leap. And it essentially allows us to do a lot of the things that I explained before on the platform. It’s a solution to the cloud. And it helps us to run our projects more effectively, right? So not so many PowerPoints anymore. It’s a function where people are able to submit information, where we gather it. So then we define some of the assumptions that we need to have to build the analysis, we benchmark that information against our empirical database. And then we go further into analysis into determining what are the key gaps that we need to target to improve performance. And then we also have a module that helps us manage the project from a PMO perspective, to see where we’re tracking internally of our initiatives, and then on ongoing achievements. Okay, so maybe digging a little bit deeper into the phase one assessment. So why has actually gone into quite some detail on how some of these things work. So the benchmark performance analysis that we do, as you mentioned, is an empirical database where we have to determine what is world-class, it’s not necessarily us, the hacker group that subjectively decides, okay, this is world-class, it’s just basically looking at it at the scale, but who is the upper quartile performance and performance and there are companies that are really obsessed about improving processes. So we know there are other people that can do better and if they can do it better than maybe you can do better too. That’s how we determine that scale. So wanna understand where’s your performance in relation to the companies and then we go more internally into the companies and speak with the individual stakeholders to understand what are the perceptions of the maturity of the process, and we do this on both the executive level on the stakeholder level, right? So, you know, maybe in management on the executive level, they might think everything is fine but want to get to the shop floor level, it might be a different story. So we’re looking at what’s really the consistency of that message. And where are the gaps of that consistency, that might point into maybe some process improvement areas? The next piece that we use to assess the processes is the best practices. So Bryan has kind of walked you through the lagging, leading and achieving and exceeding. That’s exactly what we do here. So I think our database on the customer cash side is about 200 best practices that we use to grade and measure the performance of your product or processes. And then also we have the best practices that are mapped to process flows. And there’s In fact, also some technology vendors that we’re working with to align the process flows with configuration requirements. So that also helps us to bring what needs to be done into the technology landscape is best practices.

[01:20:02] Robert Haas:

They’re also aligned with what Bryan mentioned in terms of the service delivery models. How did this practice relate to the dimension of the HR function? How do we deliver service to our customers? And in terms of the technology environment, what are some of the areas that we need to improve? And then lastly, as I mentioned, we put together the roadmap, the benefits case, and what is it that we need to do to get where we need to be? So the phase one assessment, it can be applicable to almost any maturity stage of a company, right? So we sometimes go into organizations and redo these assessments because companies change especially if they’ve changed the processes right through maturity through their objectives. And it might matter to look at some of these things again, to assess Okay, now I’ve gotten to this stage of my maturity level, whereas maybe some worse maybe some other areas that I need to move to next. So the last piece of this presentation, we just wanted to give you guys some key takeaways that could help you for your own finance transformation initiatives that you might run and give you insight when we do an implementation. What are some of the key pillars that we use to drive success? So one is the case for change. The dimension is really the assessment. And that really tells you well, should I do this initiative or not? Right? So those are the stakeholder surveys, the interviews, the benefits case that we put together that says, Okay, this is the size of the price, and there’s maybe merit in doing this. The change management is really more on the executive level of the client that has to explain to the organization the objectives and as to why we want to do this how does what we plan to do align with our strategic goals, then the governance bit is okay, who is responsible and leading certain initiatives, who’s going to be the responsible person to drive the benefits and mitigate certain situations. The roadmap is the plan on how we want to get there the things that we want to do. And then the structure is the last consideration in terms of Okay, do you want to keep the processes within onshore?

Do you want to rationalize? Or do you want to drive more efficiently? So some of the key takeaways, here again, we definitely want to have an endorsement from the leadership level about the objectives of the organization. So we had a project, for example, it was a water drinking water distribution company. And they had a product, it’s obviously a commodity, the only way that this company could grow was through acquisition. But they had a problem that their processes were so dysfunctional, that a lot of customers were going to write off not because they didn’t pay because they just couldn’t pay. It was so broken, so they were losing a lot of money. A lot of customers were being dissatisfied. And especially in the commodity-based industry services, the key thing that distinguishes you from your competitors, so they really have to communicate to the collections teams like ‘look, you’re getting a salary, but we’re having trouble collecting money, we’re not in the business of being a bank of paying salary and having continuous backup write-offs.’ I think they were writing off about half a million dollars every month in a billion-dollar company. So the collector really had to understand to keep me rolling up my sleeves and working through this initiative, how’s that gonna benefit the organization to help improve the service levels and also get more capital, in the end, to enable more acquisitions so that the business can grow on this competitive landscape. Then the governance structure I mentioned is also key to having the executives involved in the transformation initiatives. So we usually pick you know, somebody like the CFO, and then down to the functional level, like the head of collections of the global customer to cash manager to be part of this process, so that when we have monthly discussions on where the project is going, they can give the key feedback and insight and if we need them, we also change directions how things are going. measurement, as I mentioned, first, we need to be clear on what are the key things that we want to measure. But we also want to be sure that we understand what the output is giving us. So frequently, when we go into assignments, some of the understanding of the data might be quite different from when we really take it apart and look at what it is like you might have unbilled in the sales component when you look at your DSO, right? You want to when you’re looking at collector effectiveness, take that unbuilt component out and only look at the built component versus the AR. If you have the whip component in there, it’s definitely going to skew your numbers.

[01:24:36] Robert Haas:

And then this last point, I’ll just summarize in one bullet that is when I kind of mentioned before, you’re shaping the organization into a new future stage of creating a new environment and it’s key definitely to create an opportunity for people to shine. So you might have people that have, you know, been in a process that was suboptimal, as there’s the opportunity to change things there, they will come forward. And you will recognize that there’s actually a talent that you can put in key roles as the organization changes in terms of the structure. So that also comes with potentially some incentive benefits and bonus structures, and some career planning and development opportunities. So it’s really an opportunity to make things better, and that definitely should be recognized. So that’s what I had for this from my side kind of quick, had 20 minutes, there’s a lot more to it. So if you, for example, saw in the very beginning by and had this overview of these Chevron’s and the process flow of the order to cash process, when we do an implementation, every one of those sub-points is on the high level of methodology that we have capabilities for that we implement on assignments and drive engagements through and benefits. So there’s this is really just a high level in terms of getting a flavor for what a transformation project with the hacker group looks like. Thank you.