Shared Services Centers Need Fine-Tuning

As media companies increase in size, it only makes sense that they look to shared services centers (SSCs) to streamline back-office processes. Centralizing these functions can help drive down costs. However, to be effective, SSCs must focus on providing excellent customer service to the business units that are their customers.

I like to think of SSCs as a type of internal outsourcing. In general, a company should consider outsourcing only processes that are not a primary offering and are things that can be done better by an outside provider.

Thus, many companies have contracted with a third-party company like ADP to handle payroll functions, but one would expect that ADP manages its payroll functions internally.

Credit is a critical part of the media industry’s financial function, yet it requires skills and expertise different from those of others in the finance department. This is the reason MFM set up its BCCA subsidiary more than 30 years ago. Its mission is to provide credit information, education, and networking opportunities to media credit professionals to help them manage credit risk and increase company profitability.

Among the ways we serve these credit members are a regularly scheduled credit column and an annual special report in The Financial Manager, our member magazine.

Back in the industry’s BC era — before consolidation — it was common to have a credit manager at every station. Now it is more likely that a corporate department serves as a company-wide clearinghouse for reviewing and approving credit applications from local advertisers and agencies and following up on delinquent accounts.

When these changes began, there was concern that an off-site manager would delay the credit approval process. Another concern was that “someone from corporate” wouldn’t appreciate the local market’s unique requirements. Thanks to thoughtful implementation and the tapping of seasoned credit professionals from their stations, these fears are not being realized, and SSCs are flourishing.

The March-April 2018 issue of TFM includes this year’s special report on credit and collections. In an article entitled “Fine Tuning the Shared Services ‘Machine’,” C. Robin Szabo, president of Szabo Associates media collection professionals, provides some useful thoughts for ways to make sure an SSC is performing optimally.

Client-Focused Relationships

Even though an SSC has been performing its tasks for years, it must continually work to demonstrate that it is the best method for handling these financial needs. “This is where communication best practices are essential,” Szabo stresses.

In addition to achieving buy-in among management and staff at all levels, members of the shared services team must relate to each business unit as their client. Szabo recommends that the team be “staffed with relationship-driven multi-taskers who are able to communicate effectively with peers, finance managers, sales teams, corporate and customers, and who focus on providing high-quality service.”

Successful team members are those who are immersed in knowledge of the individual markets and their customers. “A true personal relationship with sales personnel, with a designated individual assigned to each market, will go a long way to create an ‘I’m in your corner’ sensibility rather than sparking an adversarial attitude to credit and collections.”

Ongoing Performance Evaluation

SSCs, like their third-party counterparts, must always be measuring and improving to ensure they are delivering the desired results. Such assessments will determine whether the center’s performance is comparable to that offered by outside vendors.

Performance results will also help management decide whether an SSC can take on additional responsibilities or absorb additional stations resulting from a merger or JSA — joint sales agreement. Regular, detailed reports to stakeholders help to ensure that goals and expectations are in sync.

Adds Szabo: “Everyone needs to be clear about the division of responsibilities between the SSC and the individual business units.” Examples include companies that also task the SSC with all accounts receivable processes, including billing, and all payment applications (cash, credit cards and ACH payments) as well as adjustment posting.

Managing Credit Investigations

In some organizations, the ultimate decision to extend credit to an advertiser or agency may rest with the business unit while the SSC carries out credit investigations and provides recommendations. The SSC may also handle collections, working with the business units and, if necessary, a third-party collector.

In these situations, it’s very important for the SSC to align with the organization’s philosophy. For example, some companies place greater emphasis on tight credit requirements and less on collection efforts while others may take an opposite approach.

“Fairness, consistency and accuracy should be the hallmarks of any findings. The SSC should also be expected to submit its findings and recommendations regarding credit in a timely manner to avoid conflicts with sales,” Szabo says.

Managing Payment Data

The SSC must also adhere to an accepted method for its recording of cash-in-advance payments, whether they are short-term (one month) or long-term (one year). Once the invoice is produced, the SCC should be equipped to provide immediate postings of any payments or credits.

In addition, the SSC’s account management software must allow members to see a customer’s full portfolio on all systems of record prior to any contact with the customer. The data should make it easy for team members to determine such things as how much (of the balance due) is collectable today or in 30 or 60 days.

The dashboards should also show the customer’s credit line and how much has been used, any disputed amounts, or if any payment work-out plans exist.

Collections Communication

SSCs are typically expected to manage collections communications with the company’s advertising customers. Szabo recommends contacting any customer with a receivable balance every 30 days.

These communications should be prioritized, with new customers taking priority, followed by riskier customers, high-stakes accounts and slow pays, in that order. Consider automating routine tasks and reminders.

Dispute Management

Another best practice Szabo recommends involves the SSC’s ability to track changing payment behaviors. This includes the ability to recognize issues such as broken promises, late-pays, short-pays and unearned discounts. “Percentage amounts of disputed invoices and percentage of receivable portfolios being disputed should all raise electronic red flags that are visible to collections staff, management and sales.”

Along these same lines, the SSC should maintain dispute management and resolution processes that allow team members to quickly identify, analyze and resolve the issue efficiently. Root-cause analytics can reduce the incidence of disputes and facilitate process improvement.

Keeping Pace With Change

As Szabo concludes in his article: “All of us who have witnessed and been part of media’s transition to a digital world understand that change itself is the one big thing we can continue to count on. As organizations change to succeed, they also must change to maintain efficiency and control of processes.”

If you would like to read Szabo’s article in its entirety, the current issue of TFM is available on MFM’s website for a limited time.

Helping media organizations anticipate change and remain ahead of the curve is a big part of BCCA’s role as the media industry’s credit association. BCCA identifies and guides the professional development programs that respond to the changing needs of the industry’s credit and collections community. Its efforts include a full track of educational sessions included in the annual MFM-BCCA conference.

This year’s conference, Media Finance Focus 2018 will be held in the Washington, D.C., area (Arlington, Va.) May 21-23. W. Charles Warner, president of media management consultant Broadcast Finance Inc., who serves as MFM’s conference program director and chief financial adviser, also authored an article for TFM. It outlines the topics, credit and other, that will be addressed by this year’s conference keynoters and more than 150 industry experts.

Warner’s conference preview may be found in the same issue as Robin Szabo’s article. I encourage you to check it out to learn what we have planned. Consistent with the event’s 58-year history, it will provide the tips and tools that can help your organization fine-tune shared services or other processes and provide insights about what is on the horizon for the ever-evolving media industry. The entire program is designed to help attendees find “Capital Success in the Capitol City.”

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. She can be reached at [email protected] and via the association’s LinkedIn, Twitter or Facebook sites.