Matt Reynolds :
Okay, I believe we’re supposed to get started with a panel question if the person there we go. Okay, folks, so I think everyone knows the Whova drill by now, our first panel or poll question, what do you think is the top reason for revenue leakage in the Order to Cash process? Is it siloed processes, or lack of adequate knowledge, invalid deductions, or change management? We’ll give that just a minute. Are we gonna do the results?.
Moderator:
Okay, so far, I’m going to still give everybody 13 seconds to answer the poll. So far, so good, though. All right. And again, we have 50% of you said siloed processes. Oh, my goodness. Now I don’t and it’s about an equal 14% said lack of adequate knowledge and invalid deductions. And then about 25% said, change management. So first, the siloed processes then change management, a tie between lack of adequate knowledge and invalid deductions. round out, three and four.
Matt Reynolds :
Okay, Alrighty, well, we’re gonna go a little bit back and forth. We’re gonna do four questions, and then I’ll open it up to the floor. So please keep your questions for the end here. And, Joanne, the first question is for you, CFOs, in 2021, and onward, are looking to shift gears from cash preservation to cash excellence. But various industry experts have concluded that a billion-dollar company’s revenue leakage reduces earnings by 1 to 5 million dollars. So this is a matter of concern. What according to you are the major reasons for these leakages?
Joanne Mayer:
Well, for my company anyway, I would say an understanding, lack of collaboration across the business, but there’s a lot of misunderstanding of dilution, and where that comes from. So sometimes sales are thinking, its distribution. Distribution is thinking that sales was the way the product was ordered? Is it something that the distribution center did. So understanding how everyone contributes to the retention of the value of that sale? And we talked about siloed processes, and that has a lot to do with it? You know, I still, with seasoned veterans in the company, have conversations where they say, but I didn’t pay for that. No, you didn’t pay for it, the customer did not do it. But it’s you didn’t get the money. So there’s a lack of understanding really, how this whole thing really works. Like what is a deduction, to begin with? And, you know, how much if we just spoke to each other? How we could prevent some of that? Leakage?
Gregory Ottalagano:
I strongly feel like the poll said, collaboration, silo processes is a huge thing. And if you don’t have collaboration across functional teams, like Jessica had explained earlier today, you know, cross-functional, collaboration is huge. And if everybody’s working in silos, you’re gonna fail. Okay? The largest siloed company, or organization I can think of, is the US government. Last year, they sent out billions of dollars of stimulus checks, the people that were dead. But the funny thing is that when you die, Social Security knows within 24 hours that you’re dead. So how are the IRS and Social Security not talking to each other, and they sent out all his money, that silo thinking that’s how that works. That’s how drastically bad it could be. And I’m saying to silo, people that work in silos, companies that work in silos are doomed to fail, it’s not failing, it’s just eroding your profits. That’s what it is. Okay. And just one quick story about silo processes. When I was with a former company, we had moved our customer service team from one state to another. So none of those people that were in one state moved to the new state, so we had to build a whole new team. So I said to my boss said, Listen, as the whole new customer service team that’s out there is going to be processing orders. They’re going to be processing orders, they’re probably going to be bad. Road pricing, wrong terms. What that would have you. It’d be The best thing for us to do is to go out there and talk to those teams. and say, This is what happens when you process an order with, with bad terms with bad pricing. I mean, those kinds of things that just kind of filter down and the downstream effect is going to be devastating. So making sure that everybody understands what their fiscal responsibility is to the company is vital.
Joanne Mayer:
I would just add one thing. The earlier realize that you have a problem, and how responsive you are to those problems is really key. Because if you don’t have good data, if you don’t have a good measurement system, the problem could become so large, very quickly, especially if you’re a big company. So to the extent that you’re able to identify the problem, the source of the problem, and then respond to that. So having the validation having information and then being able to be collaborative with a team of people to say what is the root cause and have the proper response, then you’re avoiding cost. You’re not only recovering, identifying, validating, but you’re remediating, you’re mitigating and that’s, you know, that’s preventing that leakage. So that’s really what you know, at one point, I worked in a company that called it the prevent the chargeback prevention department, it wasn’t called compliance. So compliance came from, you know, everyone that buzzword when we started getting into GS one, it became more standardization of all of these technologies. But before that, it was prevention. So that’s really key.
Matt Reynolds :
Okay. And I mean, everything you guys said, it sounds like it comes back to collaboration for resolving deductions is perhaps the biggest reason for revenue, leakages. And part of the reason it’s most challenging, and Joanne, this is the example you just gave, you’re dealing with internal stakeholders, the chargeback prevention unit, sales, customer services, and then external services, your brokers, vendors, carrier distributors. How do you address these challenges? And what’s your secret towards an effective deductions process?
