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Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
OTC Best Practices
Webinar:
Crisis Driven
Headcount Management
Matt Skudera, Vice President
Credit Research Foundation
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
CRF Webinar Agenda
Webinar Topic Introduction
CRF Platinum Sponsor Intro
OTC Best Practices Discussion
Q & A
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
What we will cover today
• Crisis Driven Collections Headcount Management
• Optimizing OTC Resource Productivity
• Achieving 100% Portfolio Coverage - Each 30-Day Cycle
• Applying Six Sigma DMAIC Methodology to Order-to-Cash (DMAIC
OTC)
• Strategic Collections Management (SCM)
• Methods for Dispute Resolution Cycle-Time Compression (DRC)
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Typical OTC Workloads
• Collectors, Dispute Resolvers and Credit Analysts can have
responsibility for 500 or more customer accounts each.
• On a rolling 30-day cycle, Client-to-Collector ratios above 150 do
not typically leave enough time to effectively touch 100% of your
A/R balance-carrying customers.
• Above 150 accounts, the industry averages range between 40% to
60% A/R portfolio coverage on a rolling 30-day basis.
Result: As much as 50% of your current balance-carrying
customers, are not being touched by a C&C team member
monthly.
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
January 2016 CBO (Congressional Budget Office) released
“THE BUDGET AND ECONOMIC OUTLOOK: 2016 TO 2026”
CBO Outlook 2016-2026
December 2015 interest rate hike and projected continued increases in
the effective federal funds rate (EFFR):
• “…(will) rise from their currently low levels. The Federal Reserve had held
the target range for the federal funds rate (its primary policy rate) at zero to
0.25 percent since late 2008, but in December 2015, it raised the range to
0.25 percent to 0.5 percent.
• CBO projects that the federal funds rate will rise to 1.2 percent in the fourth
quarter of 2016 and to 2.2 percent in the fourth quarter of 2017 before
settling at 3.5 percent in the second quarter of 2019.”
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
CRF Platinum Partner - Cforia
For 16 years Cforia Software has served over 240 customers managing $250B of Working Capital in 55+ countries
Cforia’s sole focus is delivering technology transformation to streamline order to cash (OTC) processes and results in Local, Hosted and Financial Shared Service Center Environments
OTC Best Practice examples are based on direct experience with a global enterprise customer base
Cforia Software is also a continuing contributor to the CRF News & CRF Management Review publications
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
CRF Webinar Guest Speaker
Chris Caparon has led over 240
Cforia Order-to-Cash (OTC)
Improvement Projects globally,
integrating real-time data across
multiple ERPs Systems, Countries,
Currencies and Languages
significantly impacting DSO/DBT
and available Working Capital.
Chris has degrees in both Electrical
and Computer Engineering from the
University of Michigan
Chris Caparon
COO, VP Professional Services
Cforia Software
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Why is your AR Department
the size
that it is today?
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Target
DSO
Sales
Actual
DSO
Crisis Driven Headcount Mgmt
Time
FTE’s
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Crisis Driven Headcount Mgmt
• The history of Order to Cash (OTC)
management is working from Excel,
reports or even system generated work
queues
• Full Time Employee (FTE) staffing is
based on high-level metrics – Not tied to
specific KPI’s
• Collector capacity KPI’s and metrics are
difficult to obtain
• Management engages when high level
metrics (DSO) are impacted
• Management Reacts by Hiring Temps >
Perm
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
OTC Current State
Multiple Systems of Record (ERP) & Systems of Engagement
Off-System/Manual Credit or Collections workflow & processes
Call-Focused collections processes
50-60% AR portfolio coverage every 30 day cycle
System generated worklists are not based on capacity
Overloading worklists causes abandonment of the system
Collections prioritization not controlled by management
Parent/child relationship is poorly supported and increases the
number of FTE touches required to manage the relationship
No ability to separate sub-ledgers to optimize collections and
disputes performance
Not managing collections process via exceptions
Limited IT resource and knowledge impairs OTC performance
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
What Methodology and
Approach will Optimize
Departmental Size and
Performance ?
