A credit staff can work for a long time without ever achieving its full potential. Lack of training, direction and/or up-to-date systems and procedures can lock it into consistently subpar performance. Then again, with the training and systems readily available today, the same staff can quickly blossom into super performance. That's what happened here under a new manager committed to excellence.
Double digit reductions in DSO, delinquency and operating expenses won the credit department at The McGraw Hill Companies a Leadership Award in February, 2010. Accepting the award on behalf of his management team and department staff was David (Dave) Weidinger, the Senior Director of Credit and Receivables, who noted what a "substantial advantage" well-informed credit personnel provide an organization. What he might have added was how recently that advantage had materialized.
When Dave arrived in 2006, not one of the 100-member staff had NACM certification. Today more than one-third are CBAs and CBFs, and more are preparing for domestic credit certification, as well as international education and certification though the International Credit and Trade Finance Association (ICTF), which he chairs.
Now relationships are much more open. We have meetings where we can bring up ideas for improving things. . . It's so open and empowered. It's a constant learning thing, and it's getting better all of the time
What's more, the department systems and procedures have all been radically updated to deal with the changing credit and collections landscape, both domestically and internationally. Management is now more in tune with what the credit and collections staff needs, and Dave and his management team stress an open door to anyone who has improvement ideas.
Open Relationships
"Years back, if you thought there was something that could be done better, there wasn't any way of bringing it up," says Collector Jennifer Abate, a 30-year department veteran. "Now relationships are much more open. We have meetings where we can bring up ideas for improving things. If something doesn't seem right to me, I can go right to my manager and say, 'I just thought of this. What do you think about it?' It's so open and empowered. It's a constant learning thing, and it's getting better all of the time."
Dave notes that when he arrived he found a hard working staff that understood the fundamentals (e.g., know your customer). But that wasn't enough. "You need credit education to survive in this economy," he says. "All of the tools have changed in the past 30 years. So we've been working on those, keeping up with industry trends at credit groups and webinars that the ICTF and other credit resources provide. We want them to understand all the tools and all of the opportunities that are out there for continuous education."
In addition, the ICTF and the Thunderbird School of Global Management have jointly established courses for international credit at both the beginner and advanced levels. Given the linkages of global economies and how they impact one another, Dave feels a large company like McGraw-Hill needs to have all credit and collections staff current with both domestic and international business risks and opportunities.
Dave also points out that publications, like Credit Today, are critical resources that regularly update international trade credit and collections staff on improvement opportunities.
Besides globalization changes, one of the main drivers of change is technology. Computer hardware and software tools have evolved and he aggressively changed and updated what he found when he arrived.
More Empowered
"We got Oracle just before Dave came in, and we feel much more empowered," says Credit Analyst Margaret Morris, a 29-year veteran, referring to some of the additional Oracle Modules like Credit Management, which is in place, and Oracle Advance Collections that Dave has pushed for. "There's so much information on the screen now. You don't have to search further. What you need is right there. All of us in credit analysis start with the same thing, but we all work differently. It's so much easier to do what needs to be done so we can get paid."
In addition, Dave and his team use Business Process Management (BPM/Six Sigma) as another tool for process improvement that aids the staff in their work. (Editor's note: See also Credit Today, "Six Sigma: A Primer on How It Can Apply to Credit.") Since 2008, project teams led by the Credit and AR departments have been deployed to look at issues and obstacles that the staff have identified. These problems are evaluated and solutions are determined and implemented based on data research and analysis, which leads to sustainability of results.
The project teams are often comprised of members across the various departments, including Credit, AR, Finance, Customer Service, Order Entry and Sales. In addition to solving problems in a more efficient way, having these groups work together on the projects has led to further collaboration which benefits the entire corporation.
Setting Performance Goals
Dave meets with his five direct reports to set certain key performance goals every year, and they agree on what DSO, delinquency and cash collections percentage improvements should be. What is target performance versus exceptional or significantly exceptional performance? This helps drive the right strategies for collection calls and is used for annual performance reviews. And the Accounts Receivable staff that supports Dave's collections staff has performed admirably in assessing new tools and better system usage to improve credit and collections functionality for the whole team, making the large percentage improvements possible.
Rather than setting a performance target of the number of calls collectors should make, he prefers to set cash collection targets: "Here's what you did last year. Here's what you should do this year. It's a bit more, but you know that all debits and credits are clear (clearing up millions of dollars in old debits and credits was another major initiative he took when he arrived) so you know you're starting with a cleaner balance."
So even in the current downturn, when sales are challenging for many businesses, he's looking--not at whether collectors pulled in more collections this year than last year--but rather at whether the collection percentage is up, even if the dollar amount is less. "Now that the portfolio has been cleaned up, they have pride in keeping it that way," he says. "The approach is, let's sit down and make goals together."
There are also regular meetings with the entire staff, where they review where they are so far. "We recognize their successes, such as when they get their ICTF and NACM certifications as well as completing BPM green and black belt training," he says. "But I still believe their best incentive is satisfaction with a job well done as they are all very proud of their accomplishments -- as am I."
Resolving Everything
Jennifer Abate, who describes herself as "passionate" about customer service, typifies this sense of satisfaction. "Before it was call, call, call," she says. "Now, with our software and email capabilities, anything that the customer tells us, we can resolve. You're not going to get the money in unless you get the problem solved. We can listen to their problems and get them resolved.
"It's wonderful if you can make lots of calls," she continues. "But our responsibility is getting the money in. No matter what we need to do, we do it. Depending on the problem, the sales people or Sales Administration or Advertising may be involved. People in every division can help. We can contact them directly and get the customer's problem solved, and that's what brings in the money. It's about people caring. It's about customer service. If you're not resolving problems, you're just calling people."
Abate says that people throughout the company are getting back to collectors with ideas of what they can do to help. "We keep track of them--solutions for billing problems, service problems, you name it. It's a huge list that goes on the computer, which generates a report for Dave so that he can see what the problems are."
She and her fellow collectors are keenly aware that they are likely to be the first people in the company that a complaining customer talks to. "Whether it's cancelling or billing or whatever, we always make sure it's resolved," she says. "You talk to the sales rep and call the customer back and say, 'Okay, this is the story. This is resolved.' I love to work with customers. We can do so much more to help them now."
Advance Collections
In March, Abate and the other collectors will begin working with the Oracle Advance Collections system now be implemented. Under the current system they are taking time at the end of each
day to lay out a collection call plan for the following day. This involves going into the system to see which customers have the highest or the oldest balances.
Advanced Collections will search out this information automatically and present it to them each morning. This will both free up a half hour of their time and lay out a sequenced plan of whom to call or contact in some way.
It will also send out first notices--not necessarily dunning notices, but notes saying, "Your balance is due next week. Are there any issues or problems?" They won't have to take the time to write emails. Also, if payments arrive overnight, cash applications improvements allow for the customer balance to be updated overnight and the call plan can be adjusted by the system before the collector arrives in the morning and starts their call plan task list.
"Putting in place this technology will allow them to maximize their time and performance," says Dave. "We're just now getting this in. Up to this point we've been working with the staff to set clear goals and plans and they've executed beautifully. We'll be able to do an even better job going forward."
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