While it’s still true that you can’t cost-cut your way to success, it’s also true that you can’t waste money in a business that is under unprecented competitive and economic pressures. So, here are some ideas for saving money. They range from keeping an eye on the thermostats to making sure your credit and sales departments are talking to each other.
Since my last column (You Can’t Cost-Cut Your Way To Success) focused on the importance of investing in new ways to generate revenues for our businesses, even in the midst of a recession, I wanted to balance that message by looking at ways to improve operational efficiencies. After all, revenues and expenses have equal impact on cash flow. With that in mind, I am sharing some tips and observations from two more of our 2009 conference panels.
The first of these was called “Top 10 Ways to Save.” While the topic was similar to that tackled in “Group Therapy Session: Best Practices in Cutting Operating Costs” covered in a May article by TVNewsCheck (Stations Tighten Belt A Few More Notches), this panel took a different approach.
Featuring Matt Deprey, vice president of financial planning for Discovery Communication’s U.S. networks; Michael Solan, president of the auditing firm Telemax Communications; and Paul Bernstein, vice president of treasury operations at the cable operator Bresnan Communications, the panel could easily have been entitled “Top 25 Ways to Save.”
Their top money-saving ideas included:
- Consolidate purchasing with certain types of vendors, such as post production facilities, in order to leverage buying power.
- Review consulting and legal costs. Negotiate fees upfront, and tie fees to results. Determine if in-house personnel may provide any of these services. Also, consider if replacing “brand” consultants with lesser-known individuals can achieve the same outcome.
- Adjust the thermostats in your office space to ensure that areas within your facilities aren’t being heated or cooled during hours when no one’s working.
- Turn off non-essential lights and computers during non-working hours.
- Review what’s in storage, and reduce storage space by discarding what’s no longer needed. Transfer video tapes to discs or centralized servers. Ensuring compliance with your company’s record retention policy is also a good way to weed out outdated documents in file cabinets and bank boxes.
- Audit phone bills for potential overcharges.
- Institute hiring or pay freezes; or tie salary increases to performance.
- Require mandatory vacations when business is slow.
- Create a wellness center on site to reduce medical insurance costs.
- Encourage mail-order prescriptions, which are often less expensive than bricks-and-mortar pharmacies.
- Eliminate cash advances for employee expenses.
- Don’t reimburse staff for airline or hotel upgrades.
- Require that “overnight” shipments be delivered in three days, unless they’re urgent.
These tips were summarized by Janet Stilson, a research analyst and award-winning journalist covering the media industry and editor of The Financial Manager, MFM’s bi-monthly magazine. Janet will be including thoughts from a number of our member companies on the role of centralization, or “shared services,” in improving operational performance and cash flow margins in the September-October 2009 issue of our magazine.
Shared services has been a big topic for our BCCA members who are responsible for the credit and collections practices within their organizations. A few years ago, the driver for developing centralized practices for credit and collections was the requirement for greater financial transparency under Sarbanes-Oxley.
With accounts receivable often representing the second largest asset on a company’s balance sheet, companywide policies and procedures for credit and collections have helped to improve their DSO (day sales outstanding) ratios, more easily address revenue recognition requirements and improve the accuracy of their cash forecasting capabilities.
In addition, a consistent approach toward credit and collections across the company also makes it easier for organizations to reduce personnel costs by combining the credit manager and business manager jobs at local stations which is becoming a common practice in the industry.
This leads me to the second panel I wanted to share with you today, “Business Manager Guide to Credit & Collection in the Current Economy.” This session assembled some of the industry’s most seasoned credit and collections executives for tips to help local business managers optimize the effectiveness of their credit and collections efforts.
Debbie Barrera, who serves as both credit and business manager for KSAT San Antonio, underscored the importance of a good working relationship between the business/credit manager and the sales department. This relationship is improved by a strong credit and credit procedures policy. Such a policy can eliminate frictions that may arise over credit approval for a prospective advertiser by clearly establishing protocols such as who can override the credit/business manager’s decision.
Lillie Moore, credit and collections manager at WAGA Atlanta, added that ongoing communication with the ad sales team is fundamental. Account execs often do not have complete familiarity with their company’s credit polices and yet they are the ones who oversee all of the paperwork with the advertisers.
With many media buyers now inserting collections liability language on their ad placement orders, it’s essential that the account rep is fully knowledgeable about the company’s polices and flags any discrepancies before finalizing the order. One solution is to require a signed letter of liability from the entity placing the order. Account execs should also stipulate that their signature confirms receipt of the order only and thereby doesn’t override the letter of liability or terms that were accepted in the credit agreement.
Moore also underscored the importance of the credit manager’s relationship with the advertiser or agency. “Yesterday’s accounts payable manager could be today’s controller. When payments start to slow, it’s a lot easier to find out what’s going on when you’ve had a longstanding relationship with the customer.”
Lisa Doyle Kelly, Atlanta market controller for Radio One, recommended that the person responsible for managing credit and collections meet with the sales team at least once a month.
Getting the sales team more involved in collections builds their appreciation for its relevance to their compensation and reviewing past due accounts with them improves cash forecasting, she said. Creating aging reports by sales representative can also help to educate reps on how to read the reports and take a more active interest in the process.
Kelly also encouraged attendees to hold staff meetings even more frequently when introducing new polices and procedures or when migrating the function to a shared services model.
While communications is the nature of our business, the focus on new efficiencies — whether in eliminating wasteful spending or in combining heretofore separate job responsibilities — often results in our not spending enough time communicating within our own organizations.
These observations from the credit and collections side of the business are a great reminder of the importance for creating systems and practices that engage and inform our employees, especially when it comes to changes that affect their positions. The best way to ensure that our cost-cutting activities have an optimal impact on our operating results is by having everyone on board and moving in the same direction.
Mary Collins is the president and CEO of the Media Financial Management Association, a professional society addressing the diverse needs of the industry’s financial and business professionals. Her column appears here every other Friday.