Jeff Diorio

Jeff Diorio

Managing Director
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Jeff Diorio has more than 30 years of experience in both financial technology as well as global treasury operations that allow him to bring a strategic focus to this leadership role. As a Managing Director at PMC Treasury, Jeff works with corporate treasury departments, treasury technology vendors, as well as financial institutions across a wide variety of complex engagements.
Doug Drew

Doug Drew

Financial Consultant
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Doug Drew, a former Treasurer, primarily supports all aspects of standing up a new Treasury from establishment of policy and procedures to onboarding banking services, capital markets, team onboarding and training to temporary staffing of Treasury until permanent staffing is in place.

Session Summary:

Takeaway 1:
Value of optimal working capital management
Key Points
  • Liberates the cash by extending payables and accelerate receivables
  • Drives efficiency by reducing third party fees and reduce manual work for FTEs
  • Improves customer, supplier, and employee satisfaction
Takeaway 2:
4 recommendations to achieve your target state across Data, Process, Governance, and People
Key Points
  • Data – Capture, normalize, consolidate, enrich data and digitalize the process
  • Process- Determine optimal mix of central/local activities
  • Governance- Develop dashboards, analytics, and optimization engines to drive value-creation and risk mitigation
  • People- Migrate from operational- to knowledge-workers
Takeaway 3:
How to get started with optimizing your working capital?
Key Points
  • Be clear on constraints, timeline, growth considerations
  • Break execution into manageable initiatives with a clear business case
  • Inve
Jeff Diorio 0:00

More technologist. So I automate the Treasury. And Doug actually sets up treasuries and any aspect of them. And so as we go through this, he knows a lot more about the topic than I do.

Doug Drew 0:14

I’ve been a treasurer and a lot of companies, but I’m only there for four or five months. So

Jeff Diorio 0:21

That’s what he does now. So we’re talking about working capital. And I think it’s very appropriate here at the high radius conference that we talk about this, because this is really the one area that Treasury and finance can truly move the needle on, on, you know, impacting the bottom line of the organization, an awful lot of a treasury and finance do is focused on your fiduciary responsibilities. Somebody once said to me, make sure none of the checks bounce. Right? That’s what the Treasury does, how does that move the bottom line? So but but working capital is where it can, you know, whether it’s, you know, improving the invoice to, you know, pay site, or the procure to pay side, or making sure that you’ve got a really good visualization of where your money is, so you can minimize cash balances, that’s all working capital. And that’s really where you hit the bottom line. And I’m going to move a little fast, because that was a super long introduction, which is my fault and center, the long ones. So where’s the value? Why should you be focused on this. And so if you look at it, you’ve got cash, if you have a really good ability to manage your working capital, you can liberate cash. And I remember I gave a speech at the AFP a couple of years ago, on faster payments. You know, it was about ACH moving to same day and that kind of stuff. And I call up a treasurer in Boston area called Marcy Lerner. And Marcy is like, the God of Treasury in Boston. And I said, Marcy, I got to do this speech helped me come up with a couple of good lines for it. And she said, What is it on, I said, faster payments, and she said, I don’t want faster payments, I want slower payments, I want faster receivables. And I was like, that’s a great line. But I can’t use it, because it’s a speech about faster payments. But that really stuck with me. And then you’ve got driving efficiency. And I’ve been here for most of the other presentations. And where it says eliminate FTE, that’s eliminate effort, not bodies, right, you shouldn’t be gathering data and putting it in systems and doing manual processes, and hoeing the tomato plants manually, it should be automated. So it frees you up to make sure you collect that money, right. And your processes are as efficient as possible. Because I’m pretty sure everybody in this room will admit, even during COVID, you really could use one or two more people on your staff. And you’re probably doing a lot more work than you should be. Automation helps you deal with scalability. So when you say to your boss, this is why I need this technology. It’s all about scalability, improving client experience, you want your clients happy enough to pay you, right? But it is true, if you have a superior process to a lot of your competitors, your clients will be happier. And then that can be part of it. And then governance, and I heard ransomware before and yet governance is really, really important. And, you know, the working capital touches on that. Any comments before I move on? Are we good? No. The

