Radiating A/R Operations: Collaborating with a Third-Party Ally

Joy Krugel:

Okay, just to check everybody here since we have a full room I want to make sure I have everybody’s attention. Well, thank you for joining us today. They do say they saved the best for last. So between the session and lunch. Here we go. Just maybe just a little bit that I didn’t include in our bio for those of you, Johnsonville though has been around 75 Years we’re celebrating our seventy-fifth anniversary this year. We’re a little over a billion dollars in sales and we are national as well as international in 42 countries. So a lot of people go, oh really! You sell sausage across the border. Yes, we do. And it is our brand. So if you’re traveling in Asia and Japan-China you will see our brand in those marketplaces. So anyway I’m excited to be here with Kathy today.

Kathy Rotondo:

Yes, I have been working with joy at Johnsonville for eight years now. We’ve developed a great partnership in supporting her team. And in the area of deductions, customer deductions. So we’re hoping to share some of our experiences today and how we make that work and how you might be able to make that work for you and your organization.

Joy Krugel:

So I’ll let you know. So just to kick off the agenda. We’re going to talk a little bit about why the partner, selecting the right partner project or I should say selecting the right deduction project, six best practices for deduction partnering and then the ideal partnership. So again why partner? We had a lot on our grill, slow deductions research and resolution just were very slow. We just couldn’t get through the piles of investigation. Since we started our relationship from 2011 to 2018 we had over 14 million dollars in Post Audit deductions. Improper resource optimization and we’ll talk a little bit more about that later and then really overall it was like, you know we would need additional FTE as if we wanted to tackle this and tackle it right. So then we move into the challenges of processing deductions inhouse. Post audits, we talked about claims piling up a huge amount to recover, the scope to improve the Post Audit resolution. We just really could never get through the weeds to understand the root causes. Lots of collections follow up. You know the same thing. We just weren’t finding the time and again resulted in increased FTE. You know I talk about and we talked with Peggy, I should say Kathy and Peggy and their team when they came in, just better overall roller coaster effect we would hit hard on post-audit deductions and you know we would get so far and then we had to get back to their everyday business. We had oncoming deductions that were coming in and had to work with our sales folks on settling those and you know so it was just kind of that up and down and we never got to a point where we really were ultimately successful, a few paybacks came in. And like I said it was piling up.

Kathy Rotondo:

I remember when we first started with joy and we were sitting around a conference table she said, you can help us with these, you can you know help us unravel what’s happening with these posts. As I said absolutely. So pass them along and you get back to your business and we’ll work together as a team. And it’s been a terrific partnership.

Joy Krugel:

And one of the things that I remember is they said and we can take all your data and we’ll go back two years. It’s like really what do you mean you could go back two years and you could collect some money back. Absolutely.

Kathy Rotondo:

So we said the Post auditors can do it, we can do it right?

Joy Krugel:

You know and I will also say and I’ll talk a little bit about it, we’ll keep moving on because we will talk about why the right partner. So we asked ourselves when we went into this, what is the greatest advantage to partnering and we came back to the “why”. We just did not have the time and the resources to collect money back that was truly invalid. It took a lot of time, effort and resources. The other area that IAB brought to the table was visibility and they also showed us and they had statistics on the recovery percentages. We talked to several clients. And so everything that we did from a reference perspective and all the information they shared was factual, it was true. So we really felt as though we were on the right track to having a business partner.

Kathy Rotondo:

One of the things that we were able to do is leverage the information that we learned with other clients and we were able to share that with joy. We don’t share numbers and names, so it’s very confidential but we were able to kind of steer them in the right direction based on what we learned working with other clients in her space.

Joy Krugel:

Yeah. And you know when you talk to somebody that really talks about your language, you know that it’s very exciting.

Kathy Rotondo:

Talk of deduction.

