Steve Savino: Extending Credit’s Role by Breaking Down Barriers

Steve Savino, corporate credit manager for ASSA ABLOY Americas (INS), is by no means a traditionalist in credit. And, given that his professional beliefs that credit traditions are not the way forward for the industry, he seems to be just fine with that.

"Not everyone agrees with me and some hate it, but tradition is not the future. It's just not," Savino said. "To me, seamless operations is all about solutions. Seamless operations is about redirecting labor into other areas, the right areas."

Savino sees the basis for a winning formula involving the proper use of metrics and shared services. Though words like shared services, automation or outsourcing can be controversial for some in the industry who are worried about credit-related job losses, the argument can be made that the industry is evolving to some extent, like it or not. The key is in the how.

"For things like automating processes and incorporating credit scoring and such, it directly results in us moving people out of non-productive positions into productive risk management positions," Savino said. "There will be more of that. There will be more shared services and more consolidation. It is the wave of the future. Granted, not everyone might need to do things like automate, as that depends on the size of the portfolio or directives given to you, but the days of dialing for dollars are pretty much done."

"It's Not Like I Wanted to Go against the Grain."

Savino's early years in credit were anything but going against the grain. During his 14 years as credit and leasing manager at Gerber Scientific Products, Savino leaned heavily on relationship building (and managing) as a means of getting the job done. That meant spending a lot of time on the phone and, admittedly, golf courses with customers-and the approach was successful. To this day, at least one former Gerber colleague describes Savino as "a revenue machine" and a motivator. "The popular notion in credit was and continues to be building relationships, above all," Savino said. "I'm not putting that down. There will always be a need for that. It's an ingredient."

Near the end of 2004, Savino took a position as finance and credit manager at Stanley Black & Decker, Inc. That's where his traditional credit management style fell by the wayside, and not by choice.

"My Light Bulb, or Knife-in-the-Heart Moment Was When Given an Ultimatum..."

Moving to Stanley was a bit of a culture shock for Savino, especially when given an ultimatum about where his days sales outstanding (DSO) had to be by one year's end. The numbers didn't add up and the directive could not be met without drastic changes, which came in several forms like taking the phones out of staffers' hands and automating the process or letting a service provider take on tasks not viewed as high in value or productivity.

"Sometimes, when you're faced with change, you can die by sticking to the traditional way," said Savino, who described his experience at Stanley as eye opening. Because policies at Stanley were similar to those of the metric-driven culture of General Electric (some of GE's management had previously worked for Stanley), he had to adjust. Then, when he took a position at Rexel, which had purchased GE's American distribution subsidiary, GE Supply, it only reinforced the focus on metrics. Relationships were just one piece of the puzzle, "not an all-encompassing thing," for the credit department. "I realized I would have to make changes because our industry had changed, our profession had changed," he said. "A lot of managers are wrapped up in tradition and still tied almost solely to the relationship mode."

It was this focus on metrics and shared services that landed him at ASSA ABLOY. He pitched ideas for the method and it was a good marriage. "I just explained how these solutions and my running of shared services at Rexel would help them in what they did," Savino recalled. "Bringing a cultural change to ASSA ABLOY didn't happen overnight. People are territorial by nature. So, the biggest thing was to break through barriers and make it very clear that 'were not out to eliminate your jobs [to credit staff] or expand credit's territory [to sales]...we're looking for partners' You have to eliminate territorial fear. You have to have a working agreement and have all people working off the same metrics."

"We're Not Cutting Jobs, We're Refocusing People"

The reason why so many cringe at outsourcing, automation or shared services is the perception that they eliminate jobs in the trade credit industry. Savino believes that doesn't have to be the case. "We're not necessarily talking about eliminating people, we're talking about moving them into more productive areas," Savino said. One example was outsourcing tasks associated with letters of credit. The three or four affected staffers were moved into positions dealing with risk analysis or disputes, and the work was farmed out to freight forwarding companies, a solution representing a significant move away from traditional practices.

"There are people who say, 'I don't want freight people messing with my logistics,"' he said. "They already are: they're clearing customers and delivering goods for you. Why not trust them with an LC? Any good freight forwarder has their own LC person, and what they charge is miniscule compared to full-time salaries. We moved our people and made them twice as productive." Key to the story is that major cost savings were achieved and no jobs were lost.

