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Creating Relationships that Pay Moving Your Bill to the Top of the Stack Presented by: Jerry Ashton CFO advisors, inc. June 20, 2009 IQPC London June 2009

Let’s Determine Your Understanding of the Value of Customer-Centric Operations The ACSI affects MVA by as much as… 5% 20% 50% 100% And the answer is…

Customer Care translates into Big Returns 100%. What does this mean? ACSI stands for American Consumer Satisfaction Index which allows companies to measure customer satisfaction from 1-100 MVA stands for Market Value Added, comprised of stock price and ROI. The top 50% of ACSI scorers generated $42BB in shareholder wealth, and the bottom 50% created only about $23BB. Bottom line: One point of customer satisfaction is worth almost $1BB for the “average” International company Why? Because sellers compete for buyer’s satisfaction, and satisfied customers reward companies with repeat business, higher retention, and larger purchases

A Wake-Up Call Customer service – especially in a down economy - is now priority #1 and must run seamlessly through sales, credit and collections This is both an outbound and inbound process Frustrating the customer is expensive – relationships take on a new dynamic and immediacy which can only be satisfied within a “social media” context High Tech, High Touch, High Time

Upgrade from Credit to Credit 2.0 We are still bound by the experiences of the past What you know got you to where you are (Dead Guy, Old Guy, New Guy) What you don’t know is keeping you there The time value of money vs. the revenue value of a long-term relationship The future in mind in every calculation Creating that “Customer Relationship” profile Get all the details and agreements up front Establish a personal contact relationship It’s Relationship Management, not Credit Management

It’s All About CONTEXT The New Thinking to Apply Collection Management is dead; its successor is relationship management Calls, contacts are seen as a “sifting, sorting and separating” process Slow-pay is the symptom, not the disease. Become proactive, not reactive The prime directive for any intervention: Motivate , not Alienate!

The Problem is Serious, as America’s business last year… Wasted countless hours, telephone calls and postage in fruitless pursuit of non-responsive accounts Assigned $200 BILLION DOLLARS to collection agencies Only 7 cents on the dollar from such efforts were returned to the creditors Only 1 account out of 12 is collected Not just dollar losses -- customer losses

The Importance of People and Partnerships in Your Order-to-Cash Process Put New Thinking to Work... Call it a Relationship Profile, not Credit Application. Incorporate a “It’s not about the money!” attitude Mutual Exchange of information; e-mail addresses - Open, honest, reciprocal Allow Client Access to selected A/R data and encourage self-correction, feedback Partner and strategize with the errant client; It’s about recycling, not waste management

Time to Invoke Your C.O.R.E Principles Pillar #1 – Become Partners; no one can go it alone The key: Collaborate (but, with whom?) Pillar #2 – Make Sure the Client is touched affordably; and be ready to bring in the Outsource troops; (but, to whom?) Pillar #3 – The Customer is not a “debtor;” Recycle Pillar #4 - Go Outside your own box; Educate Your job: stimulate customer-centric practices and approaches from the point of sale on through to the check clearing the bank

Pillar #1 - Collaboration Scores of Traditional Partnering Resources NACM - or other such industry resources FECMA, MACM – many local and world-wide associations And then, there’s that mystery of Social Networking I have to join Facebook? I can’t even keep up with my email – and now, this? Exactly how much time and attention – and the reward? Can this be made easy? SMMI (Social Media Marketing Institute) is created in May, 2009 – the “Priest Class” is showing up CFO advisors , inc

The “New New Thing” Social Media and Social Networking Between 28-29% of people’s free time is spent on the Internet 66.8% of Internet Users worldwide use “member communities” compared to 65.1% using email Twitter – 140 character “updates” – and is all about “getting attention” It is all about YEO - You Engaging Others The battle is over, Twitter is coronated – evidence the front cover of Time and Iran elections

What’s the “Buzz” on Social Media and Social Networking – and why? Social Networks overtaking traditional web gateways such as Google, Yahoo, etc. Old goal: organize the world’s information BIQ (Biz Intelligence) vs. Old way: hub and spoke Focus on P&P (Preserve and Protect) customer contacts Facebook, LinkedIn, Twitter draw well over 100,000,000 unique visits a month New goal: organize the world’s people WCQ (Web Culture Quotient) New way: spiderwebs Focus on Strategic Alliances and partnering

SalesFuel.com Trigger Events – only of interest to sales? Increase/decrease in earnings Funding and financing Grants M&A Job postings Layoffs/restructuring Management changes New business deals New product announcements Credit people need to think like sales people CFO advisors , inc

Pillar #2 - Outsourcing Time to bring in the specialists It’s their core competency, not yours The staff is held to two standards, and the outsource provider’s standards are higher This does not mean you are outsourcing responsibility Train your provider to understand. It’s not about the money – it’s about the relationship Drill this in: the co$t of a lo$t relation$hip If this fails? Have a contingency plan in place

The What and Why of Outsourcing Outsource non-value added activities Outsource for quality/expertise Outsource for economy Outsource to keep up with technology Outsource to reduce reliance on Collection agencies Outsource to stay ahead of the competition Outsource on the basis of 80/20

Receivable Realities How Money Due Depreciates an average of 10% in collectability lost per month! (U.S. Dep’t of Commerce) Aging cycle over a year period $ Dollars