Doug Drew 3:29

No, the one thing I would say is that don’t underestimate the improve the experience, both from a call it a vendor partner, a customer partner. I do a lot of work in private equity. And we stand up a business and first thing out of the chute. We’re moving from a large corporate, oftentimes to a highly levered environment. What do you think vendors are looking for? immediately on close, me not making payments on time, me drawing out payments, saying Oh, it’s a new system, okay, but I’m now a highly leveraged business. And my credit exposure is significantly datahigher than what they’re accustomed to. And it’s amazing what they can do to you. In terms of, oh, by the way, I’d like a $100,000 deposit. From now on, you know, and all of a sudden you start thinking, it’s important for me to maintain those relationships, particularly after a transaction. And I would tell you, don’t underestimate the impact of that in normal day to day activity. You abuse people in terms of leveraging your influence and power that will eventually come back. Do what you say you’re going to do, do it when you say you’re going to do it. And quite frankly, you build relationships and that sometimes people get carried away with driving the efficiency on the collection side, driving the efficiency on the Stretch payable side. Don’t forget the relationship side. Key.

Jeff Diorio 5:06

Very good. By the way, this is an hour plus presentation that we cut down to 18 minutes because it’s TED Talk. So if you want to see, we have a bunch of slides in the appendix on really digging into the details of how you do these things. I think you can download it off the app that they’ve given you for this. Okay. You can go back and say I learned something that’s going to make our company a boatload of money. It is right? If you can, if you can adjust DPO, DSL a few days, it is going to be 10s of potentially hundreds of millions of dollars. I don’t know if the guys from shell are here, but they were two guys down watching the football field. And they were from Shell. And I said, well, you’re a big company. And they suggest that what, what would happen if you could move like DPO, DSO two days? and they said that would be hundreds of millions of dollars. And well, all of a sudden treasuries adding value, what a surprise. Okay, let’s talk about challenges because you have to address the challenges. So I’m going to just click for all of them. So you’ve got data, which is the cool data diagram, you’ve got the sneaker, because at the end of the day, things are never as automated as we’d like them to be. And if that’s something you’re going to have to deal with to get this working right. And then you’ve got, you know, management and stuff like that. So let’s start with data. The data is never as good as you’d like it to be. We’d like to get data from our ERP. Well, some companies have multiple ERPs. We’d like to get data from the field. So we know what’s going to happen. And the folks in the field don’t care. And I was at five serves. And they had me forecasting every week. And I was like, I don’t this is for sales, right? So it was the receivable side of things. And they wanted me for every week, and finally said, You know what, I’m forecasting a whole bunch of zeros. So why can be done with the forecasting process, focus on sales, and overperform. And, but that’s how people in the field feel. And you need to, I think you gave that presentation, people need to get engaged in the process. Now. During COVID, I had a lot of hospital clients, you know, big hospital systems, and they were real put upon during COVID. Because the revenues went like that, and their expenses went like that. And one Treasurer said we went from forecasting once a month, to twice a day. Because we had no idea when we’re gonna have to shut the doors in this place. Or if we needed to borrow more money. And all of a sudden, everybody became aware of how important forecasting was. Another Treasurer said, you know, a year ago, nobody knew who the treasurer in this company was. Now everybody wants to know what I know. And, and that silver lining coming out of a horrible, horrible situation. But a lot of people finally got the remit from the powers that be to spend some money to fix these problems. And I’ve heard that a few times today. So getting access to data, fragmented responsibilities. Who is responsible for working capital? That’s a problem. It’s not one group. It’s a whole bunch of different groups, and they all have their own focus, and they all have their own responsibilities. So nobody’s looking over the whole thing. Treasury tends to take the lead in it, but they’re not. It’s the controller’s area in a lot of cases and other folks that have to feed the data. And that goes to reactive management or failure to optimize because it’s not exactly anybody specific responsibility. So that’s the high level and Doug’s now going to tell you,

Doug Drew 8:49

I, I would say the one thing you need to think about is just because you don’t own it doesn’t mean you can’t influence it. Okay. And, you know, I’ve been in many Treasury roles. I don’t bother whether the people report to me or not, okay, I’m indifferent where they report. If I want to know something, I go ask. I’ve yet to have anybody tell me, they won’t provide it, or they won’t cooperate with us. But, you know, from a treasury seat, you’re in a unique position of providing oversight, and being able to educate folks that are operationally focused, and bringing them up a level two results focus what happens when I improve my DSO, what happens when I extend my DPO you have a role to play in terms of getting those people to understand the benefits of that throwing off cash drops debt drops to the bottom line in terms of interest expense, and drops to the bottom line in terms of liquidity that’s available for other things to invest in. And those are the kinds of conversations the Treasury team should be happening. Having with Working Capital Partners,