Joy Krugel:

Exactly. You know they know the pain points. They work with many other clients bigger, smaller. And it’s like a feeling of we’re not in this alone. We have you know somebody that can be by your side to help us. So as we went through selecting the right partner. So we’ll talk about eight different areas to consider and IAB met every one of these, hands down industry experts. You know when they came to the table as I said, you know they shared with us you know some of the common themes they had the expertise they knew what was going on in the industry. They understood our customers which were good because in the CPG world you know it’s easy for someone to say you know you have third party collectors and so forth that says, oh I can collect your receivables well then you have to start asking questions it’s like, OK well tell me how you do it. Tell me you know to give me some success stories. And the third party collectors really don’t have success stories in this area because they can’t dig and dig and dig like the IAB crew. So engagement, we are experiencing credentials hands down references came through just as you know they are shared with us in our meetings, resource quality as well as sustainability. You know I’ve known Peggy you know since we started the relationship, our collector or I should say Diane who is specifically on our project since day one. Sarah who’s the project manager she’s also been on the project so they really know our business. And know what’s going on. Data security and compliance. You know we downloaded it. We provided files. They had all of our information. They have complete access, that is they have complete access to our system. They have user I.D. to come into SAP. They’re pulling information. We have documentation on their process. They actually even create debit memos for us. Anytime we get a confirmation from a customer they get a confirmation that something’s being paid back. They automatically create the debit memo ASAP. Therefore when the cash comes in it ought to apply.

Kathy Rotondo:

I don’t think we had that from the get-go. We had to earn her confidence that they would allow us to do things in their system. Initially, a lot of our clients will just give us read-only access or inquiry access to their systems. But you know as we worked through the process they were more comfortable with us and confident that we knew what we were doing so that we could issue debits and credits correctly.

Joy Krugel:

And I think it was, I would say we probably were pretty quick into the relationship because we are all about efficiency. It’s like, OK why should they send us the data we created when they have it right at their fingertips. And our company is very open. So, when I say open again there has to be that trust. But Diane and Sara both have Johnsonville e-mails. Their signature is you know Diane@Johnsonville.com. She signs that she’s the credit analyst for Johnsonville.com. So from our relationship, it is very transparent. We are not doing business. It’s not IAB working with our customers. It’s Diane from Johnsonville. It’s Sara from Johnsonville. So it’s really an extension of our accounts receivable team.

Kathy Rotondo:

All right, that business model works the best because we don’t have any leverage with her customers. Right? We’re IAB they have that trading relationship that is a trading partnership with their customers. So we know that that’s our business model to work transparently as an extension of their department complementing what they do.

Joy Krugel:

So then corporate vision alignment. Again that was a key important area. You know they understood that this was about process improvement because coming into this was you know we also want to learn from you. We want you guys to bring to the table root causes and things that we can do to incorporate into our business and absolutely hands down. They were you know they were totally on board. You know that’s what we’re about. We’re here to be an extension of your team. Cost-effectiveness. Again meeting long term short term goals. We continue to review our relationship. We media, every year talk about results. You know where we’re headed.

Kathy Rotondo:

New opportunities.

Joy Krugel:

New opportunities yes. And we’ve just recently engaged in a new opportunity. Our supply chain folks understood what we were doing with audits and they said you know I think there’s an opportunity here we have somebody that could help with this. And for any of you that are in the CPG world you know, we’re getting fined and fed to death. So I jumped in May of last year I think. And they are now working on our compliance deductions and we’ll talk, I have a couple of little stories later in the presentation. Technical skills, they continue to have training in SAP or whatever system they use. So, HighRadius. You know we share things with them. There are things that we learn from them. It’s like, Oh I know you could do that in a field by then. Or some of the different screens, So there’s the technical expertise with the Excel skills and just you know the V lookups and the different pivot tables that they put together for us. They did a Wal-Mart project for us recently and it was a pretty big project and they came forward with you know the pivot tables by year by type. And it was just very easy to send it to the sales managers like wow this is cool you know that. I mean again it took time but it came back in a very nice readable format. The scalability, you know they can take on projects short term long term. We have another project or actually, we had a couple of people hold FMLA at the same time in our office. Like what are we going to do? We called IAB and one of the girls that were working on our accounts, we had her come in-house. So she did our Canada accounts, she was a deduction specialist and we kept extending the relationship and they’re like We need her back and we’re like No we need her a little longer.

Kathy Rotondo:

Like you can’t have her forever.

Joy Krugel:

So anyway scalability they can you know they can take on short term projects they can take on the long term and again that’s really.

