Tim Fogarty:
All right, fantastic. So we’re going to talk about Kellogg’s guide to cash excellence. Now, as you heard, I’m running solo today. Dee Costa, who was scheduled to be here, unfortunately was involved in an accident yesterday. She’s fine. She’s home. She and I were talking earlier this morning, but she was unable to attend. Apparently, she was feeling well enough to coach me, and how we wanted to present our material today. So it tells me she’s doing well. So here we go. Let me, I’ll use this. So I think everyone’s already familiar with how to use the tool on the phone. So we’ll jump right into it.
Okay, so just to give you an idea of the size of this team, she has over 200 people on her team, working from three regional centers with about 60,000 customers, globally. So you can imagine, I think there was a question around dunning letters? And how do you leverage an automated dunning letter to account for not only regional dependencies, versus different types of customers strategic versus non strategic customer. So we spend a lot of time putting together a strategy, and how do we entice customers to accelerate payments, reduce the number of deductions, and quite frankly, make it easier for them to interact with the team and AR. So when Dee and I started back in October, one of the things I asked her, I said, Look, we’re going through this project, we’re implementing Cash Application, Deductions and Collections. What is the one thing you want to accomplish out of this project? And she said, You know, I want to change the customer experience. Because I believe, by improving how we interact with our customers, that will drive cash flow. So we started to talk through, how do we accomplish that? One, she was more than transparent with me, and those of you who know Dee; Jennifer, I think you would agree, very transparent. So Tim, I have zero data, I have zero analytics, I really need to understand my customers, I need to understand how they pay, I need to be able to categorize them in various risk categories. So I can help my collections team be more strategic when they’re contacting their customers. And we also know that you can’t send or interact with every customer the same way. So then we started to talk through how do we make it easier for customers to interact? I think you would all agree what is one of the major pain points for customers to pay on time. I need an invoice copy, I need a copy of my statement, I don’t understand my invoice, or I have a dispute or deduction. So the next part of the phase was truly understanding what’s preventing customers from payin.
So there were three metrics we wanted to focus on. One, payment terms. All would agree, global clients, global customers, they all have different payment terms. The problem is, how do you minimize the number of payment terms, so you can accelerate payments? And I can tell you, she and I were talking about Italy, and Italy tends to have longer payment terms than in the US. So when we created DSL reports, she wanted to have a DSL report at the regional level, knowing that one or two countries can obviously skew the results. We wanted to understand disputes in deductions. So what does that actually mean? It’s not the ‘what’. It’s not the ‘how’, it’s the ‘why’. Why are these customers constantly taking deductions? And I’m gonna show some metrics in a minute, $69 million worth of deductions in a given month, that the team’s currently managing. A lot of money out there. In fact, $12 million of that is greater than 90 days. And those of you familiar with collections, I used to run a Collections Department. Once that deduction reaches greater than 90 days, let’s face it, most of our customers won’t even touch it. So you’re already accruing for it. And then lastly, better understanding your aging. So we’ll show you the standard aging categories that Kellogg uses and Dee and I said, you know, we need to double click into those aging categories. We need to understand why deductions or invoices are aging beyond 90 days.
So again, it gets back to how do you remove the challenges that are preventing those customers from either paying their invoices on time, paying them in full, or helping them better understand their invoices, so they’re asking fewer questions. When they’re interacting with their collectors. They’re having a I guess, I would say more viable conversation. Obviously in collections, it’s always difficult to pull money from customers. It’s just the way it is. So we talked about how do we help the collectors more effectively contact their customers. So again, we talked about automating dunning letters. What’s the most important thing about dunning letters? You obviously don’t want to ask for cash when the customer is already paid. So providing real time visibility into the AR, when the collectors are contacting their customers. There’s another component which is invoicing. We’re now starting to talk about the EIPP. Having the ability for customers to access a portal, view, download, they can actually dispute an invoice all real time. So again, what are you doing, you’re accelerating the opportunity to view your deductions, to understand the deductions, validate the deductions, and then communicate back to your customers, especially for those that are deemed invalid. And then lastly, Customer Master. 60,000 customers, you can imagine it’s difficult to maintain Customer Master. So whether your contact information is out of date, whether PO numbers are out of date, so having the real time access to this information, so the team can work within one system and make the updates real time.
