Cyber Credit

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Cyber Credit

Skillful delegation has always been a key management tactic. Today the best delegatee is as often a computer as a subordinate. Are you and your professional staff delegating as much as you should to (and taking maximum advantage of) your organization's computer capabilities?

Cindy Vescio knew something was strange when an account deservedly considered marginal suddenly turned up with a $9,000 credit from a "cash-in-advance" payment. Had this customer turned over a new leaf? Sadly, no.

"It was back in July and we'd just completed a version upgrade of our mainframe software," says Vescio, who is credit manager of Leslie Controls, Inc. (Tampa, Fla.). "Something didn't work. Parts of the system weren't talking to each other. All of our automated receivables programs crashed."

The Leslie computer is central to a myriad of credit/financial functions from automatic invoicing to automatic payment posting, and all of them were impacted. But the problem was quickly resolved, and Vescio sees a bright side. "The pain of July," she points out, "shows how much automating repetitive tasks has eased the rest of my job."

Credit automation has been building at Leslie since lock-box collections were tied in with the company's MIS four years ago. "That worked so well, we decided to automate as much as possible," she says. "Why have people devoting their time to collection functions that can be automated? We have plenty of other tasks that require a human touch."

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No More Void
She is especially taken with the online processing now used with Leslie's government accounts. "This works wonderfully," she says. "Before we sent out invoices, and it was as if they disappeared into a void. Now we're submitting invoices through their Web site. There's a 30-day turnaround, and the process involves less human intervention. The invoice is sent electronically directly to the paying office.

For credit managers embarking on the automation process, Vescio suggest three guidelines:

Provide plenty of input to MIS. "You've got to enable them to provide you with exactly what you need," she points out. "You cannot expect them to know the specific requirements of the credit and collection function. A process that's not properly designed can wind up costing time rather than saving it."
She cites the example of Leslie's current payment application system in which payments lacking some designation detail are systematically posted to the unapplied cash account. This requires human intervention with someone having to retrieve it from unapplied cash and posting it to the correct customer account. "So then you have two things to do instead of one," she notes. "We're currently working on modifying the auto-cash program to delete this extra step."
Be patient. "Keep in mind that MIS has other projects it's working on," she says. "Be nice to the people you're asking to help you. Remember that your priorities may not necessarily be theirs."
Quantify your time. "Keep track of how much time you and your staff spend on activities that could be automated, like daily posting. This is time you could apply to going after problem accounts and other responsibilities that really require human intervention. This is what sells automation to your boss."

Receivables Outsourcing
Easing Vescio's job along with computer processing is an outsourcing arrangement now in its third year with Dun & Bradstreet's Receivables Management Services (RMS) division in Bethlehem, Pa. RMS now handles 350 Leslie accounts on a continuing basis, with Vescio attending approximately to 110 to 120 accounts herself. "I make it a point to handle most foreign accounts and any customers that I have a relationship with, such as our largest representatives."

RMS manager Herb Petty describes Leslie Controls as an "ideal client." "They freely communicate with us on a very frequent basis," he says. "Information is crucial, and every Monday they let us know exactly where we stand with the portfolio."

The RMS staffers--one full-time and one part-time--represent themselves as Leslie Controls staff, which is indeed what they have essentially become. As well as calling any delinquent accounts, they routinely call accounts on current status to inquire if invoices have arrived and if there are any "issues."

"Because we have a long-standing relationship with these accounts, we have a feel for who's going to do what," says Petty. "They know we'll call. In fact, if they have issues they may wait in anticipation of our call."

Leslie Controls has given RMS a DSO goal of 44 to 48.9 days. In the most recent report, the DSO of the RMS-managed account was 45.7 days.

"This didn't happen overnight," says Petty. "It took a lot of mutual work to get to this point. Now we've got it down to a science."

There are, however, problems that neither automation nor competent receivables management outsourcing can overcome. Included among these, notes Vescio, are delays in payment--often resulting from documentation discrepancies. "We have over 70 different companies representing our products. The purchase orders may be made out to the representing company, and the customer doesn't recognize Leslie on the invoice. We wind up having to credit the customer and charge back to the representing company."

Then too, there are all of those other errors, often minor, that can slow down or stop payments. "While we at Leslie emphasize that cash is king, everybody is responsible for asset management."

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.