Phil Connor Director, Business Development December 16, 2009 Peggy Artz Corporate Vice-President, Operations 2009 Deductio...
<ul><li>IAB Solutions LLC </li></ul><ul><li>Deduction Management and Resolution </li></ul><ul><li>Accounts Receivable Inso...
25 Years of Exceeding Expectations  <ul><li>Experienced Leadership </li></ul><ul><li>On-site / Off-site Flexibility </li><...
<ul><li>Benchmark Statistics </li></ul><ul><li>Deduction Types </li></ul><ul><li>Prevention & Resolution Strategies </li><...
<ul><li>“ Data, data, data…how can I make bricks without clay?”  </li></ul><ul><li>- Sherlock Holmes </li></ul>2009 Deduct...
2009 Deduction Data <ul><li>Aggregate from the CRF database </li></ul><ul><li>  Segmented by Industry Groups: </li></ul><u...
Company’s primary revenue: Contractors/ Construction 9.4% aggregate
Furniture, Fixtures & Home Furnishings Retailers:   72%
Customer Channel Construction & Building Supplies & Materials Plumbing & HVAC Equipment Contractors / Construction Compani...
What area is most responsible for  investigation/research of deductions? Credit / Accounts Receivable (Includes Financial ...
Primary responsibility to follow up with  customers to collect invalid deductions: <ul><li>Other areas: </li></ul><ul><ul>...
Who is Ultimately Accountable for the Deductions  (absorbing the write-off)? Credit/Accounts Receivable 54.5% Sales  or  S...
Time Limits: Writing off open  or unresolved deductions: No Time Limit 53.5% Up to  12 mos. 14.8%
Depends on Type 32.8 % No 24.4% Yes 42.8 % … charged back to appropriate  business unit or department? aggregate
Construction & Building Supplies & Materials Plumbing & HVAC Equipment Yes 78.10% 42.90% No 15.60% 28.60% Depends on deduc...
Allowance Policies to eliminate individual claims: Other 53.8% aggregate
… compared to Construction & Building  Materials & Supplies (Red). Other 53.8%
Do you write off deductions under a certain dollar amount at cash application? Yes  67.7% Depends  On Type 15.1% No 17.2%
… Typical Tolerance Levels:
What is your single biggest internal challenge when trying to control deductions.
Senior Mgmnt Buy-In Lack of Resources Timely Access to Info Inefficient  Processes Other Cross-Departmental  Communication...
<ul><ul><li>Departments operating as silos </li></ul></ul><ul><ul><li>Dysfunctional processes </li></ul></ul><ul><ul><li>P...
Deduction Resolution Unauthorized Customer Initiated Preventable Process Oriented Planned Budgeted or Pre-Authorized
The Most Significant Types  of Customer Deductions
<ul><li>Advertising & Rebate Claims </li></ul><ul><li>Damaged / Unsaleable </li></ul><ul><li>EDI Deductions </li></ul><ul>...
Most Prevalent Deduction Types Pricing Shortages Advertising, Promotional and Rebate Claims Construction & Building  Suppl...
Prevention Trends
Initiatives to PREVENT deductions : Focused on Improving Order Accuracy Better Communicated Our Policies to Our Customers ...
Initiatives to PREVENT deductions : Focused on Improving Order Accuracy Better Communicated Our Policies to Our Customers ...
Resolution Trends
Initiatives to RESOLVE deductions : Focused on Timely Review and Follow-Up Made sales (& other Departments) accountable fo...
Focused on Timely Review and Follow-Up Better Communicated Our Policies to Our Customers Made sales (& other Departments) ...
Receipt of Deduction to  Determination of Validity: Red – Construction & BS & M Green – Plumbing & HVAC
Determination of Validity to Clearance: Red – Construction & BS & M Green – Plumbing & HVAC
Receipt to  Determination: Determination  to Clearance:
What platform are you using?
System or process to record  & track sales agreements:
Are the sales agreements available to the group responsible for clearing deductions?
Collectability 30 days  60 days  90 days  6 mos  9 mos  1 yr  2 yrs
Future of Deduction Management <ul><li>RFID, EDI, EIPP </li></ul><ul><li>Workflow Applications </li></ul><ul><li>Dedicated...
Future of Deduction Management <ul><li>Technology </li></ul><ul><li>Service Partners </li></ul><ul><li>Evolving Skill Sets...
Future of Deduction Management <ul><li>Technology </li></ul><ul><li>Service Partners </li></ul><ul><li>Evolving Skill Sets...
Future of Deduction Management <ul><li>Technology </li></ul><ul><li>Service Partners </li></ul><ul><li>Evolving Skill Sets...