Okay, so we have our first poll question. What was your AR team strategy to deal with the impact from the evolving business dynamics? Look, we’re in a different time now. I think, Kay, you touched on it. You know, the pandemic has had a dramatic impact on the way customers are paying Kellogg. So, A, having a stringent credit and collections strategy, being more aggressive when you’re contacting your customers. B, faster deduction or disputes validation? Get it touched on this earlier, the sooner you validate sooner, you can collect it. Focusing on customer relationships. You know, Sashi and I, we had a training session within HighRadius, we were talking about building champions, how do you build champions with your customers, the end of the day, if you can build that relationship with your AP contact, and help them make you their priority, that obviously accelerates payments. And then lastly, maybe it’s something else. Hopefully, it’s a component of those three, but we’d love to see what the results are. All right.
Audience (1):
Going to try percentages again. So about 19 people have responded so far, which is not bad. Good job, everybody.
Tim Fogarty:
Yes!
Audience (1):
Out of those 19, seven said having stringent credit control and practicing aggressive collection, six of you said faster deduction/dispute claims validation, four of you said focusing on strengthening customer relationships. And two of you said nothing.
Tim Fogarty:
Okay
Audience (1):
None of the above.
Tim Fogarty:
Fair enough. So I think that’s pretty consistent with what Dee and I’ve seen with her team and her customers. Okay. Okay, so let’s talk about how we addressed some of these challenges. They’re facing the team. So one, through implementing our Cash Application Cloud Solution, we’re able to centralize Cash Application, reporting is more efficient. Obviously, on account payments represent a challenge for the team. And we definitely don’t want customers having to speak to their collectors, and how to apply payments. So by centralizing Cash Application, having one central reporting system globally, where you can review your Cash Application metrics, both header level, and line item level detail at the regional level, it really helps the team drive further automation within Cash Application. And as you’re improving automation, you’re improving the ability for the Collections team to interact with their customers. Second, by automating a lot of the more transactional type activities. So one of the things I’ll show you in a moment, is how many times the team accesses a customer portal to download documentation? And you’re going to be amazed when you see the number. It’s incredible to think that for 10 customers, the number I’m going to show you is for their top 10 customers that every week, the team is accessing these portals to download information. Now I see some of you have your phone in front of you. So I want you to think about this. You have your phone, you’re logging into your system. You’re logging into a customer portal. You’re now looking for the section that you have to go into to download your documentation. Now you’re having to wait for that documentation to download. Now you’re having to wait again to upload that same documentation somewhere on a SharePoint, whether on a desktop. So think about the time saved through automating that process. By saving time through just not only downloading that information, but having the system tie their documentation to either an existing deduction, or creating a pre-deduction, then enables your team to spend more time performing root cause analysis, understanding the ‘why’ working with your key stakeholders, and how do you address these problems. So you’re preventing them from moving forward.
And then lastly, how do you take information and provide it to a set of executives, so they can simply absorb it? I mean, Tim, I can tell you, I’ve done a number of presentations, where I’ve been told too much analytics, too much data, I need the message and four or five bullet points, and you know what the problem is, and what you’re going to do to solve it. So it’s having data, real live examples that you can feed to your stakeholders to say, look, the reason why we have so many pricing deductions is because we’re delayed in updating our pricing and in in the ERP, so just using as a great example, and how you can actually accelerate the resolution of deductions and actually prevent them moving forward and gain their customer support, the stakeholder support.
