Authored By Robert Unger and Sahil Hakim
Companies large and small are clunking along with legacy receivables systems, and are challenged to improve operations and reduce costs in order-to-cash processes. These inefficiencies increase the cost to serve customers, and erode margins on customer profitability.
At the nexus of change, it’s good to hear from the bleeding edge folks who have broken through the legacy barriers, who are now maximizing customer profitability, and who are willing to share insights and lessons learned.
In this blog, we are talking to Tim Walker, Financial Project Systems Manager, at Brightstar Corporation. The Brightstar Corporation is a multinational distributor of mobile devices and services supporting carriers, retailers and enterprise customers. Tim supports all Brightstar’s systems related to finance and accounting, and has tackled a lot of those A/R things that give companies headaches like invoicing, deductions management, collections/aging receivables and related customer payment issues.
Rob: What metrics does Brightstar use to measure the cost of customer service and customer profitability?
Tim: We do look at things like bank fees. So, when we implemented EIPP we wanted to enable ACH payments. There was a concern over how much the bank would charge for the ACH debit and receiving the ACH. Managing and tracking bank fees is important.
Rob: At Brightstar how has the role of the credit and A/R department in controlling customer service costs or customer profitability, evolved over the years?
Tim: I have not worked in credit and A/R, but have worked on implementing technology in those areas. For example, managing deductions became a huge focus here. When you start disputing the customer stops deducting. Before we implemented a solution that helps us dispute through the retailer portals, all deduction disputes had to be sent in by U.S. mail.
Getting customers to self-serve was very important too. One of the first things we did was install an EIPP module so customers can get their invoices electronically.
Rob: One of the major cost factors cited by teams is the cost of accepting payments, could you give us an insight into the incoming payment mix (ACH, checks, cards, wire transfers) at Brightstar?
Tim: Most of our payments are ACH, then wires, checks and credit cards. Remittance information is mostly sent separately by email.
Rob: How would you like your payment mix to change over the coming years? What initiatives is the finance or credit team taking in this direction?
Tim: We are looking at EIPP to help increase ACH payments. We are still working with the corporate office to get ACH enabled through EIPP, which will help reduce costs. Right now, we only accept credit cards through EIPP, which helps with PCI compliance. We have taken credit cards, and compliance was difficult when the customer used to fill out a form and send it. The portal now handles compliance.
Rob: Paper, print and mail unfortunately continue to dominate costs in most invoicing processes. Are things any different at Brightstar? Is this something you have been able to cut down over the years?
Tim: I started in 2012 and we have never mailed an invoice or statement. Some customers prefer to get an email with every invoice as it is generated, or we could sum it up into a weekly electronic bill, or send an EDI file. However, our customers using the EIPP module do not like to get emails of invoices because of the volume; this is a big benefit of implementing EIPP. Customers can get their own invoices/statements from the portal, so the account managers and other support personnel don’t have to get calls to generate them on the fly.
Rob: High volume suppliers such as Brightstar deal with a high-volume of deductions. What’s your take on some of the biggest reasons that lead to this?
Tim: We supply to a lot of retailers and as such deductions are a very big part of what we manage. Most of the deductions are due to vendor compliance issues or a result of post-payment audits from the buyers.
Rob: Which of these are controllable internally? What are the external?
Tim: Internally, deductions could be curbed by improved access to real-time information across the order management process. If a particular product is short on stock, the sales manager should have the required visibility to be able to check status and not accept an order if it’s not going to be fulfilled.
Externally, it is important to provide a self-service access for buyers to be able to review their invoices and payment terms to avoid any confusion at the time of making a payment. A self-service portal would also cut down the time A/R teams lose in addressing repetitive customer queries. It is also important to be able to keep close tabs on carriers and third-party logistics providers – this is crucial to minimize concealed shortages and ensure that delivery timelines are met.
Rob: Deduction write-offs are seen as a major leak in customer profitability. What is your long-term strategy for controlling deduction write-offs at Brightstar? What have you done to achieve this?
Tim: We operate on a simple philosophy – dispute everything! We realized that when you start disputing, certain customers are less likely to make invalid claims or deductions. Let’s say, if you keep writing-off deductions under $10, it won’t take much time for some of your customers to figure that out and start increasing deductions under that threshold. The long-term strategy would be using technology to make sure that the auto write-off levels are at $0.
The process of researching and disputing invoices should be simple. Analysts should be able to effortlessly pull together the relevant back-up data including invoices, proofs-of-delivery and bills-of-lading and send them over to the customer along with a deduction denial notice.
Rob: Collections is the backbone of any successful receivables management operation. What has been your biggest concern around collections as you continue to grow the business?
Tim: The challenge with collections is that effective collections dunning involves prioritizing accounts based on their receivables aging in addition to other factors. With a growing customer base, this is not scalable and results in ineffective account coverage. Your collectors might be making calls all day long, but the question you have to ask is, are they making the right ones?
Rob: What role do you think automation technology could play in making collections a more scalable practice? What has the team achieved through their automation initiatives?
Tim: Technology transforms collections from a reactive process to a proactive process. It has the ability to quickly prioritize critical accounts and contact them en masse. For customers having invoices due in the next five days, an automated reminder e-mail gets sent to them with invoice details and link to a payment portal where they can pay online.
Previously, analysts spent a big part of their time in manually running aging reports and managing notes in spreadsheets. This was a direct impact on the time which could have been spent reaching out to customers. With automated email correspondence, we were not only able to improve account coverage but also refocused resources to more strategic functions within finance.
Rob: What were some of the concerns you might have had when considering a cloud-based automation solution? How did you resolve these? What were some of the obvious benefits?
Tim: The biggest concern the business had was keeping the ERP as the system of record, or the single source of truth. Our IT team was skeptical about integration to an external system. But we worked closely with our vendor and were quickly able to resolve any technical concerns.
Rob: What is your advice to credit and A/R process managers and leaders on how they could play a more proactive role in improving customer profitability?
Tim: Definitely look for ways to implement automation, including the customer self-service aspect. With automation, a cloud-based solution means there is less reliance on internal IT, where they may say “we don’t have the resources” or “you have to wait.” But it is important for IT to be involved, and helpful if they can be involved at the beginning of the project. And needs come up. For example, we have to make sure the information we are providing to the cloud is correct and timely so the system works correctly.
And, keep focusing on disputing deductions. Dispute everything. With automation, you should have the information available.
Listen to the the experts from NACHA and Brightstar as they explain how you can review your credit-to-cash processes as a cost-center and create a strategic plan of action to optimize costs.