Another example of change at ASSA ABLOY involved handling the credit reference and invoice copy requests. Instead of having two full-time staffers making, mailing and faxing copies, and so on, those staffers now work as cash application receivables specialists. "We give our information to the NACM National Trade Credit Report and simply swing our reference requests over to the NACM website. Now, we don't have two people spending time on these references," Savino said. "Also on our website now, we had IT work it so customers can log in and print their own invoice copies and memos. We redirected those two people from back-office clerical and now they apply the cash and manage an A/R portfolio, which is far more productive than making copies."

The latter solution is not unlike that of Ticketmaster allowing customers, often free of charge, to print their own event tickets after the purchase rather than having them mailed or relying on physical stores, as used to be the case. To Savino, it's the opposite of traditional processes, it's the opposite of territorial behavior. "To me, territorial is not customer service."

vice president of A/R, credit and collections for G-III Apparel Group LTD. "If a company is somewhat limited in resources, it's often better to find something with 80% or 90% of the functionality you need than try to develop it and write it yourself."

However, options like third-party activity or automation software cost money, money that businesses generally used to prefer spending in other areas or holding onto entirely when growth and credit availability experienced a sharp downturn a few years back. But there are strong signs that spending finally seems to be turning a corner and upper management is looking more favorably on investing in solutions that will help reduce errors, cut new customer load-in time, identify deductions faster and so on.

"People are finally getting credit and A/R projects approved," said Mike Gilbert, senior director of business development at HighRadius Corp. "There are credit managers who have been looking for tools in automation for years, but the money has been spent on sales or other 'money-generating' areas." In fact, several of NACM's Preferred Partners that help companies contribute to and use NACM's National Trade Credit Report (NTCR)-Cforia Software, Credit Management Solutions, Inc., CreditPoint Software, Inc., Dynavistics, Inc., Forseva LLC, HighRadius, SunGard and WorkflowAR-reported that interest and purchases have surged in recent quarters.

Brian Schumaker, CCE, credit manager at Universal Forest Products, Inc., said he has found his company's officials have been increasingly willing to spend on technology. The big driver is that solutions often drive cost reductions. "It was little by little over time. I can't think of one big moment that made us feel comfortable," Schumaker said. "We've been using more solutions and outsourcing with technology and just getting more comfortable with them over the years."

They're obviously not alone. Part of the willingness could be that the advances in solutions now dwarf what formerly was available, said Jeff Parisi, vice president of sales with Forseva LLC. Also a part of the recent surge is the changing dynamic of the position of the credit department and its manager(s). "Credit and collection historically was a very back-office, lack of visibility role," Parisi recalled. "It's going from back-office systems to more front-office and being part of an overall corporate strategy. I'm seeing integration with existing systems other employees in areas like sales and purchasing are on [CRM, ERP, etc.]. The credit manager is becoming an increasingly strategic player."

Using the advanced, tech-based solutions is certainly a part of that shift in roles, which might scare some people.

Solutions at Work Now

A spike in interest in credit and collection solutions, albeit one that outpaced actual sales by quite a bit, appeared to occur during the economic crash last decade. "My company said, 'we can see efficiency in what we're doing and that contributes to the bottom line,"' David Fritz, credit manager at Cytec Industries, Inc., recalled. "I think it was just a time when more companies had to justify resources. Some people are just getting around to it now, once they had some more money they could spend."

Fritz said Cytec has been using Cforia's services for several years to help extrapolate information from several ERP systems into one. He said that, prior to this, such a process was laborious and time-consuming, something the company could not afford as it started running a collections-based shared services operation out of Latvia. The platform helped incorporate worldwide efforts in areas like collections notices, promises to pay, customized aging buckets, disputed invoices, even workday prioritization.

"It has all been extremely valuable," Fritz said. "It was like a one-stop shop and a game changer. And it was easy to learn. Our people in Latvia had no experience, and we had them up and running well in a month." Fritz said Cytec is now investigating credit scoring and SAP software as well as part of a constant effort to have streamlined, consolidated processes that provide efficiency and consistency.

Schumaker discussed his outfit moving to Forseva for creditscoring software. Unlike with past software offerings from others, the company can now use the provider's software to pull reports and information not just from the NTCR, but also Dun & Bradstreet, Experian and others. "We're excited about that and think it's really going to help us out," he said. "Now we will be able to use multiple bureaus to score, which we feel is going to give us a better decision."