Jeff Diorio 10:04

I think we have three slides. So I’m going to try and go faster the next one. But so what is the target state you should be aiming for? Getting Zig Ziglar was a great motivational speaker, he used to say, one of his quotes was, how can you hit a target you don’t even have. So this is kind of the targets that you want to be thinking about, digitize? Well, these guys are all about digitization here. So I don’t need to beat on that one too much more. API integration, lovely stuff, love API’s love the dream of API’s. The problem is, with API’s, we’re kind of going backwards to every banks gonna have a different API, you’re gonna have 10,15,20 different API’s. So you got to partner with somebody who can take care of all those different formats for you. But it is important. Now you’re going to look at these and go, alright, some of them, I can influence some I can’t we’re giving you a list, right? It’s not the same list for everybody. So think about that. Oh, the wrong button. There we go. I was pressing the laser button, automation, orchestration controller processes, optimizing your payment methods, a lot of people think about this one. But again, it’s a list you should visibility into cash, real time visibility into cash is is like Valhalla, some organizations actually do it. But I would say in my experience, 90% of the organizations I know don’t have real time visibility into cash. So you know, it’s expensive. If you’re very complex, if you have one bank, it’s not that hard. But even then, it’s nice to automate it. real time monitoring of Counterparty these are recommendations, right? scalability. I’m a big believer in automation, because of scalability not because you’re going to get rid of people, you’re going to automate things for them. extensibility a bit. I talked to a treasurer last week, and he said, we gotta put in a system, we got to put it in now because we’re about to grow like mad. And they’re not gonna let me hire double my staff. So we need the scalability, this extensibility. Okay, recommendations, this is really the meat of the presentation. I’m sorry, took us so long to get here. So we’re going to hit this pretty hard. And we’re gonna want questions. So hope you’re all thinking of questions. So let’s start with data. But Doug, do you have any key thoughts on data, or should I take that one?

Doug Drew 12:34

Perfect data is the is the, probably the bane or the enemy of activity. Don’t wait for perfect data, you’re not going to get it. Take action with what data you have, you may make a mistake. But generally, mistakes of action are a lot more constructive and a lot, you know, and can be modified, as opposed to mistakes of inaction. And so I would tell you, data is important. Get out there with the data you have, once you start to identify business issues, it’ll help you identify where you need to mine the data more closely, where it’s more influential. But don’t just wait for the perfect data to come your way, not going to happen. And you know, you’ll be waiting a long time, and things will pass you by.

Jeff Diorio 13:22

So right. And the next one is process. Now, I’m not going to say which of these is foundational to the others, because we think they’re all important. So on the process side, you should be looking to streamline and simplify. And most organizations, things get really complicated as time goes on, it does make, it’s important to look to do that. And then the optimal mix of what you’re responsible for and what others are responsible for. Too many people want a system that’s going to magically figure it all out and they’re hoping you know, all centralized, it’s all gonna, that doesn’t work like that you need input from others. I was helping a healthcare company a couple of years ago, and they wanted to look at receivables and projects, the kind of stuff you’re hearing about here with artificial intelligence. And we said, okay, that works. Until you get, you know, a tail event, something abnormal. And lo and behold, Obamacare happened and they were like, oh, all this data goes out the window. So, you know, they, they, we encourage them to find different ways to streamline their world. An automated governance gets into putting controls in place, escalation, like escalation, making people responsible with speaking with colleagues in Atlanta, I can’t remember the companies with but it’s owned by Time Warner. And we’d spoken one year about putting a really great system in place. And then a year later I met him and they’d done it and I said, How did you do this? How did you, how did you improve working capitalists dramatically? And he said, they made it part of everybody’s bonuses all the senior level. People had to hit some kind of improvement on this, or that was part of their bonus calculation. Surprise, everybody was really interested in doing something about it. And then there’s people and people are the key. If you don’t have support, or you can generate support in the organization, to improve working capital, you’re not going to get it a friend of mine, Treasurer of or assistant treasurer of Hess, and we give a presentation on this. So I’m allowed to talk about it publicly. And he put together a dashboard on working capital. And the Comptroller’s group said, Why are you doing that? And he said, I’m pretty sure we’re paying some of these invoices early. And oh, we would never do that, is it? Something’s going on. And he put it together, and they found out on average, they were paying some invoices five days early, five days on there, they only pay a couple of really big invoices. So it was impactful. And and, and so a little bit of effort to put a nice dashboard in place that reached into a couple of days versus had a huge result. Doug, any thoughts before we move on? We’re good. Okay, so I’m going to skip this, but it gives you some examples of where you can look to improve your working capital and amounts associated with them. And now we’re to q&a. Two minutes over. Okay. So we threw some ideas up here questions. So small group, you can ask us anything?