Okay, so what is the role of technology? You’ve heard about it all day, and hopefully, you’ll be hearing about it for the rest of your day. So obviously, you want to remove transactional type work. Technology needs to be scalable, you need it to be able to implement it in a timely manner and has to be easy to implement. And, you know, if I think about some of the challenges that Dee and I have been working to address within Kellogg, it has been the fact that she’s got a brilliant team. But they’re not used to operating differently. So one of the things that we’ve had to focus on is, hey, we’re going to free you up, we’re going to remove a lot of this manual effort. But now we want you to leverage the technology to help you be more effective in your role. I touched on the access to customer portals. So again, what we’re seeing more and more specially in some of the other regions, they don’t necessarily have portals. So we’re having to find other ways to download documentation, one of which is sending documentation to a group mailbox where we can actually scrape the information, index it, and again, apply it to the deductions that are in the system. And then lastly, having again that visibility to where the team is spending their time. That was the other ‘aha’ moment that I would say Dee and I had. When we started to review the operational metrics. So this is, how often are the collectors contacting their customers? How often are they updating notes in the system? How effective are they when they create a promise to pay to actually collect the money. So these are the operational metrics that are enabling her leaders that when she has one-on-one with their team, she can actually have real life examples with their team that says, this is where you can improve. They’re not wasting time on activities that, quite frankly, don’t add value.
Okay, so I touched on this, and yes, it’s an eyesore, it’s meant to be. So as I mentioned earlier, $69 million in deductions in a given month, and 11 million of it over 90 days. Now, you’ll see on this screen, here’s a list of the deduction types. And I’m sure some of you probably have three to four times the number of reason codes. In this case, what works well, is by limiting the number of reason codes, you can be a little bit more tactical in addressing the issues. Jennifer and I were talking earlier today about trade deductions. Let’s face it, 90, did we say 93%? I think 93% of trade deductions are valid. It’s basically a process of just walking through paperwork. And we found that the team was spending time doing so we automated that process, we have controls in place. So the team’s not wasting time just matching deductions with credits. Here are the aging categories I was referring to. So what we started to do is start to dissect some of the aging buckets. So zero to 30. Wanting to better understand aging beyond five to six days. Trying to understand what’s impacting those customers, and why they are constantly taking deductions. Why does it take so long to validate or at least understand the type of deduction to the point where you’re actually resolving the deduction whether it’s through payment with your customer, and you’re doing it through education, or you’re resolving the deduction internally addressing some of these ongoing issues. And pricing was one example. Okay?
Okay, so this is the number I was referring to. 3700 times per week, the team was accessing a customer portal to download information. Again, I think the number we use is maybe five minutes per. So by automating that process, that process alone, the team is spending that much more time now focused on understanding the ‘why’ working with their key stakeholders to address the ongoing issues. So now we’re actually starting to see a reduction in the volume of deductions, we’re seeing a reduction in the aging, we’re seeing the improvement in the ability to collect. At the same time, we’re leveraging technology to auto resolve deductions. So the team’s not spending time manually performing offsets. So again, the idea, let’s remove the transactional repetitive type activities. you’re leveraging your teams and the more strategic discussions with your customers. They’re focusing more on problem solving, building those relationships with the end customers that have a direct impact on cash flow.
Look, I think I went too fast. Okay. So where do we go from here? I always love that because, you know, being that I’m in trance, you know, digital transformation. It’s all about where we take Kellogg from where we are today, to where we’re going to be tomorrow. So we’re focused on streamlining payments. Obviously, improving the customer’s ability to pay electronically, yes, are still sending checks. Can’t believe that’s still the case, but they are. Moving more customers to EDI. As I mentioned earlier, we’re discussing the opportunity to implement EIPP. We think that’s something that’s going to resonate really well. They recently had an acquisition of our x bar. And that’s more of a b2c model. So we’re working to leverage our Cash Application Cloud Solution to address that need. As I mentioned earlier, Dee was very transparent. She wanted analytics, she wanted reporting, she wanted to have data in a manner that she can easily consume and share with leadership. So we’re in the process of implementing our dot one analytics and performance reporting. And I hope you have time later today to see our booth that we have set up in the back. And then lastly, helping her team. And again, these are experienced people, they know the customers, they know what the root causes. They’re spending more time on the more critical activities, resolving these recurring issues, building those relationships with the customers, they’re spending more time, more strategic type actions, versus getting more into the redundant rhetorical activities. And quite frankly, don’t add a lot of value.
