Shared Services Help Advance Gray’s Growth

In announcing Gray Television as its Station Group of the Year for 2016, TVNewsCheck observed: “The group has flourished with top station acquisitions, savvy business moves and tech innovation.”

One example of its business moves is how the station group has used shared services to not only control expenses, but also to facilitate the integration of newly acquired stations into its operations and improve its advertiser relationships.

An article appearing in the current issue of MFM’s TFM – The Financial Manager magazine examines the steps the company took as part of implementing shared services into its accounting functions. Here’s a top-line summary of their experiences, which may help your stations to accomplish the same kinds of results:

1. Select and implement a solid integrated ERP (enterprise resource planning) system. When Vance Luke joined the company 20 years ago in conjunction with its acquisition of two TV stations from Phipps Broadcasting, the newly appointed VP and controller found the company had five or six different ERP systems for general ledger. Further complicating financial oversight, payroll was on another system while fixed assets records were maintained on spreadsheets.

Luke, one of MFM’s “People to Watch” in 2016, and recognized as “The Shared Service Innovator” by his colleagues, took the first step by moving the stations to a single general ledger system, with a common chart of accounts. Additional modules were added to the same ERP for standardizing accounts payable, human resources, payroll and fixed assets.

2. Centralize back-end accounting processes. Luke’s next move was to consolidate such functions as accounts receivable, cash receipt processing and billing across the group. The company also outsourced the task of printing and mailing paper invoices — 15,000 invoices a month on average — and implemented remote deposit capture for receipt processing. The expense of outsourcing billing was been neutralized by lower postage costs achieved by the vendor.

3. Replace lock box systems. The shared services game plan kicked into a higher gear with the arrival of Trisha Allen, who became Gray’s director of broadcast accounting in 2006. At the time of Allen’s arrival, there were 32 Gray stations, each with its own lock box and associated bank account.

In addition to having to manually post information from each lock box, there were a host of problems arising from having so many of them. For example, staff would need to spend additional time sorting out payments that were sent to the wrong station as a result of address errors, such as “Channel 9” or “CBS 9,” or in cases where stations had similar call letters. Moreover, the bank’s “accept all payments” practice meant stations would receive payments sent to the former owner of the lock box, requiring time and effort to track down the correct payee.

In addition to eliminating those challenges, replacing local lock boxes with a “virtual lock box” managed by Gray’s shared services center is saving the company an estimated $250,000 in annual bank fees.

4. Automate payment processes. Advertising clients also now have a choice of paying by check, automated clearing house (ACH) or using Gray’s credit card portal, making it much easier to make payments. Credit card fees have been offset to some degree by the savings the company experienced by eliminating the lock boxes and managing multiple bank accounts. Also, since clients are paying earlier than when they would normally cut checks and the mail float has been eliminated, the credit card portal has accelerated access to money.

5. Consolidate accounts payable. Previously, each station had one or two people responsible for the process. This created lags in invoice processing when someone was out of the office. In addition to invoices being held up, it also meant there could be instances where checks requiring two signatures went out with only one.

Gray selected a business process automation partner offering an adaptive core software platform as part of its accounts payable centralization. Now all invoices come directly from the vendor to the shared services center and are digitally captured immediately upon receipt. From there, they are electronically routed to individual department managers and general managers at each station for general ledger coding and approval.

“We always have backup, so it doesn’t matter who’s on vacation or who’s out sick. That’s something Gray never had before,” says Gray’s Trisha Allen, an active member of MFM’s Television Committee. Allen is also a member our BCCA subsidiary, which serves as the media industry’s credit association.

6. Centralize staffing.  Prior to these changes, each of Gray’s stations had an accounting manager and, in some instances, one or two other people handling accounting functions. Now the television station accounting staff is consolidated into the company’s shared services center, where a staff of 36 people is responsible for financial accounting, accounts receivable, credit and collections and accounts payable.

By shifting to shared services, only three people are needed to process 72,000 accounts payable invoices annually for all of Gray’s stations. Allen is justifiably proud of the results, “We’re able to tell station managers that even though they don’t have someone in the office next to them, they will always have somebody to do payables. They will always have someone to post accounts receivable and handle the financial accounting for their location.”

7. Choose the right vendors.  Because shared services relies very heavily on enterprise management solutions, Gray looks for these attributes when selecting the best partner to handle automated functions:

• Industry Knowledge
• Team Mentality
• Accessibility
• Seamless Integration
• Adaptable, Extensive Solutions
• Future Proofing
• Rules-Based Workflow Engine

‘Benefits Galore’

In Gray’s case, the cost savings and improved audit efficiencies “have been striking,” with the time and cost of audits reduced by at least one-third. However, the single most significant advantage has been Gray’s improved ability to assimilate station acquisitions. That’s a very important factor when you consider the company’s on track to own and or operate 93 television stations in 50 markets following the consummation of all announced transactions.

Additional savings are expected when Gray completes its implementation of a new bank-neutral virtual credit card payment system. The company will receive monthly cash-back reward incentives for vendor payments made through this virtual card payment option. When fully implemented, these cash-back incentives are projected to offset all the cost of Gray’s AP department and turn it into a profit center. The automation and efficiencies of Gray’s paperless processes have also eliminated paper clutter and storage demands.

The article was written for TFM by John Queen, founder and CEO of Digital Designs, whose company provides document-driven business processes and payment automation solutions for Gray Television and other industry clients. As I mentioned, this is really just a top-line summary of what you’ll find in Queen’s article, which is entitled, “A Clearer Shade of Gray.” It may be found in the January-February issue of TFM and a digital copy of the issue is currently available for on the MFM website.

Sharing stories such as this one is at the heart of what it means to be an MFM member.  MFM’s mission is to provide members with education and best practices that help them and their companies. We do this through a number of educational programs including our upcoming annual conference Media Finance Focus 2016, which will be held in Denver May 23-25. I encourage you to check out the more than 70 sessions we have planned; it’s three days that will pay back for the next 365. 

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at [email protected]. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.