Shared Services 202 – Consolidating Credit and Collections

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While we talk a lot about the ways that communications technology can disrupt our traditional business models, media companies are also harnessing its potential to improve the performance of their operations.


For example, many companies have already consolidated their traffic management, master control and a host of back-office systems through automation and networking solutions.  Combine these developments with the requirement for additional accounting controls under Sarbanes Oxley and you can see why station groups are now thinking about next-generation applications for shared services, including centralized credit and collections management.

The benefits and requirements for consolidating credit and collections were outlined during a panel discussion at the recent Annual Conference for BCFM, which will officially become the Media Financial Management Association (”MFM”) in a couple of months, and our Broadcast Cable Credit Association subsidiary (BCCA).

A number of topics were covered under the session’s “Streamlining Credit” banner, but centralizing the credit and collections process came though as one of the best ways to improve the operational efficiency for this essential element of an ad-supported enterprise.

Begin with Company-wide Credit Applications
 
The centralization process begins with ensuring that the company is using the same credit application and is consistent with its credit policies in all of its markets.  Not only does having multiple credit applications create more work for the attorneys who review agreements, this can also translate to the potential for multiple lawsuits when we need to involve the courts in collections.

In addition, consolidating credit and collections makes it much easier to streamline the process for addressing disputed invoices.  There’s one location for advertisers to send their payments or to contact in the event of a discrepancy. In the event that litigation is required, the company can file one lawsuit on behalf of multiple outlets.

Support from the Top

Of course, it can be a lot easier to write companywide polices than it is to follow them.  Strong, local relationships are often the key to successful ad sales and there will always be occasions where a rep will want to deviate from the policy in order to close the sale.  Good credit managers understand the need for some elasticity in the credit approval process and they recommend incorporating the steps for providing that flexibility into the company’s credit policies.  This makes it much easier for everyone in the organization to understand and follow the company’s process for making or overriding credit decisions.  It is also much easier to ensure that these polices are being practiced consistently when only one location is monitoring all of the agreements.

One concern often expressed about centralizing the collections function is that it will make it harder to call on delinquent accounts.   However, the operative word here is call.  Communication by email and telephone represent the most common forms of communications by collections departments.  Moreover, geographical distance doesn’t mean collections managers are separated from their accounts.  Collections expert Abe Walking Bear Sanchez has said that one of the most successful credit managers he’s ever met has an office that’s filled with photos of the families for her good friends at the accounts she manages.  These friends don’t just live in her community, they live all over the country.

Tap into the Natural Resources

The Conference session’s panelists reminded attendees that their local ad sales representatives remain their most important resources for making credit decisions.  In addition to possessing local market intelligence, account reps have the incentive to delegate the task of getting additional information from the client to a centralized credit and collections department; the faster the credit is approved, they more quickly they can begin counting their commission for the sale.  This exchange of information needs to flow both ways.  In return, credit mangers need to provide their local account reps with access to important data about their advertisers, such as credit line status.

Credit reports are an essential resource for evaluating whether or not to extend credit to an advertiser and, if the customer is creditworthy, exactly how much credit to extend.  Generic sources, such as D & B, can provide credit professionals with information about how the potential advertiser pays all of its creditors – everything from vehicle leases to utilities.  In addition, BCCA provides industry-specific credit reports on individual agencies, advertisers and buying services.  BCCA members learn how the potential advertiser pays other media companies, a good indication of how the advertiser will pay your company.  They can call the office to request reports or access the on-line credit database; all reports are completed by a trained BCCA credit investigator.

BCCA members are also among the mix of natural resources that credit departments can rely upon for assistance in making a credit decision.  The presenters in this panel at the Annual Conference, Greg Frost with LIN TV, Bonnie Krabbenhoft at Scripps Networks/HGTV and Premiere Radio Networks’ Jeff Kucera and Mary Campbell, are great examples of BCCA members who willingly share their expertise to improve the quality and performance of the industry’s credit and collections practices.

Janet Stilson, an industry reporter/analyst and editor of our magazine, The Financial Manager, observed that our Conference sessions contained enough pearls of wisdom to create a necklace large enough to lasso all of Dallas, our 2008 host city.   We appreciate the opportunity to share a few of these pearls with the RBR/TVBR readers via this monthly column.  With any luck, they’ll rope anyone who isn’t already involved in our organization into joining us and mining even more gems from our members.

Mary M. Collins is President & CEO, Broadcast Cable Financial Management Association.