<ul><li>People Management  System Management </li></ul><ul><ul><li>Most processing done with automated systems </li></ul><...
<ul><li>Increase Efficiencies </li></ul><ul><li>Maximize Effectiveness </li></ul><ul><li>Re-deployment of Scarce Resources...
Outsource to Win! <ul><li>What could I get done if...? </li></ul><ul><li>How valuable would it be if…? </li></ul><ul><li>W...
Questions? Let’s discuss the issues you face. Partners. Solutions. Results.
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Trends in Customer Disputes and Deduction

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Covers different types of statistics, deductions, prevention and resolution strategies.

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  • Thank you for having us. May I introduce Peggy Artz…
  • We are going to present some hopefully useful information to you. But first I would like to take a moment to explain why the people from IAB Solutions are the right people to present this information.
  • Web-based proprietary software On-Site and Off-Site capabilities with Operations Centers in traditional Manufacturing hubs where our clients lacked facility for our people but with the internet being remote support is seamless today. Confidentiality &amp; Customer Service two integral ingredients to our successful partnerships.
  • We’re numbers people. Facts people just like Sherlock Holmes. He solved mysteries by collecting information and that is what we do…Our careers are number crunching…root cause analysis is at the core of the credit industry.
  • CRF background
  • CRF data came from companies whose primary revenue channel is…
  • From your industry groups perspective…. 10/20/2009
  • From your industry groups perspective…Contractors and Distribution were the main channels.
  • … for example, overwhelmingly Credit is most responsible. Field Sales/Manufacturer’s Reps
  • … .but Credit &amp; A/R still the primary point of responsibility for follow-up.
  • Here is an interesting change in the mix that although initially credit’s focus, ultimately the Deductions get written off by Sales or the Personnel responsible for the issue (ie. Order Entry, etc).
  • In reviewing the data from CRF, the aggregate had No sun-down for nearly everyone. This appears to be an opportunity to improve efficiency and cleaning up the aging. What is purpose of retaining the deductions for an indefinite period? …collectability is certainly dropping the older.
  • Over 40% said Yes with 1/3 saying it would depend…
  • … looking at related industry groups the trend is much more prevalent in Construction &amp; Building
  • Information indicates a core group of areas with a focus to reduce line items/deductions. In our experience unsaleables is a food industry term (ie. swell allowances) so that may or may not pertain to your business…Feedback from group?
  • … when compared to the Construction industry segment the ‘Other’. Ask audience…what categories would you set aside allowances for?
  • Cash Application Auto-write off vs. under cap vs. under tolerance…invoice levels, warehouse vs. DSD…customers will learn your tolerances.
  • Goal of this group would be elimination of claims or undocumented deductions.
  • Communication between departments…breaking down the silos…our experience matches the research
  • Communication between departments…breaking down the silos…our experience matches the research
  • Planned: Not recoverable; SPEED Preventable: Root Cause once identified can be corrected to reduce deductions Unauthorized: ie. Pricing, Shortages and Post Audits that may require research but should be collectable.
  • In addition to how they are handled the respondents were asked for the most significant types…
  • This is what we do.
  • Top three in both units and dollars deducted…
  • In addition to how they are handled the respondents were asked for the most significant types…
  • Bulk of the 60-120 days for the industry groups was 90 days…possible opportunity if you could speed that up..
  • Time Value of Money…
  • Some of you are on JDE? IAB’s network of analysts have experience on these systems and more. What platforms do your divisions operate on?
  • Many respondents indicated an In-House solution as well as manually tracking…many tools available in the marketplace to help this process…. (examples?)
  • Possible another opportunity if your agreements are not in your system so A/R can see them at time of payment
  • It can actually be summed up in a standard collectability chart. The older it is the less likely it will end up in your pocket and more likely stay in theirs…
  • Step back a moment and ask a question some of you may be thinking to yourselves…Why Outsource? I would challenge you to think of it as something not done when you are failing but when you want to win and be the best. You dry clean your clothes not because you can’t do it but because you want to make the most of the limited time you have. The same with your business life.
  • … if I had one more person focused on that stuff I can’t get done? … that person would pay for themselves and not bring a cost to my team? … why? I am not asking for answers but think about them and consider that in some situations there are firms like IAB that can help you be more successful.
  • Trends in Customer Disputes and Deduction

    1. 1. Phil Connor Director, Business Development December 16, 2009 Peggy Artz Corporate Vice-President, Operations 2009 Deduction Data
    2. 2. <ul><li>IAB Solutions LLC </li></ul><ul><li>Deduction Management and Resolution </li></ul><ul><li>Accounts Receivable Insourcing </li></ul><ul><li>Fortune 1000 clients, Manufacturing Sector </li></ul>Partners. Solutions. Results.