Kathy Rotondo:

It’s that we have additional resources that Joy didn’t have that we can either put on her project or take off her project based on that and the volume of work that she has at any given time. So I think these solutions we specialize in the identification and the recovery of unauthorized customer deductions. And we pride ourselves in developing winning relationships with CPG companies like Johnsonville and we hope to help recover money on your behalf and have a positive impact on your bottom line. And in the process, we’re able to share valuable information that will help you in your day to day activities and hopefully streamline your processes and deduction management. When I started in this industry 30 years ago I thought I’m going to figure out how to eliminate deductions right. Let’s just figure out what’s causing them and then we’ll be done with that. And I thought for sure I’d be working myself out of a job and we wouldn’t even have to do deductions in the future. Well, here we are right? All these years later and we’re still doing the same thing, got the grey hair to prove it. What I learned is that there’s plenty of work to go around.

Joy Krugel:

Yeah and just to add in you know I think, I joined the National deduction group for the same reason you said 30 years ago you were gonna help eliminate and I’m like oh well we have a group we’re gonna figure out how to you know work with the retailers and we’re gonna figure out how to eliminate. Well no. If you figure out how to become more efficient with the crazy processes they bring forward. So anyway a lot of learning.

Kathy Rotondo:

So over the years, we have learned that technology has helped us to at least identify a cash application and what types of deductions you’re dealing with. So we know what they are. You know we know that there is a price. We know that there is a shortage. And companies do a really good job of identifying what they are now, where years ago that wasn’t necessarily the case, but it’s really the next step in the validation process determining whether or not that customer is entitled to the deduction or not. That takes the most time. Right? And that’s where we’re able to step in and help you identify those areas where there might be an opportunity for recovery. So by a show of hands, I’m just curious to know, as far as types of deductions are concerned. Do you all handle that trade promotion deductions? Are they a big part of what you do? How many of you handle trade promotion? I’m not seeing good. Good. And then post audits and compliance-based deductions. We’re finding that those are the areas that really require a deep dive. It’s not like I was in the AI session this morning and while some types of deductions can be cleared very quickly through an AI platform. What happens is with post audits like we’re doing with joy. What happens is you really need some investigative accounting, you need some forensic type accounting and you have to think out of the box because these post auditors that are generating these deductions are doing that. They have volumes of data that they’re bringing together to create them and then you have to do the same to combat them, it takes time and takes resources to do that. So that’s something that would make sense to hand off to a partner. So we want to talk about what makes sense you know, what makes sense in your portfolio to hand off to a third party. Now everything makes sense. But some things really do make sense. You want to evaluate your portfolio and you want to evaluate your process. So to evaluate your portfolio you want to look at your deductions that are received where automation might not make a good fit like the Post Audits and use those types of deductions to hand off and then the less labor-intensive deductions you can handle in-house or with automation such as AI. You also want to look for specific customers where your disputes are being denied. You know that shortage claims that you dispute in a system like a target for instance and they deny them. All right. You submit them, you get your case and then they deny them and then what we’re finding is it takes two-three times to dispute and then an escalation process. And then you can finally get your money back. It takes time, it takes resources. How many times you are going to have your people you know refile the claim and refile the claim because what happens is they have new ones coming in fast and furious that they have to address and get research otherwise they’ll Time out. So that’s a good area. Those deductions that you’re disputing that are being denied or perhaps the smaller dollar deductions the ones that are over tolerance but a lower value that maybe your folks aren’t getting the attention that they deserve because they’re focusing on the big-ticket items as I call them or call them the larger items. So that’s another area. Those in-between deductions that are the over tolerance but not twenty thousand dollars. So you want to evaluate your process and when you evaluate your process you want to identify key metrics in areas where you want to improve. So you want to put your resources to the most valuable proactive tasks. You don’t want them to be you know just re disputing claims all the time when they can be doing more valuable action activities for you like implementing tools such as HighRadius or some other tool that will help automate it to help improve things in the future. You now put your focus on those value-added activities and let a partner perhaps work on some of those lower-level priorities. We like to look at historical data that specifically claims that were cleared or closed through your standard operating procedures. So things that were closed with credit where they could be or they probably were valid but they may or may not be valid because maybe the complete due diligence wasn’t done especially on items when there’s a high volume for a particular customer and your team has to clear the deck you know clearer as much as they possibly can within 90 days to get there. They’re their balances down. We’d like to look at the historical data things that were closed and there’s a real opportunity for recovery there. And we call it a closed review and people love it because the money that it’s collected goes right to your bottom line. And if it’s against state trade funds, for example, those trade funds would go back to promoting your product. It’s recovering back. They go back to your product. So it’s a win-win. So we’re going to move on to six quick best practices for partnering. The first thing if you decide to partner with an outside organization is to centralize your data and make all your data available, Joy alluded to it before where they make information available to us. Where we have access to SAP, we have their outlook. You know SharePoint wherever they may store their data. So access to information to centralize the data. We want to make sure we enhance external collaboration. Any partner needs to understand that the trading partner relationship is between the manufacturer and the retailer. We don’t have that relationship as I mentioned before. So we want to make sure that we provide the highest level of customer service and we want there to be a well-defined process if there is an escalation issue. If there’s a problem with an account we go to Joy’s team and we say, OK here’s the issue. We escalated it to this point, where do you want to go from here? This is your customer. How would you like us to proceed? You don’t want to step on your toes, we don’t want to cause any conflict.