Steady competition for solutions providers has driven an increased flexibility in their products, allowing users to do a lot more with that all-important data. As Longo characterized it, data can mean different things to different people and newfound flexibility in the software allows applications to be modified so that the information is highly informative for the end user.

Longo recently started testing WorkflowAR solutions M-III as a means of helping with mass maintenance of its A/R. Even without a full launch, she said the tech-based solutions are having a significant impact. "It was a great help in terms of efficiency and reporting when I was previously at Liz Claiborne," Longo said. "We can maintain multiple records at the same time. You can do multiple records with different types of changes but bring them all into the maintenance screen. Just in terms of efficiency and keystroke time, you can update your files so much faster."

Regarding the aforementioned flexibility, Longo said the WorkflowAR software offers more fields that can be populated with information, which sets various scenarios apart from projects of the past. This can include whether a certain customer is on a payment plan. "Yes, they might be past due, but if it is noted that they were already granted a payment plan, maybe this is a customer I don't need to call," she said of one time-saving scenario.

A significant recent trend, especially in retail, involves deduction management and charge backs. Solutions that help with early detection are proving to be of critical importance. "When the customer has a valid claim, we need to remedy those problems quickly," Longo said. "You have to have a method internally for making sense of the types of things, whatever the hiccups are in the supply chain."

Dave McIntyre, chief financial officer at Cforia, said detection products and services that help to better and more realistically track the receivables actually coming in help a business to see the real picture of what is happening. "Clean receivables reports strip out all the noise, all the deductions, all the things that obscure the true credit value of the customers," he said.

All of these are joined by thousands of other applied solutions, and are only going to get more company in the market, and fast. McIntyre said providers are always pushing to create something because, in solutions, "you never find nirvana." Schumaker said he believes this is a great thing for credit professionals. The harder the providers work, the better the end product and, thus, the data or resources. In addition, competition drives better prices.

Selling It to the Higher Ups

Here is the hook: how much is it going to cost and what is the company getting out of it? The credit manager who wants to spend for these solutions had better have good answers when upper management asks such questions, even in a landscape where the purse strings (finally) seem to have loosened a bit.

Schumaker said the competition angle is a key one to focus on. Better, more functional products and services at better pricing due to competition can be compared to the offerings and pricing of the past. In many cases, what's new out there simply blows options of the past out of the water. It's a powerful argument.

Selling speed to the company purse holders, or if you want to revisit trite adages along the lines of "time is money," is also a near-unassailable argument. When speaking about an area like deductions, Longo reminded that the faster you identify the issue, the faster you can go back to your customer and get to the root of the problem: "Everyone knows, the sooner you go back to your customer, the better. The sooner you work on that collection, the more likely you are to be successful. In many cases [contracts], after a certain number of days, if there is no dispute and given documentation, the customer will not address it. The clock is always running, and many major department stores have that restriction in how long you have." In short, timing can be everything in getting paid.

Gilbert agreed with the sentiment that speed and success are deeply linked. Beyond that is the matter of financing the money you aren't receiving due to disputes. It's a critical issue on large accounts. "Let's say you're waiting on $2 million and $200,000 of it is disputed," Gilbert argued. "If you're identifying this two days sooner and maybe collecting two days sooner, think about what it takes to finance that money for an extra two days on $5 billion in revenue. The impact is much bigger. For example, $5 billion X 20% disputed = $1 billion. If only 50% are valid disputes, in effect, I am financing $500 million for every day those funds are disputed. This might cost me $40,000 every day. Technology might help resolve this 30 days sooner, saving $1.2 million. Also, I can take that out of the ERP and the A/R, so I know I'm not looking for that $200,000 to come in right away. That's good to know as a treasurer or CFO or VP of finance. It's about having a better picture of where and what my money is. If we use these technologies to improve, this has a financial impact on an organization. There's a hard savings you are able to show."

Gilbert also argued that more automation can mean reduced reliance on often overburdened IT staffers. "Often a project gets approved, but IT involvement is needed and it doesn't get off the ground quickly or never gets off the ground," he noted. "Something like cash application software might not require a lot of IT support. Service providers have the equipment, do the setup and provide the support. The Cloud helps streamline projects, which helps get them approved faster. It speeds processes, which frees people up for other activities."

