Credit & Collection Trends: Outsourcing Receivables - A Success Story
The knock against outsourcing receivables management is that you can lose control over your relationships with your customers. But don't tell that to Cindy Vescio, credit manager at Leslie Controls, Inc. (Tampa, Fla.).
"When I took this job a year ago, I wanted to do everything myself," she admits. "It took a couple of months before I realized how much easier they make my life." "They" are the staff at Dun & Bradstreet's Receivables Management Services (RMS) division in Bethlehem, Pa. (Editor's Note: Since the original publishing of this article, RMS was spun out of D&B and is now an independent company, unrelated to D&B.) RMS now handles an average of 350 accounts representing $2.5 million in receivables each month for Leslie. In the period between January and April this year, they reduced aged receivables by $400,000. "We communicate and work together very well," says Vescio. "They're willing to take a lot of direction from us. They represent Leslie every bit as well as our own employees would."
"We focus on ensuring seamless integration between our team and our customers to do just that," says Forrest Old, vice president of marketing and product management at RMS. "We take the time to learn the ins and outs of our customer's business. That knowledge, coupled with D&B's proprietary scoring models and advanced technologies, helps to increase and speed up collection rates." "A Lot of Old Receivables"
Prior to its initial contract with RMS, the company had a DSO of over 60 days and, in Vescio's words, "a lot of old receivables." A major reason was the Leslie product line: highly engineered valves and valve products. Customers don't need these very often, so repeat orders are few and often years apart. Working together, Leslie and RMS staffers developed an aggressive matrix for dealing with them. "We're now calling accounts identified as potentially shaky 10 to 15 days after delivery," she says. The RMS staff begins its collection efforts with Leslie accounts at the 30-day mark or earlier, depending on the amount. This month, they began looking at every account over 60 days no matter what the amount. Vescio divides her time between providing RMS with the information they need to do their work and attending to accounts that she decides need her personal attention. This latter category includes accounts granted dating or extended terms and foreign accounts that may be difficult for RMS to contact. What is the cost compared to what Leslie was spending prior to contracting with RMS? Vescio hesitates to make any exact calculation. She says personnel costs have certainly dropped since in-house staff had been reduced from a manager and one full-time and one part-time staffers to herself and one part timer. RMS is paid a flat rate per account. Recently an incentive was added for reductions in DSO. Darrel Hewson, D&B's assistant vice president for outsourcing development, cites Leslie Controls as an excellent RMS client/partner. There are, he says, three fundamental requirements in these partnerships:
- Open exchange of information.
- Development of an appropriate treatment matrix, identifying causes of delinquencies and addressing high risk accounts.
- Assistance in determining where the RMS staff should network within the partner organization.
"We're D&B," Hewson says. "With our global information infrastructure and expertise, we have capabilities that our partners don't have. Because of our expertise, we bring a level of discipline that they haven't seen before. What's more, we're flexible and easy to work with." Dedicated Staff
What about the interpersonal relationships between collectors and customer account payables clerks that so many credit mangers treasure? Aren't these sacrificed in receivables outsourcing? Not according to Hewson or Vescio. "Our customers never realized that the people they're talking with are not our employees," says Vescio. "The RMS staff handling our accounts is professional, friendly, and easy to work with." "That's because D&B treats Leslie Control's customers as its own customers," adds Hewson. "Our people develop friendly, professional relationships with our partners' customers. And when our partners experience surges in business, we are able to add trained, qualified staff far more quickly than they could." Editor's Note: The above article originally appeared in the Credit & Collection Manager's Letter, a newsletter purchased by Credit Today in 2006. This article originally appeared prior to 2000.
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