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
• Departmental goal: deliver optimal financial performance in
DSO (DBT), DDO, Write-Offs while simultaneously minimizing
overhead and cost
• How many Full Time Equivalents (FTEs) are required to deliver
optimal financial performance?
• If you had 3 times the FTEs would your DSO and DDO be
lower?
• What is the fewest number of FTE’s that could deliver
optimal performance?
• How do you calculate FTE requirements?
• How do you track your FTEs?
• How many processes are actually in OTC?
Order to Cash Performance
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
OTC has Multiple Processes
Manual & Paper > Process &Technology
• FTE Event Optimization
– Cforia FTE Event Coefficient > WC Release
• Orders & Hold/Release Management
• Multiple-EIPP Billing Options
• Zero-Touch OTC Lifecycles
• Strategic Receivables Mgmt (SRM)
– Proactive Collections & Dispute Prevention
– Customer Harmonization and Aggregation
• Lockbox TIF/PDF OCR Automation
• Cash App: Automate BAI, BAI2, MT940,
EDI 820, Excel and CSV Data
• Deductions Resolution Compression
and Prevention via Root Cause Review
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Introducing Lean into AR
Each FTE (Full Time Employee) has a finite number of tasks they
can accomplish in a workday = FTE Events (FTEEs):
• 100% Portfolio Coverage of NECESSARY Customers/Transactions
is the goal
Goal #1: Exponentially scale the number of FTEEs for smaller
customers/ transactions (Segment: high volume – low value):
Zero Touch Collections
People are expensive, electrons are free
Goal #2: Maximize the value of each and every FTEE to yield the
desired Financial Outcomes:
Who is in control of your FTEEs? IT, your customers or you?
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Lean Sigma OTC Principles
Applying Six Sigma DMAIC Methodology to OTC
• Define Finance Outcomes
• Measure KPI’s
• Analyze Data & Root Causes
• Improve Finance Processes
• Control Continuous Improvements
Current A/R measurements (DSO, %PD, etc…) do not support
Best Practices methodology
What is the Capacity available in the A/R department?
What Capacity is required to deliver desired Financial Outcomes
Define
Measure
AnalyzeImprove
Control
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Collections Best Practices
Create single database to drive OTC performance
Segregation of "Clean" versus "Dirty" receivables to optimize
resource effectivity
Full visibility of parent/child hierarchy for exposure, priority and
work queues
Client Portal for Self Service (e.g. Reprint Invoices, generate
statements, make disputes, make payments)
100% NEEDED portfolio coverage every 30 days
Zero-touch collections to exponentially scale FTE events
Automatic generation of work queues by Segment, Treatment,
Risk Class, Specialization AND capacity
An FTE event saved is an FTE event earned
Single solution for managing all aspects of AR Collections
No “Alt+Tab” or having to drive multiple screens
Creating KPI’s that support DMAIC process and reporting
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Disparate OTC Databases
Integrating disparate ERPs to create a ‘normalized’ Global OTC databases
Cforia DB
C&C
Workbench
Dashboards
AR DB
Cash
Application
Automation
Cash Application Write-Backs to ERPs
Customer
Self Service
ERP 3
ERP 2
ERP 1
Email and Fax
Servers
Database Server ApplicationsInvoice
Copies
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Clean vs. Dirty A/R
Collectable Clean
Receivables
Disputes
Dirty Receivables
Deductions
Dirty Receivables
Typical A/R Database
Undisputed
Transactions(Clean & Past Due)
Cash
Forecastable
Transactional
Discrepancies
(Pricing, Freight, Tax)
Item Level
Resolution
Often Contractual(Service Agreements,
Trade-Funds Co-Op)
Item Level
Resolution(often across hierarchy)
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Global View of Client Activity
Global HQ
Parent Parent
Co/CustomerCo/Customer
Co/CustomerCo/Customer
Invoice InvoiceInvoice InvoiceInvoice InvoiceInvoice Invoice
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Harmonized Customer Data
BradCo
Cust # 341
BradCo
Cust # 458
BradCo
Cust # 231
BradCo
Cust # 981
BradCo
Cust # 312
ERP 1Braces
Divison
Brenda
BradCo
Cust # F321
BradCo
Cust # F493
BradCo
Cust # F401
ERP 2Implants and Joint
Replacements Div.