    3. 3. 25 Years of Exceeding Expectations <ul><li>Experienced Leadership </li></ul><ul><li>On-site / Off-site Flexibility </li></ul><ul><li>Confidentiality & Customer Service </li></ul>
    4. 4. <ul><li>Benchmark Statistics </li></ul><ul><li>Deduction Types </li></ul><ul><li>Prevention & Resolution Strategies </li></ul><ul><li>Discussion </li></ul>Goals for Presentation
    5. 5. <ul><li>“ Data, data, data…how can I make bricks without clay?” </li></ul><ul><li>- Sherlock Holmes </li></ul>2009 Deduction Data
    6. 6. 2009 Deduction Data <ul><li>Aggregate from the CRF database </li></ul><ul><li> Segmented by Industry Groups: </li></ul><ul><ul><ul><ul><li>Construction & Building </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Materials & Supplies </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Plumbing & HVAC Equipment </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Furniture, Fixtures </li></ul></ul></ul></ul><ul><ul><ul><ul><li>& Home Furnishings </li></ul></ul></ul></ul>
    7. 7. Company’s primary revenue: Contractors/ Construction 9.4% aggregate
    8. 8. Furniture, Fixtures & Home Furnishings Retailers: 72%
    9. 9. Customer Channel Construction & Building Supplies & Materials Plumbing & HVAC Equipment Contractors / Construction Companies 52.80% 46.70% Distributors / Wholesalers (high value / low volume) 11.10% 20.00% Distributors / Wholesalers (low value / high volume) 11.10% 20.00%
    10. 10. What area is most responsible for investigation/research of deductions? Credit / Accounts Receivable (Includes Financial Services, Accounting, General Administrative) <ul><li>Other areas: </li></ul><ul><ul><li>Sales or Sales Admin </li></ul></ul><ul><ul><li>Customer Service </li></ul></ul><ul><ul><li>Field Sales/Broker </li></ul></ul><ul><ul><li>Service Provider </li></ul></ul>
    11. 11. Primary responsibility to follow up with customers to collect invalid deductions: <ul><li>Other areas: </li></ul><ul><ul><li>Sales or Sales Admin (4.9%) </li></ul></ul><ul><ul><li>Customer Service </li></ul></ul><ul><ul><li>Internal Compliance Group </li></ul></ul>
    12. 12. Who is Ultimately Accountable for the Deductions (absorbing the write-off)? Credit/Accounts Receivable 54.5% Sales or Sales Admin 26.2% Personnel 11%
    13. 13. Time Limits: Writing off open or unresolved deductions: No Time Limit 53.5% Up to 12 mos. 14.8%
    14. 14. Depends on Type 32.8 % No 24.4% Yes 42.8 % … charged back to appropriate business unit or department? aggregate
    15. 15. Construction & Building Supplies & Materials Plumbing & HVAC Equipment Yes 78.10% 42.90% No 15.60% 28.60% Depends on deduction type 6.30% 28.60%
    16. 16. Allowance Policies to eliminate individual claims: Other 53.8% aggregate
    17. 17. … compared to Construction & Building Materials & Supplies (Red). Other 53.8%
    18. 18. Do you write off deductions under a certain dollar amount at cash application? Yes 67.7% Depends On Type 15.1% No 17.2%
    19. 19. … Typical Tolerance Levels:
    20. 20. What is your single biggest internal challenge when trying to control deductions.