Okay, so I was told I had to keep it within 20 minutes. I think I achieved it. Questions, and nothing too difficult. Oh, stop. Come on, there’s got to be at least one or I know I didn’t do my job. And if I call Dee tonight. Oh, you’re not allowed to ask questions. Oh, here we go.
Questioner (1):
Tim, we talked about change management issues. Sashi and Katie talked about that. Can you tell us a little bit about how you achieve the right change management at Kellogg, what were the challenges?
Tim Fogarty:
Yes, yeah. So it’s a good question. How do you address change management? Transparency, I can tell you the first conversation that Dee and I had, when I was introduced to it, I said, look, you know, I have a consulting background, and I have a delivery background. We’re going to have difficult conversations. And she’s like, I’m totally fine. If we have difficult conversations. As long as I can curse once in a while. I’m like, yeah, that’s okay. I’m okay with that. But I can tell you actually having real tough discussions around where her team is lacking in skill sets, where they could be working differently, actually leveraging data to help her understand where there is opportunity to remove those repetitive transactional activities. And then spending time training. I know, can you talk about training? I think there’s a question around training the team. You know, it’s not a one and done type scenario. I think the important thing about training is to tell them once, tell them twice, ensure they understand it. In fact, we actually held a different type of training class. We had a day in the life session. So this wasn’t about keystroke. How do you hit a button? How do you execute a transaction? This was really walking them through from the time a collector places a call to the time an invoice is cleared. Walking in through an Anton process, helping them understand how the upstream process impacts what they do on a day to day basis. And I can tell you, transitioning from that keystroke type training to a day in the life had an immense impact on the team’s ability to understand how to use the tool, how to change their process, because again, technology isn’t about just trying to automate a broken process, right? It’s all about driving efficiency. You drive efficiency through changing your process, eliminating work that’s redundant. And then you want to automate it. Yes, I think there’s another question. All right, it’s two.
Questioner (2):
Hey, thank you. This is great, Tim. What about the customer portals? Were you getting the promise to pays, or the deduction status, or both?
Tim Fogarty:
Sure. So we haven’t implemented the customer portal yet. We’re almost there. I think I’ve got her sold out. But I can tell you the promise to pay, it’s twofold. In the collections portal, you can use promise to pay. What’s great about that is if a collector is talking to a customer, and say we’re having a dialogue, and I convince you to pay me $150,000 in invoices, and I logged in as a promise to pay, our system actually has the ability to provide it as a remittance advice for the Cash Application eam. So now you’re starting to improve the communication between Collection and Cash Application. So it does another thing for you as well. So we talked about cash forecasting? Well, when I talked to collectors, one of the metrics I hold them accountable for is how effective is your promise to pay? And what are those conversations you’re having with your customers, either one, they break their promise to pay, or they delay their promise to pay and having real data. So you can say, so customer A, I’ve noticed the last three months, you’ve failed to meet every single commitment. You’ve either been late, or you haven’t paid the amount that you promised to pay. I just got the sign. I got two minutes left. So I hope that answered your question. All right. Any other questions? You have two minutes. Well, thank you. And you know, I wish Dee were here because this would have been a lot more interesting if she were here. I tend to talk too much. So if you have any questions, I’ll be around. We’ve got some great booths in the back. If you have any specific questions around deductions or Cash Application, or obviously I’ve been talking about collections, but appreciate your time this afternoon. Thank you for coming.