Joanne Mayer:
Well, definitely identification, working collaboratively with teams understanding what’s causing them. And finding what is the appropriate response to it. Now, there’s short term long-term response to those things. So what could you do right away you’re validating? And, you know, what can you do to prevent it from happening? More so than it is? So do you go to the customer and ask for an exemption? So it doesn’t have to be one response, it can be multiple responses. So you can talk to your people internally and see what we could do to fix whatever was going on. But at the same time, you could be talking to the customers saying, Can we negotiate recovery? Or can we get an exemption, if you get a commitment, and you can, that’s more effective if you get a commitment from your internal stakeholders, and you say, we’re working towards a fix, then you know, your business partner is more likely going to say, Okay, I’ll give you all your money back or part of your money back. And we’ll turn off the chargeback for, you know, the agreed-upon however you think it’s a reasonable amount of time, for you put that fixed into place. But, I would say that you really need to know and have good relationships with the people that you need to work with, you
Matt Reynolds :
Kind of Tim had mentioned internal champions that you have to build people that you can go to
Joanne Mayer:
Absolutely.
Gregory Ottalagano:
I agree with Joanne. You know, finding sources of deductions, and working on remediation is extremely important. I mean, when you talk about compliance, I remember when compliance shipping compliance issues came about many years ago, I’m way too old, even say how old you are, how long ago was, but we always thought the credit people we thought that, hey, compliance deductions, were just a profit center for that company. Okay, and, but what you really have to look at is like a Walmart, you know, they have a distribution center, if you ever been down to a Walmart distribution center, any retail distribution center for that fact, if you go in and watch what happens at that distribution center, then you fully understand how compliance is very important. So that label that they’re using at their distribution center is off by a half-inch. You’re getting dinged every time maybe $150. Who the heck knows. But I mean to understand where the deductions are coming from and doing remediation to resolve those, that’s the only way you’re going to be a winner.
Joanne Mayer:
And I’ll just I’ll give a real-life example. The knowledge I think is really important when you’re talking to whether it’s your internal partner, or your customer, to the degree that you’re able to speak intelligently about something. So having a first-hand experience going out to the warehouse understanding, I had a situation where, you know, I was one particular retailer, and they kept taking chargebacks or unscannable, hang tags. So I went out into the warehouse and I pulled tags off garments, the very garments, they would tell me, they couldn’t scan, then I put it on a copy machine, and I scan the copy. So I said, Wait a second, what’s going on, scan this, scan the ticket, then I scanned the copy from the copy machine, and it still went through? So is it okay, something’s not right. So you know, we talked about whitespace, we talk about, you know, other things. So you have to know enough about the technology to challenge these people to say, both internally and externally, by the way, because you could be again, we’re talking about knowledge. So the people in the warehouses and the people in compliance, you know, that are responsible, they might not understand what we’re dealing with from the financial side. So it’s kind of you walk a mile in someone else’s shoes. So you try to share, the pain in either direction. But to be able to speak that way and understand better what it is that you need to change. Otherwise, you’d less convincing either way, either to convince the change that has to take place internally, what a sell your position to the customer to either give you that exemption or say that they’re being unreasonable. Or maybe it’s their instruments that have to be changed because maybe they don’t have as good a high-grade scanning machine. And something’s wrong because there’s nothing no other customers are having that problem. And they’re buying the same garments. So how could that possibly be happening? So to have the good argument, in order to do that, you really have to have a pretty good understanding of root causes and the technology itself. So I think that’s very helpful.
Matt Reynolds :
Great. Moving on to question three, this is for you, Greg. With an increasing trend in applying undocumented claims and rebates to their payments, clients are putting a serious burden on AR deductions management operations. How do you see technology and specifically AI, making an impact on optimizing deductions, resolution and helping resolve problems faster? And if you could use a real-life example, as well, that’d be great.