Such activities can also involve credit professionals becoming more involved with important credit analytics or direct "touch" with important or troubled customers. And, after all, as Parisi characterized it, its everyone's job in a business to keep the customer happy, successful and retained. "Let's talk about a new account. Taking days to approve or delay a deal is a horrible policy. There are systems that can help those decisions happen earlier," Parisi said. "Now think about collections and managing risk. Doing that on an island can lead to orders placed on hold, lack of credit lines and customer dissatisfaction. Bringing it front-end and finding things out early in a process, helps you understand. That drives customer satisfaction."

As noted in the Steve Savino profile (see page 14), words like "automation" in the context of credit and collections solutions can raise a red flag to those working in credit. It results in questions like "Will I have to radically change how I do my job?" or "Will I be out of a job entirely?"

Impact on Jobs: Danger or Opportunity?

It might be naïve to deny that a heavier reliance on technology and automation will cause big changes, and it's not like credit professionals are going to have a choice. "You can't fight automation," Schumaker said. "It's something that will always be there."

There is plenty of debate as to how much a continued rise in tech-driven solutions will change employment in credit. Longo is among those who believe the change represents an opportunity for a more important, more fulfilling job in credit. It's the analytical over the tactical. "Personally, I don't see a loss of jobs," Longo said. "If you are in an industry that deals with a lot of charge-backs, many companies may not factor that into their decisions to ship or not ship. It actually creates more jobs around supply chain management, compliance management and distribution. They may not be the same jobs, but there are still jobs. It's not a job loss as much as it's a job change. In many ways, the shift could actually be creating more jobs."

Longo is a believer that automating formerly manual processes allows more time to perform real credit analysis, which is more valuable to companies than just glorified key stroking, in theory. It could also benefit the company in terms of morale and motivation. "If you're playing a bigger role in relationships and held accountable to a different level, you're of more value. They absolutely know that," Longo said. "Those people feel more a part of something."

Sometimes, however, companies simply want to or need to reduce staff. This certainly happens, even if it is unfortunate. "When you are justifying resources, sometimes, you have to look at head count," Fritz said. "You're always looking to repurpose and sometimes some of these people can focus on other areas instead, but the hard reality is, you have to look at it. If you are more efficient, sometimes you can or have to let people go. It's a natural progression. It's hard to see colleagues go, but in the end, you have to make the right business decision for your company." 1

"For things like automating processes and incorporating credit scoring and such, it directly results in us moving people out of non-productive positions into productive risk management positions. There will be more of that. There will be more shared services and more consolidation. It is the wave of the future...the days of dialing for dollars are pretty much done."

"People are territorial by nature. So, the biggest thing was to break through barriers and make it very clear that 'were not out to eliminate your jobs or expand credit's territory... we're looking for partners.' You have to eliminate territorial fear. You have to have a working agreement and have all people working off the same metrics."

LOOKING FORWARD

"One of the most recent things we've been looking at is the NACM National Trade Credit Report data and how it is becoming a bigger player in the credit data arena. Because the information is coming from credit managers or credit groups, the data may have more integrity than other sources. We're watching where that's going to be in the next two to three years."

- Brian Schumaker. CCE. Universal Forest Products Inc.

LOOKING FORWARD

"My focus right now is so much on ERP systems. For me, it's about the next generation. What is the latest and greatest? How do you make it all work together? How can you automate the set up process even more? How valuable is having an online portal for your customers or allowing them to print their own invoices?"

- David Fritz. Cytec Industries. Inc.

LOOKING FORWARD

"A buzzword bouncing around right now is business intelligence.' A lot of the data that flows through A/R is used when looking at things like profitability for bigger decisions: Should I expand with them? What is it going to cost me7 To the extent you can measure to perform your analysis, having good data helps in making good sound judgment."

- Joanne Longo. G-lll Apparel Group LTD

LOOKING FORWARD

"I'm looking at information and process integration of mobile devices. Having access to information across departments easily and mobile is very doable and very valuable to a client. The tech is rock solid, the security is in place. People do bank transactions over their phones every day. Security concern is more of a myth when talking about credit and the possibility of approving deals while mobile."

- Mike Horvath. Forseva LLC

A panel of credit managers from various industries and third-party providers including HighRadius, Forseva, Cforia, CMS, CreditPoint Software, SunGard and WorkflowAR will take part in two technologyfocused Executive Exchange sessions at Credit Congress. For more information, visit http://creditcongress.nacm.org.

Brian Shappell, CBA, CICP, NACM staff writer, can be reached at [email protected].