Joy Krugel:

And I mean it’s periodically we. Yes. Diane calls us and says here’s where we’re at. I need to speak to the buyer and we all know buyers are sensitive. So it’s like okay, time out and we’ll get the salesperson and let them know where we’re at where things are and so forth. So you know from time to time he’s like, yes go ahead and send a message. But again like Kathy alluded to they will not cross boundaries where they feel they could end up where there could be a relationship Issue.

Kathy Rotondo:

And so we also want to streamline inter-team communication. We want to make sure that we develop strong relationships with their salespeople and their customer service support teams and we share our information as we learn various pain points that may help them. We share that information and we meet with their teams, especially with the compliance and finds that you mentioned just recently. What we’re finding is that we have to get to the source of the problem. So we’ll meet with the people in the warehouse and say OK if you don’t use these pallets this problem is going to continue. So we not only collect the money but we also help resolve some of these problems where we can’t collect the money because they’re doing something right. Not in compliance.

Joy Krugel:

And that happens, so one of the root causes that they identified. There’s an exit pass and the exit pass has to be given for carriers and drivers and that has the appointment time in and out and so forth. Well, our carriers were not submitting those exit passes with the proper deliveries and so forth and even our drivers. So that was one of the root causes where they said you know what we’re getting denials on all these because we don’t have root causes. Well, we at Johnsonville though implemented that, now the exit pass is a requirement for the freight carriers to be paid as well as our drivers. But again it was a document that is needed for the proof to get repaid for late and even early delivery fines.

Kathy Rotondo:

Yeah, so one of the things that we do is work with their sales teams. So we’ll have faith, we do conference calls but we like to do it face to face meetings as well. We sit down and we put the Kroger team and we say OK. This is what we’re finding and we get their feedback and really try to understand how a particular trade promotion was presented and what the intent of it was, sometimes this trade you know the deal sheets aren’t really clear. And it really helps to sit down and talk to them and how the deal was created and how much did you expect to spend on it. Right? And we worked together and then we talked about a solution and together we’ll go to the customer. So we’d gone with sales to the customer and we solved a lot of issues.

Joy Krugel:

Yeah yeah. And to finish up here they ensure better visibility, engage in continuous improvement, negotiate contracts. You know all of that is taking place. We’ve provided some of those examples. But again you know they come to the table and we have some great conference calls with some of our third parties. You know the third party auditors and again with their expertise with different clients and success stories and so forth they’re there coaching us on the conversations. They’re coaching our salespeople. Our sales manager you know they’re always saying, hey what is IAB saying? Why does Sarah say all this?

Kathy Rotondo:

We give them confidence because we’ve had success with other clients so we give the sales team the confidence that you can push back on this. They will pay it back. I promise you. And the sales guys you know they just want to sell they don’t want to rock the boat. They want to just sweep things under the rug. But we give them the confidence to say no. We can fight this. Let’s do this together.