Gregory Ottalagano:
Well, I strongly believe, and you know, I’ve been around for many decades. What I see today in technology, and artificial intelligence, and what this company is offering, and there are probably some other companies out there offering the same kind of thing, but to see that, to come into play, especially over the years, is incredible, you know, and if we’re not using technology to help us resolve and use technology to its fullest, we’re only kidding ourselves, I mean, that AI technology that these guys have come out with this incredible than the most, incredible thing I’ve seen, you know, and it’s just going to get better and better for that, to predict that a customer is going to make a deduction, or these deductions are coming down the road is is something that everybody should be looking at, especially in a high volume company. I mean, you know, my company, we’re small potatoes, compared to like Johnson&Johnson and P&G, you know, in the amount of transactions that I have, I think are a lot, but I can’t even imagine what the amount of transactions that those people have. So using technology is key to to help you resolve going forward. You know and what you really have to look at is, and I think Joanne hit upon it is you know, collaborating with your customer. You know, my experience was one of the largest retailers in the world is that if I’ve come to that retailer and say, hey, look, we got a problem. We have a lot of returns that are coming back to us for no reason, you know, and we know the reason why they’re coming back is because I worked in a seasonal product, and customers would buy the seasonal product and then return it after the season. You know, because it was a useful product. It wasn’t close or anything like that. So going back to that customer and saying hey look, these are rentals. We could fix this. So you could put it back on the floor. So you can regain the profit that you’re going to make, and we’re going to regain our profit because we’re not taking the product back. You know, so, you know, understanding what happens, and showing the customer, how it affects you and how it affects them. And if you have that collaboration with the customer, and they understand it, and they understand where you’re coming from, you’re going to be successful, and resolve and deduction, especially with larger retailers.
Joanne Mayer:
Yeah, I would say, just as far as technology to have people working smarter, it sounds like, I guess a corny phrase, but working smarter, not harder. So when we talk about compliance, right, we’re talking about value-added services, right? That’s the same thing here. When, people who are working and putting in an eight-hour day, if they’re pulling claims off from portals, I mean, that’s not really adding value. So if they’re delivered to them immediately, and they have access to that without having that step, and perhaps even some of the supporting documentation is there. So they’re becoming thinking they’re thinking not doing so all of that time that’s spent with the non value added process, you know, you can replace that with things that are valuable. And, of course, hopefully, that transitions into more collection or remediation or correction, whatever it is, but it would definitely be better. And it may not necessarily mean reduction of headcount. I mean, I don’t think that’s the goal, although it could be, but it doesn’t have to be it could just make more of the people that you have, and there’s a lot of smart people in these areas of work. And so I think that they would appreciate that more than anyone to have some of this stuff be done for them. Certainly.
Matt Reynolds :
Yeah. And that’s something that we see I mean, your customers are getting smarter, they’re constantly, you know, submitting higher and higher volumes of deductions, and they’re trying to test what they can get away with. So it behooves you to think smarter as well. All right, last question, before we open up for panels. And let’s see, Greg, let’s start with you. I just want to ask, what’s your perception of the future of deductions management.
Gregory Ottalagano:
Utilizing technology, you know, where it comes into play, you know, trying to take the human element out of a lot of rudimentary everyday processes like Joanne alluded to. But you know, the whole thing that we’re going to go through, and if you haven’t done this already, especially if you’re thinking about going into a different direction, or using automation, for your deduction management, getting your senior management, the buy into that is a huge, huge thing. Okay. And, you know, because as a credit and collection guy, I’ve always felt disrespected in my company all the time, because they don’t care about us, because the money keeps coming in, right? We do our good job, we’ve reduced DSO our DSO’s, in line with our terms, or what have you, but then there’s deductions. And so all of a sudden, you say, Well, our deductions are becoming an avalanche to us. And we either have to add new people or automate. Well, automation is going to cost us money, but it’s going to stop us from adding new heads, keep the people that we have, but they can use that resources in another area. But getting them to buy into buying something that’s going to cost an X amount of dollars every year with spike buying insurance, they really don’t feel it. Okay, the only people that felt is you and I, because we’re the frontline, we understand the product, we understand our, activity on a daily basis. So when you’re presenting or going to management, make sure you give them every piece of information you can give them. Okay, in a simple I think somebody talked about it earlier about giving a presentation and keep it simple, stupid when you’re presenting to senior management. Okay, you have probably five or six bullet points, give them numbers behind that. Okay, and that’s important, you know, so if you say, okay, we’re going to reduce headcount, we’re not going to reduce headcount, but we’re going to reduce our day’s outstanding order deductions, you know, I mean, those kinds of things you have to pinpoint and show them where it’s going to affect it in their pocketbook because that’s the only thing they understand. That’s all I gotta say.
Joanne Mayer:
I think production management, I think it’s come a long way. Actually. It’s going anywhere, I think there’s always going to be one compliance challenge or another as technologies evolve. But I think that I don’t know that the bookkeeper years ago was as important as they are these days, I think that, to say it’s deduction management, it’s actually giving a lot of information back to the organization that they really need, it’s like looking in a mirror, you know, they’re the eyes, and the ears of everything that’s going on, from the time they place the order, until the time they received the money. And everyone talks about margin now. So, especially if you’re a public company, to the extent that you’re able to manage all of that, it becomes very important. And years ago, the shipping manager was the guy, you know, the data, dust him off to find him in, a store, right? And now he’s like, you know, logistics manager is probably the most important guy in the building. You know, so things have definitely changed in the industry. And I think in terms of like, order the cash and deductions specifically, I think there’s a lot more attention around that, that information, and the ability to translate that information to back to the company about what they could be doing better. So I think that’s the way how it’s going to be if the job is going to get more important, and there’ll be more of a reason to have good data and good systems, and more support, I guess, from management eventually.