Anchor 16:50

And do keep in mind that you grab not one, but two extra raffle tickets for each question. Oh, wow, that was really quick.

Doug Drew 17:02

Somehow, I knew that was gonna be the first.

Questioner(1) 17:07

Trying to break the record on raffle tickets. So when you have a client and you go in to help them stand up a treasury, what is the very most important thing they want to get done immediately?

Doug Drew 17:18

That depends on the client, whether the I do a lot of work with private equity. So I do a lot of work with private equity as well as portcos of private equity. If the private equity firm is asking me to come in, there’s usually a problem. Unless, of course, they’re acquiring something. And then we have been integral to setting up the Treasury and then handing it off to the people that are going to operate it will generally give them a 12 to 18 month roadmap of what we expect they will do when we leave. And so there’s usually not a lot of work there. There is sometimes some add on projects there. If the private equity firm wants us to come in and address something, quite frankly, it’s usually about liquidity. It’s about cash forecasting. It’s about the rigorousness of management, it is about working capital, and they will have us come in and participate with the team. But it’s not really what I call voluntary, okay, it’s, we’re here to help you and we and we are genuinely and we take that approach, we are there to serve management. But oftentimes the impetus for it is coming from a problem that needs to be solved. Now, there, there are other portcos that we deal with or other corporates that we deal with, where they’re coming to us proactively, hey, they have a problem, they have an issue, they want us to come in and assess it. Usually the first thing we do is do a topside assessment, what’s the lay of the land? They tell us what the problem is. And sometimes we have to go find out what the real problem is. And so they think they know, but they may not know. And so we’ll, we’ll do kind of a top down assessment real quickly to figure out what the lay of the land is. And that will generally target our efforts on specific cases. routinely, it is about liquidity. It’s about cash forecasting, they’ve got a problem, okay. They’re they’re illiquid. They’re tapped out on the revolver. They don’t have the opportunity of effectively additionally doing that, unless they’re doing it at a really high price. And so they want us to help problem solve, what do I do to avoid that problem? And so it’s usually working capital, cash, liquidity forecast, period, those those are the primary things we get into.

Questioner(2) 19:51

All right. Well, I do have a question. How important is AR forecasting in terms of lowering the cash conversion cycle don’t mean to do it, okay?

Doug Drew 20:05

AR conversion is part of a business cycle. So you look at DPO, you look at AR, forecasting AR, it’s not about forecasting the balance, it’s about rigorous management of, by the way, am I past due? And if I have repeated past dues, how do I anticipate that they’re going to be past due again, and start doing things up front, to encourage them to not be past due? Okay. And so, you know, there’s a lot of tools, you know, out there in the marketplace to do anticipatory AR management. That doesn’t mean you have to have a tool to do that. Okay, you can do that in a small shop, simply by taking a look at your AR aging, being familiar with your customers. And if you’re a small shop, it’s a lot easier to be familiar with customer by customer. And you start determining how do I influence their behavior to what I want it to be? Okay. And usually, that is a collaborative approach with them. It’s not a Oh, by the way, I’m going to start charging you 2%, you know, for every 10 days, you’re late or anything like that, it’s usually a collaborative approach that says, Okay, I want you to do to say what you’re going to do, and I want you to do it. And usually the mechanism of that is having the credit function, Treasury function involved in the negotiation of new contracts with those companies. And you say, by the way, you pay late, on average, you pay between 30 and 45 days late. By the way, here’s my price, if you want to continue that, here’s my price, if you want to do what you say you’re going to do, and the contract, but we need to have an agreement here, that that’s going to happen. Because we’re not going to, we’re not going to continue down that road of, Oh, we pretend in the contract, we do one thing, in all the sudden behavior is something different. So I, AR forecasting is important. But it’s all about the behavioral issues of the customer that you’re trying to collect. Now, if you’re a mass market consumer, then you start having to think about, okay, how do I influence from a more influential perspective on the masses, as opposed to a particular relationship with a particular customer. But there’s ways to do that as well. I mean, I, I used to do collections for sprint, you know, we knew what collections were going to be, I could tell you what collections, we’re going to be within a half a percent every day of the week. And I can tell you, after a holiday, you’re going to have a peak here, it’s going to go down to this. And I could tell you on a cash forecast basis, just like a heartbeat, okay? It’s the law of large numbers, smaller companies, you have to go manage it more actively. But there’s ways of in that mass market environment, influencing the AR collections as well. Doing proactive calling, sending an email to people to remind them their bills, do all kinds of things in today’s technology that help you influence that. But it’s about influencing the collection behavior, not so much about forecasting the number, forecasting the numbers important from a cash collection standpoint. But the result is how do you change behavior?