Joy Krugel:

So we weren’t keeping up with their slides. We’re going to go through. We talked to him but we weren’t keeping up with our sign. So then we talk about the ideal partnership again. What Jacksonville achieved by partnering with IAB. We were able to modify quarter contracts. They provided several suggestions to us on how we can incorporate some language into the contracts, how we can use the history dialogue when contracts are canceled. They’ve been able to collect 25 percent of our backlog of deductions in dollars. Visibility to root causes again they’re bringing back the root cause to the different teams within the organization. And then again that ongoing continuing partnership success, we have the back and forth and we email, web conference call, we talk to each other and they’re an extension of our team. Lessons learned, they helped introduce change. Change contracts, attachments, back helping push back costs to customers, including trust in the relationship. We talked about that as we had more, we gave them more, provided exchange and coaching, shared the vision of success. And we set realistic timelines to assess the results. So with that, we quickly zip through it. Any questions? So we did have food for thought. Post on it claims are common across various industries. What do you think should be the top three ways to easily resolve post-audit claims, anybody? Well, maybe the people that are going to watch the tape diversion could get back to us. Oh yeah. We have a question on the front.

Audience:

Oh hi, my name is Jeanette and I’m from Pelican products. So what about customers with portals that see you the impromptu notifications that a claim is forthcoming. How do you suggest you handle it?

Kathy Rotondo:

So we have access to the customer portals as well. So we’ll have our log and access which would be associated with our, in this case, Johnsonville, they’ll email so those notifications come right to us. And you have to identify what deductions you know to carve out which piece, it doesn’t have to be all deductions, it’s an all or nothing you could do a piece of deduction so we’re working particular customers we’ll get their portal or different to a particular type. Yeah, we have access to that.

Joy Krugel:

So yeah. Like Kathy said so, for example, Kroger, they work all the pre deducts. I actually say they work all the pre deducts and we have like two or three exclusions from those but then we may do something to start but then we end up pushing it to them anyway like we’ve had this take. It’s a hundred two hundred thousand dollars and I will say that probably every audit for Wal-Mart we have the proper documentation and we can easily say here it is and they reverse it. So they’re just trying to see where they can get. And we are very very buttoned and I’m not saying that we are not buttoned up with other customers. It’s just Wal-Mart is a little easier because of our program staff structure.

Kathy Rotondo:

So, in this case, Wal-Mart didn’t make sense for her to know the Wal-Mart piece. But she gives us all the troublesome things.

Joy Krugel:

Yeah. And you know and our sales folks from the Kroger side you know to slice and dice that because it’s the whole big picture because the pre deducts are the same examples of, it’s just a different dollar value that they’re giving on pre deducts versus the normal every day that are piling in. So just because it’s ten thousand dollars, I forget what the pre-deduct is, I think anything over ten thousand dollars, but there might be 10 or 12 that are under that amount that is for the same claim. So that’s why you know from a big picture we just haven’t done it all.

Audience:

I’m sorry. Do I maybe think it is beneficial to have one resource dedicated to compliance and several rate noncompliance deductions?

Kathy Rotondo:

Compliance is a whole different animal. Yeah, I think you need to have dedicated resources to compliance-related deductions because of the sheer nature of them. And you need to have a background in the warehouse side of the business because there are so many different types. The other thing with compliance deductions is you have to be proactive. Sometimes you can’t wait for a deduction to come through. You have to go in the portal and you have to start addressing those before the actual deduction. A company like Amazon, for example, they post them. You have a problem today with the late shipment. You go on the website. It’s gonna be there. You’re going into the portal and you’re going to hear that ding you’re going to get dinged, it might not have even appeared on a check yet but you have to work it ahead of time. So yeah. We have to do all of that and I believe that for compliance and even post audits, we have post-audit specialists in our organization and we have a task force that just handles post audits. So for things like post audits things like compliance, yes we like to have dedicated resources to that type of deduction.

Joy Krugel:

And just to comment on when Kathy said you know specialists, they have offices all over the country and there they have clients all over and different types of clients. So from time to time, I call Sarah and say hey you know have you experienced this with any of your other clients. And she might say, Yes! And here’s what I’ve heard or whatever. But then she might say, No! But I’m going to send a message to my peers within IAB and see if anybody else has experienced it. So they have a database of knowledge you know the expertise that they can tap into. So again you know, kind of like the HighRadius, it’s a specialized system process. And I would say they have a specialized system process as well.

Kathy Rotondo:

We share information with all our friends. So if you have questions you know reach out and we’ll try to help you.