Matt Reynolds :
It’s hard to do
Joanne Mayer:
if you can make it meaningful differences definitely pays off.All right.
Gregory Ottalagano:
Yeah, I just want to say one thing, please. My company Church & Dwight was probably one of the first companies to use HighRadius, I would probably maybe even first company, I don’t know. But when I walked in the door, they were still using the very first product for cash application. Okay, it took me two years of this, to get them to change it to what the cash application is in the cloud today. Okay, and it took me another two years. And I think Jessica, can attest to that and Jessica had to come along and kind of help push the product along. It took another two years to really bring into DMS, deduction, cloud. I mean a lot of talking and a lot of pain.
Audience Member:
worth it?
Gregory Ottalagano:
Absolutely. 100%.
Matt Reynolds :
Yes. Last question. Unless Any other comments. So I think we’re good.
Audience Member:
So I have a question about the compliance function, there was a lot of talk about the importance of it. If you are to implement this, where do you think this role lies better? Is it going to be Accounts Receivable or in the distribution? Or it’s a separate function altogether?
Joanne Mayer:
That’s a tricky question. I mean, my answer to that. I have been in various I’ve seen the role in various areas of an organization. If you want to look at it from a perspective of, say, separation of duty, you don’t want the distribution center monitoring itself. So if it’s something outside, so, I think, originally because the belief was that the knowledge was there. But if you evolve people in a department that sees the financial impact, but also understand that those business gaps and they understand compliance or noncompliance, and they know those things about the warehouse, what we did is we put people out, they did our inventory, we threw them out of inventory, it was mandatory, everybody on the team, you have to go to inventory, understand what happens in a warehouse, they use the scanners, they pick the path, they did everything. And then what happened is they came back because we’re policing the facility. So who better than someone outside to be saying, Hey, this is what’s going wrong? Because if it’s within the distribution center, I don’t know how well they would tell themselves they’re wrong. So not only is it a person from the outside looking in, but they’re also the people that could come up with the angle to get money back. Rather than having two different people one, remediating and one trying to collect, it’s one individual, and that’s kind of reporting to both.
Audience Member:
I just want to say one thing about that’s a question that we asked in the survey every few years. If you have a compliance group, who do they report to? And it was it finance As it operations, over the years, there’s been a shift from finance to operations, more in terms of the compliance. But what I would say either one can work to Joanne’s point, it depends on the culture of the organization, if in the logistics or compliance area, that person really, let’s say, doesn’t believe in deduction, it’s just a profit center, then you don’t want to give it to that person, because nothing will happen. But if that group really believes in continuous improvement, and is looking to do a better job than that might be fine. So really, either one can work it depends on who’s going to do the best job with it.
Joanne Mayer:
Absolutely. Also, you know, to your point you asked about an individual they want to do something my experience is people want to make they want to feel that they’re adding value in their work. So me personally, you know, I grew up in accounts receivable, I started working at Liz Claiborne for beer money on so I can move at my parent’s house. Wine money, but I didn’t, I didn’t anticipate that it would be my career. I was going to school, I wanted to be a doctor. So here I am. But mom on that. But I think that it becomes more interesting. You know, when I had people on a team just doing debits and credits, I mean, how many people how many times you want to go to work and just debit and credit via accounting? Unless you know you’re a born into tap, you know, how many people want to be in tax want to prepare taxes every year? Who does that? So for me, and for the team that I worked with, you know, whenever a challenge was bought, and there are people that say, I don’t really want to do this not part of my job. Would you want to sit here and do debits and credits all day? How about if I give you this and you just try it and see if you like it? So I taught them how to read epi data. Okay, what does that do for you? Okay, look at what you could do, look what more you can do. And then, you know, eventually, if you could do all these things, guess what, that test, you get paid more, because now you’re more valuable. So you’re not just sitting there doing debits and credits. So it depends like just that it really depends on the group of people that you’re working with. The environment, the culture and what people are willing to do. And by the way that is separated out. So you find just like you do any other skill set you find within the group of people that you have the resources and people that want to do it, and are interested in it. You really do have to have an interest in it. Because they do get tricky and it’s tricky.