BradCo
Cust # 887212
BradCo
Cust # 674391
BradCo
Cust# 572122
BradCo
Cust# 458231
BradCo
Cust# 883011
ERP 3Recovery & Rehab
Products Div.
Ortho Supplies
is easy to do
business with !
Mary Jo
BradCo AP
BradCo Consolidated Customer
Hierarchical View of all Invoices across all ERP Systems
1 call replaces 3 calls
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Zero Touch Collections
Zero-Touch Segment = Low-Value / High-Volume Collections • 100% portfolio coverage every 30 day cycle
eContact HTML process to replace Call-Based Collections • One button press can replace 100s of phone calls (FTEEs)
• Do not review every email before it is sent…
• Avoid the unintended consequence of customer driven FTEEs
• Your smallest customers can consume extensive FTEEs for
very low value events like invoice reprints
Enable Robust Customer Self-Service and Online-Payments • Customers can reprint their own invoices and statements
• Pay their bills on line via ACH, Credit Card or other
Automate Cash Application for all Online-Payments• 100% Payment Reconciliation Hit-Rate > Zero-Touch
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Best Practices in eDunning
Latency of payment data.
• Data Connectors required to synchronize OTC data > FTE’s trust
what they see > One Call Resolution & better outcomes
Segregation of Clean A/R from Dirty A/R
• Only clean A/R drives trust in outbound correspondence
• Disputes or other Dirty A/R must NOT trigger a dunning event
Control over the transactions lists in the letter template.
• On a template by template basis, you must be able to control which
transactions are sent to segmented customer
Parent/Child Configuration
• You must dun customers at the consolidated/parent level. If the
children within a parent generate dunning the system will collapse
because you’re A/P contact will overwhelmed with documents. You
are a single company to them, not individual bill-to’s.
Must have ability to run targeted campaigns and track results
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
eDunning, cont.
Customer-facing documents must be in the format your
customer’s need and want
The date and number formats must be managed so that it is
easy for your customer to read and respond to your
correspondence• MMDDYYYY vs. DDMMYYYY vs. XXX.XXX,YY vs.
XXX,XXX.YY all matter
Support the appropriate logos and brands
Departmental Empowerment = No IT resources (or outside
consultants/vendor) needed to change OTC priority, workflows or
to reconfigure reminder/dunning templates
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Best Practices in Prioritization
Segregation of Clean A/R from Dirty A/R
• Do not touch every invoice to minimize call prep time and call
efficiency
• Collections calls are in aggregate and disputes are transactional
• Implement Parent/Child to compress the FTEEs
Align worklists with capacity.
Prioritize based on the cash flow delivered
Account balance-driven vs. transaction delinquency events
Must use customer AND invoice data to make decisions
Use customer payment and credit risk behaviors to only call
customers who need to be called
Which customers pay when emailed?
Which customers paid with 0 or 1 FTEE in the past month?
Which customers have negative payment trends?
More
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Credit Risk Driven Collections
DBT Trends
Customer
Touch
History
Credit Data
Other…
High-Risk
-Need Calls
Volunteers
Medium Risk
-Pay
w/emails
Risk Scoring
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Collections (Clean AR) Tracking
Number of FTEEs per collector & customer per month by type and
outcome
Did they pay with an electronic touch? Do they need to be
called?