    21. 21. Senior Mgmnt Buy-In Lack of Resources Timely Access to Info Inefficient Processes Other Cross-Departmental Communication Red – Construction & BS & M Green – Plumbing & HVAC
    22. 22. <ul><ul><li>Departments operating as silos </li></ul></ul><ul><ul><li>Dysfunctional processes </li></ul></ul><ul><ul><li>Poor teamwork environment </li></ul></ul><ul><ul><li>Problem of the month oriented </li></ul></ul><ul><ul><li>Slow & erratic problem solving </li></ul></ul><ul><ul><li>No feeling of empowerment </li></ul></ul><ul><ul><li>Actions teams lack focus and direction </li></ul></ul>Cross-Departmental Challenges
    23. 23. Deduction Resolution Unauthorized Customer Initiated Preventable Process Oriented Planned Budgeted or Pre-Authorized
    24. 24. The Most Significant Types of Customer Deductions
    25. 25. <ul><li>Advertising & Rebate Claims </li></ul><ul><li>Damaged / Unsaleable </li></ul><ul><li>EDI Deductions </li></ul><ul><li>Markdown Allowance Claims </li></ul><ul><li>Compliance </li></ul>Transportation, Freight or Routing Disputes Order Entry / Billing Errors Shortages Warranty Claims Pricing and Promotion Deduction Types
    26. 26. Most Prevalent Deduction Types Pricing Shortages Advertising, Promotional and Rebate Claims Construction & Building Supplies & Materials Pricing Order Entry / Billing Errors Allowances and Discounts Plumbing & HVAC Equipment Pricing Warranty Claims Allowances and Discounts
    27. 27. Prevention Trends
    28. 28. Initiatives to PREVENT deductions : Focused on Improving Order Accuracy Better Communicated Our Policies to Our Customers Implemented / Strengthened Cross-functional Teams
    29. 29. Initiatives to PREVENT deductions : Focused on Improving Order Accuracy Better Communicated Our Policies to Our Customers Implemented / Strengthened Cross-functional Teams Made sales (& other Depts) accountable for Deductions Improved relationship with face-to-face meetings or calls Performed Root-Cause Analysis
    30. 30. Resolution Trends
    31. 31. Initiatives to RESOLVE deductions : Focused on Timely Review and Follow-Up Made sales (& other Departments) accountable for Deductions Improved / Implemented Deduction Reporting
    32. 32. Focused on Timely Review and Follow-Up Better Communicated Our Policies to Our Customers Made sales (& other Departments) accountable for Deductions Initiatives to RESOLVE deductions : Focused on Timely Review and Follow-Up Made sales (& other Departments) accountable for Deductions Improved / Implemented deduction reporting
    33. 33. Receipt of Deduction to Determination of Validity: Red – Construction & BS & M Green – Plumbing & HVAC
    34. 34. Determination of Validity to Clearance: Red – Construction & BS & M Green – Plumbing & HVAC
    35. 35. Receipt to Determination: Determination to Clearance:
    36. 36. What platform are you using?
    37. 37. System or process to record & track sales agreements:
    38. 38. Are the sales agreements available to the group responsible for clearing deductions?
    39. 39. Collectability 30 days 60 days 90 days 6 mos 9 mos 1 yr 2 yrs
    40. 40. Future of Deduction Management <ul><li>RFID, EDI, EIPP </li></ul><ul><li>Workflow Applications </li></ul><ul><li>Dedicated Websites </li></ul><ul><li>Technology </li></ul><ul><li>Service Partners </li></ul><ul><li>Evolving Skill Sets </li></ul><ul><li>Metric Focused </li></ul>
    41. 41. Future of Deduction Management <ul><li>Technology </li></ul><ul><li>Service Partners </li></ul><ul><li>Evolving Skill Sets </li></ul><ul><li>Metric Focused </li></ul><ul><ul><li>Vendor Partner Due Diligence </li></ul></ul><ul><ul><li>Relationship Management </li></ul></ul><ul><ul><ul><li>Vendors </li></ul></ul></ul><ul><ul><ul><li>Peers </li></ul></ul></ul><ul><ul><ul><li>Forums </li></ul></ul></ul><ul><ul><li>Negotiation </li></ul></ul><ul><ul><ul><li>Internal </li></ul></ul></ul><ul><ul><ul><li>Customers </li></ul></ul></ul><ul><ul><ul><li>Partners </li></ul></ul></ul>
    42. 42. Future of Deduction Management <ul><li>Technology </li></ul><ul><li>Service Partners </li></ul><ul><li>Evolving Skill Sets </li></ul><ul><li>Metric Focused </li></ul>Efficiencies TPM, CRM, Supply Chain
    43. 43. Future of Deduction Management <ul><li>Technology </li></ul><ul><li>Service Partners </li></ul><ul><li>Evolving Skill Sets </li></ul><ul><li>Metric Focused </li></ul><ul><ul><ul><li>Internal and Partner KPIs </li></ul></ul></ul><ul><ul><ul><li>Increased need for visibility (global) </li></ul></ul></ul>
    44. 44. <ul><li>People Management System Management </li></ul><ul><ul><li>Most processing done with automated systems </li></ul></ul><ul><ul><li>Demand for people with greater analytical and managerial skills </li></ul></ul><ul><ul><li>Increased demand for improved efficiencies </li></ul></ul>Future of Deduction Management
    45. 45. <ul><li>Increase Efficiencies </li></ul><ul><li>Maximize Effectiveness </li></ul><ul><li>Re-deployment of Scarce Resources </li></ul><ul><li>Productivity Improvement </li></ul>Why Outsource?
    46. 46. Outsource to Win! <ul><li>What could I get done if...? </li></ul><ul><li>How valuable would it be if…? </li></ul><ul><li>Why would I not explore this? </li></ul>
    47. 47. Questions? Let’s discuss the issues you face. Partners. Solutions. Results.

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