Anchor 23:37

Sorry, I did not see you behind that whole column, it is crazy.

Jeff Diorio 23:44

I think we got two more minutes.

Questioner(3) 23:49

Speaking about behavior, we have a great deal of customers that refuse to send their checks into the lockbox, they’ll walk into our branch, right? Because they want that one on one connection with their local propane provider. ideas. We send out notices, we send out phone calls and emails, what other novel ideas could we be using?

Jeff Diorio 24:08

I’m going to start the answer to this but Doug’s going to really give you the real answer. I’m from New Jersey. So what we do is you show up at their house with a baseball bat and you say pay the goddamn bill. And as but let Doug? Doug give his thoughts on this.

Doug Drew 24:28

Yeah. There’s a double edged sword here. You have to be nice when people are trying to give you money. Okay. And so, generally speaking, you don’t give it back or you don’t deny it. But there comes a point where you have to make that stand. And their behavior has to change. I have. I have clients that occasionally they have a bank account that was set up for a single customer, because they want to be able to interact with that. Bank. And I’m like, Okay, I’m good with that until I’m not. So if I’m doing bank consolidation, I am not going to have, you know, Bank of America as my bank. Except, you know, BOTM, is my one outlier. Not gonna happen. But until I’m at the point where I care about that, am I going to tolerate that person? Sure. But once you get to the point where it’s an impediment to an efficient process, it’s an impediment to the organization. It’s an impediment to your information processing and your data processing. Then sometimes you have to say, by the way, I need you to do this. And I’m going to reject a payment. It’s just like when you change banks, you go through a bank change, and you give people lots of notice. You notify him, notify him, notify him, you tell him the first 30 days payment that they gave, by the way, here’s the new instructions, do it. And there are people that will wait until you make them do that change. There’s always somebody out there like that. And you can all you just have to judge the relationship with that customer as to what that time period is. But eventually, you have to tell them, no.

Jeff Diorio 26:21

I have a few. I have a few more thoughts on this. So there’s a Pareto optimal analysis of this, but trying to get people off of paper and to move to electronics is something most organizations I talked to hold as for this would be wonderful if we could make it happen. But nobody can truly make it happen. But you can move in that direction. So does it make sense to get them to move to cards or move to some electronics instead of paper, and finding a way to motivate them to do that. And I realized that moving the card, you’re automatically getting a haircut? And so that, like I said, there’s a calculus that has to go into that, would you rather get paid on time and take the haircut or not. And if moving to card would actually get that to happen. But there is the reason for the analysis. And you have peers that you can benchmark against that will have found ways to improve that collection that you’re talking about.

Anchor 27:26

Alright, guys, but looks like

Doug Drew 27:28

I’ve got, let me do one other comment. I’m a little contrarian about technology migration and paperless. Be careful what you ask for. Because sometimes, automated data, electronic payment may or may not be economically beneficial to you. It’s convenient. Customers like it, you know, it’s seamless, you don’t have to have lockbox, you don’t have to process checks. But I was doing collections for sprint, okay, we processed on the order of about a million checks a month through lockbox, because people were generational, they wanted to send in a check. Who am I to press them? If I can collect that check at eight cents per versus collecting at a buck 20 for interchange on credit card, or 60 to 70 cents on debit card interchange. Okay, I could eliminate all my checks, and I increased my costs by $25 million a year. There’s something to be said for harvest mode may or may not be a bad thing for you, particularly if you do have the long term plan is eventually everything’s going to be electronic. Okay, checks will go away, will eventually catch on that you’re a pet right? Okay. But for now, quite frankly, you have to be careful about the economics of what you decide, particularly, you know, when you’re processing a million payments a month or 2 million payments a month. Be careful about what seems like an arcane, ugly process may be relatively efficient in the scheme of things and I’m you know, it’s not lost on me that you have, you know, you have lockbox cost, you have all those other things that come into play, but my all in cost on a check collection was eight cents. Okay? And that includes mailtime, that float time, everything. So, make sure you understand that you’re just not headed at technology, efficiency, convenience for me. You have to make sure the economics work for you too. Okay.

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