Adoption rate of Zero Touch Collections
Value per FTEE
Low to high – high to low
Required Capacity vs. FTEEs
Aligning work queues with available capacity
Untouched customers
DBT (days beyond terms) tracking and trending by customer and
collector
# of required FTEEs per month
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Disputes & Deductions Best Practices
Prioritization to maximize cash flow
"Pre-Term Touches" improving overall collections effectivity, CEI
and DSO - Strategic receivables management
A/R automation tool tightly integrated with ERP and supporting
evidence - POD’s, imaging, contracts and other digital docs
Tracking case created and routed to resolution support teams
• Identification and collaboration with the key stakeholders
• Driven by the resolution time fence if it exists
Cases prioritized by type, value and financial impact/risk
• Which are recoverable/preventable?
• Which are regular business transactions that need to be
processed?
Root-Cause analysis by code and resolution process >
Elimination of chronic causes = Prevention Focus
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Dealing with Majors & Big Box
Resolution/FTE Cycle Compression Improvement Methods
AP Vendor Portal Automation Support – Helping to streamline
what is a manual process
Downloading the claims and related data
Mining EDI feeds to complete the transaction
When IT says you have 98% EDI automation and you
have no deduction reason codes assigned, you have 0%
automation
The EDI feeds contain critical data than IT imports into
ERP or management tool
Group deductions
If you have 100 x $20 deductions and $20 is below the
minimum threshold for dispute then have 1 x $1000 and
manage the entire balance
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Dispute Resolution Results
1. Reduce Dispute Resolution Cycle Time by 10%-50%
2. 100% Dispute & Deductions Tracking
3. Improve Root-Cause Analytics Tracking 10%-90% - Helping to Identify
and eliminate chronic recurring upstream issues
4. Eliminate Current Manual (Email and Phone-Based) Dispute/
Deductions Resolution Methodology
5. Create Systems Based Intra-Departmental Collaboration,
Communication & SLA’s – Particularly with Client Facing Field
Resources
6. Enable High-Volume Lower-Value Customers to Self-Service 7/24/365
to initiate Disputes and Deductions against specific Invoices
7. Split Invoices into Clean/Dirty to Clear Undisputed Portions for
Payment – Working toward eliminating “Short-Pay Artistry”
8. Single View of Customer Truth across all Billing, Support and
Supplementary Systems of Record
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Deductions Tracking
Number of FTEEs per Dispute/Deduction
Value per FTE
Low to high – high to low
Required Capacity vs. FTEEs
Untouched Disputes/Deductions
Number of FTEEs per day, month
Trending of FTEEs over time
Increased Dispute/Deduction Submissions & Recovery Rates
Root Cause Analysis by type and owner
DDO, DSO, DBT
By customer, FTE, owner, type..
Trending over time
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Held Order Management
Held orders are unscheduled FTEE’s that are often used as
collections events
Many held orders are the result of poor credit checking logic in the
ERP system
Credit checking policy does not create exceptions – nuisance
holds
It is critical to improve the credit checking methodology to only put
orders on hold that need to go on hold
Seasonality, credit risk, payment trending, parentization…
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
OTC Success Factors
Implement best practices to optimize your FTE performance
Focus on managing by exception for all FTEE’s in your department
Compress FTEEs based on best practices
Initiate KPI’s to track and measure departmental performance
Allocate time to review your processes and KPIs to support the
DMAIC process
It is critical to have flexibility in your OTC tools to support
prioritization changes based on your KPIs
If it takes IT and consultants to implement change then it most
likely won’t happen
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Experts’ 2016 Advise
1. Optimize FTE Allocation and Efficiencies -
Resource Productivity Gains
2. Increase Customer Responsiveness - Make
doing business with your company easier -
Customer Self Service
3. Provide a world-class experience to internal
customer(s) - Collaboration
4. Deliver focused and quantifiable financial
improvements – Measurable Impacts
5. Cultivating Continuous Improvement
processes within financial supply chains
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
Client Case Studies
Cforia Inc. USA +1.866.859.1054 / +1.818.871.9687 UK +44 (0) 203.286.0039 www.cforia.com
CRF Webinar Q&A
Matt Skudera matts@crfonline.org
http://www.crfonline.org/
Chris Caparon ccaparon@cforia.com
ww.cforia.com
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