TV stations may be reluctant to turn over credit and collections to group HQ, but LIN and Gray have shown that it can be done to the benefit of all. To make it work, station management must be convinced they are still in charge and no decisions are made without their input, say Gray’s Mindy Sugarman. “They are our customers, and shared services works for them.”
Centralizing station group credit and collection functions seems to be the next logical step after centralizing accounting functions. And, indeed, we are seeing the emergence of shared collections groups that take over when the resource-stretched station finds itself unsuccessful in collecting on local or regional accounts.
These centralized departments are also the ones that decide when it’s time to turn a delinquent account over to a collection agency.
For stations, the hardest part of this transition generally isn’t learning how to use new accounting software that may accompany the shift to shared services. The bigger challenge is cultural.
For the first time, general managers and their ad sales teams are being required to share the decision making with a corporate-level department and to adhere to strict companywide policies and procedures for credit and collections. These are people who pride themselves in knowing their local market and their advertisers.
You know that old joke about the three biggest lies. One of them is “I’m from the government and I’m here to help.”
The Media Financial Management Association asked two highly seasoned credit and collections managers who have made the transition from working for a station to the shared services model for their advice on how they avoided being greeted with skepticism and suspicion.
The advice from Greg Frost, manager of credit and collections at LIN Television, and Mindy Sugarman, Gray Television’s credit and collection manager for shared services, may be found in an article appearing in the September/October 2009 issue of The Financial Manager magazine. It includes the following tips:
Use a common traffic management system — When stations upgrade to a common traffic management system, it is much easier to create corporate reports and train everyone to work from the same report.
Underscore the station’s primary role — Stations need to be convinced that they are still in charge and no decisions are made without discussion with station management. “They are our customers, and shared services works for them,” Sugarman stresses.
One of the clearest ways to reinforce that message is by allowing such practices as a “GM override,” a process where the station manager may request permission to extend credit to a local advertiser that was initially rejected by the credit manager in the corporate credit department.
Be proactive — Although centralized collections departments don’t typically get involved in local accounts until they become 90 days past due, Frost monitors each station’s local accounts receivable (A/R) data to identify areas for improvement and provide guidance and suggestions on how to approach delinquent accounts before they get to that stage.
Create flexibility — Stations may assume that a companywide policy creates a cookie cutter approach that removes the flexibility they need for meeting the unique needs of their markets and advertisers. Countering these perceptions requires direct and frequent communication that reinforces local management’s role in credit and collections decisions. Frost meets with GMs to develop “state of the station” reports that reinforce the policy’s ability to adapt and respond to the needs of each market.
Standardize credit evaluations — At the same time, shared services departments need to balance adaptability with impartiality. For example, Gray’s credit and collections team created and instituted a credit-scoring system that was applied across all of its stations, assuring each station that its credit applicants were being evaluated using common metrics.
Refresh polices — Implementation and changes in the operating climate are likely to trigger issues that can’t be resolved without changing the policy or practice. Stations should be encouraged to participate in reviews and revisions that are designed to improve effectiveness of the station group’s policies and procedures for credit and collections.
Monitor effectiveness — In addition to responding to issues as they occur, shared services departments should monitor performance metrics to confirm they are meeting their overall objectives. For example, accounting assistants and sales assistants at the station level should be spending less time on delinquent accounts and more time on new business. In addition, there should be a positive effect on advertiser relationships.
Most important, the stations and the group as a whole should experience lower costs and an improvement in their DSO (days sales outstanding) ratio. Credit and collections departments typically fall within the corporate accounting departments within their companies, reflecting the fundamental relationship between this function and financial management.
MFM’s BCCA Subsidiary
Credit and collections is clearly a vital financial management function. That’s why we operate BCCA, our media credit reporting subsidiary, which provides revenue management services, including professional development programs and credit reports on national and local media advertisers.
BCCA’s leadership committee, which is open to all BCCA members, helps to plan annual conferences and distance learning seminars and it contributes articles for The Financial Manager. BCCA is represented on the MFM board by ESPN’s Scott Jenkins.
Media Outlook 2010
BCCA is co-hosting our “Media Outlook 2010” seminar in New York. The CPE (continuing professional education) event will be held on Tues. Nov. 17, at the McGraw-Hill Building in Manhattan. The morning will be more focused on credit and collections. The afternoon sessions will try to get a handle on what’s going to happen next year. They include presentations by Magna Global’s Brian Weiser; a panel with Stuart Diamond, CFO North America for GroupM; Kevin Lavan, CFO of ParadyszMatera; Harry Hawks, EVP and CFO of Hearst Television Inc.; Thomas H. Peck, CFO of Daily News–U.S. News & World Report; and Gene Cameron, VP, auto marketing/media solutions at J.D. Power & Associates.
One of the messages that keeps playing in my head is the importance of associations in times when resources are so stretched.
Sharing information like that on centralizing credit and collections or the experts’ outlook for 2010 is how we can avoid reinventing the wheel. As one of our CFO members commented at the end of our annual conference last spring: “It’s times like these that we really need to get together.”
If you would like to join us when we get together in New York to talk about the media outlook for 2010, or learn about the other programs and services offered by MFM and BCCA, visit MFM’s Web site.
And please don’t hesitate to let me know how we can assist you in addressing your organization’s financial challenges and opportunities.
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.