Accounts Receivable Portfolio Average Number of Active Accounts 5,500 4,000 – CFO Advisors 1,500 - Client Average Accounts Receivable $450,000,000 $XX,000,000 – CFO Advisors $XXX,000,000 - Client 4000 Accounts Outsource Company 72.7% 27.3% 1500 Accounts client Client 87.8% 12.2% Outsource

Results Year “X” Outsourcing Year-End Goal = 25% Reduction in Past Due Percentage From 39.8% to 29.8% Actual = 24.4% Reduction in Past Due Percentage From 39.8% to 30.1% Outsource Accounts Percent of $$ Past Due

Pillar #3 - Recycling What is the end game – Revenge, or Re-Boot? Each contact is to preserve a relationship, not end it Intend to get the customer back on track Involve The Sales Force They are the key to collections and, ultimately, keeping the successful relationship Problem: Credit and Sales (a) don’t understand team approaches; (b) are not trained to work as a team; or (c) they aren’t getting total management support YOU GET THE BEHAVIOR YOU REWARD

Sample Best Practices* Credit Consolidate balances across Parent/child accounts, location and business units – identify total company risk Invoicing Include due date on invoice and/or utilize pre-due date(vs. actual) Collections Develop an automated collection activity matrix Dispute Management Internet based dispute escalation protocol Metrics Incorporate relevant DSO metric into sales compensation formula

Credit Professionals Chip In… To quote Josef Busuttil of MACM: “The credit function does more than just crunch numbers and make collection calls. The credit function is becoming a more integrated business unit within the business organisation. It needs to be innovative and forget the inherited CM methods as they may well be obsolete to meet today's market needs!” Everyone is able to reduce DSO with no rocket science CM strategies, but what would be the effect on: The turnover? The long-term profit? The long-term customer relationship? The internal relationship between credit and the other departments?

Abe “Walking Bear” Sanchez Zapata Corporation/Founder B2B Credit To quote Walking Bear, “Any…business manager not focused on improvement as measured by profitability becomes an administrator at best and a bureaucrat at worst.” DSO and the energy given this out of date "performance measurement" is a distraction from the goal of achieving profitability and will adversely effect both short and long term profitability The best way to do (improve the bottom line) is by meeting or exceeding expectations, at a profit

Benchmark your operation Gather data across all functional areas Credit, Cash Application, Collections, Dispute management Compare internally and externally Other companies in and out of industry Identify the Gaps Where are your biggest opportunities for improvement Calculate and prioritize the benefits $ benefit, degree of implementation difficulty, time and cost

Exactly What are We Measuring …and More Importantly, Why? As an industry, Finance people are adept at using terms like DSO, KPI, etc. “What gets measured gets done” To measure different results which reflect your effectiveness at Relationship Management, you need to locate and track: Increased sales Repeat sales Customer satisfaction on the “far end”

Applying this to the Order-To-Cash Chain – Turning Stumbling Blocks into Stepping Stones The sales force is the key vector – creating a Bigger Picture relationship The way you sell it, deliver it, bill it and service it are clear delineators – personal follow-through points The “sale after the sale” – how you collect on it – determines either customer retention or customer loss. What is your policy governing this process? How do your processes support this goal? Where does education begin/end – and for whom?

Pillar #4 - Educate Your Internal Staff is under pressure; and for good reason Outnumbered by the numbers Are lucky to be “trained” once a year Have no career track Only noticed for what they didn’t collect Have you noticed the economy? You can fix that Swap Sales People for Credit People – great cross-training Reward innovation – what “win” is to be celebrated? CFO advisors , inc

How Can I Put Relationship Management Into a Finance Department Setting? Stimulate creative practices and approaches! “ C” – Communicate “ I” – Innovate “ R” – Re-Invent “ C” – Collaborate “ L” – Leverage “ E” – Engage

What “Stumbling Blocks” Show Up Lack of communication Issue identification Regularly scheduled update meetings Lack of Strong Champions Resolution of issues “ Bonus” the responsible management Defeat by Silo Partner with upstream departments Mesh with downstream departments Complicated or incorrect performance metrics Focus on results Be alert to the “unintended consequences”

Thank You Jerry Ashton President (212) 982-2152 CFO advisors , inc www.cfoadvisors.com

Executive Bio – Jerry Ashton �� Jerry Ashton has a 25-year background in the credit, collections and outsourcing industry and is a nationally respected speaker and educator as well as pioneer in the field of outsourcing. His onsite people in a number of states have handled over ¾ billion dollars annually, ranging from outsourcing an entire credit department to providing a targeted “clean up” of accounts scheduled for write-off. �� In addition to his writing credit/collection-oriented articles for industry publications such as Credit Today and Financial Manager, Jerry has delivered internal workshops for some of America’s finest companies, such as Gannett, Johnson & Johnson, Hearst and the Belo Corporation and a number of associations. �� Jerry, now retired, was a founding member of the Outsourcing Institute and an early member of the American Financial Association. He was also an active member of the International Newspaper Financial Executives (INFE), the Turnaround Management Association, and the New York Institute of Credit (NYIC). He is a resident of New York City.

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IQPC London June 2009

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