When Collections Goes Global

Credit and collections management can be a challenging enough job in the context of U.S. business culture; when a company expands internationally, the challenges can seem overwhelming. Joe Prudente has been there, done that. He's VP of worldwide credit at Future Electronics, one of the world's biggest distributors of semiconductors and electronic components. He explains how the company got its global house in order with the help of a collections management software system.

Business Finance: How long has Future Electronics been using its collections management software package?

Joe Prudente: We installed it in '98 and rolled it out internationally in 2002, 2003, so we've been on it for quite a few years. I've been at Future since '92. I started as a U.S. credit manager and within a few years, working in an efficient way and doing things like installing the SunGard product, we got our U.S. results much better. At the same time, we were evolving into more of a worldwide company; we began to expand into Europe and Asia. When my boss, the VP of finance at the time, compared the results that credit achieved in the U.S. with Europe, Asia, and Canada, on every metric -- whether it be DSO, aging results or whatever -- the U.S. was much better. It was just like night and day. So the company asked me to get involved and go investigate practices for each country.

BF: How did you tackle that?

Prudente: The first step was Europe. At first it was just little things, just having policies and procedures online so that people could look at a practice that was standard. Having people do their job in the same way was a real challenge -- just making sure they understood what the goals were and getting them on the same programs. When I say "programs" I mean just having collection routines and management meetings and saying "this is what we're trying to achieve for cash collections this month." They couldn't immediately be similar to North America because it was step by step, but we began the process and then we installed SunGard over there.

When we initially started doing this we were comparing the regions and getting very different results, but now every one of those teams has basically similar results, whether it be cash collections or aging or DSO. The job is done in a similar fashion everywhere now. I could take my staff in Hong Kong, Singapore, Italy, or Spain and swap them if I wanted to; they could do the same exact same job in the U.S. or Canada that they do over there.

BF: You must have run into some big cultural challenges, though?

Prudente: Well, yes -- there are cultural gaps -- and no. In our Asia region collectors were not allowed to call customers because it would offend them. Now, between you and me, in the process of buying something and selling something, at the end of the story you've got to get paid, whether it's in Asia or India or wherever you are -- you have to get paid. People have to overcome their sensitivity and understand that somebody is going to call you to ask you to pay the bills. It was hard at first, and there was culture shock more because our salesman just weren't used to calling customers, but we got the support of management to say that was just unreasonable, and obviously now we make collection calls.

BF: Was the software itself useful in bridging that gap?

Prudente: Absolutely. Yet every person that we introduced the software to said that they didn't need it. It was interesting: I have a fairly experienced staff and a lot of them said things like "I've done credit for 20 years" and my comment was "Well, if you want to work 20 more and work here you'd better use it!"

It's a great tool to guide people on how you want them to manage things. It really does set the guidelines of how I as a manager want them to manage; not how they were managing it, but how they should be managing it.

We had various debates when we installed the product -- "that's too many contacts in a week" -- but we said, "let's work at what's reasonable." We pulled our best collectors together and said "What would be a collection routine for an average customer?" It was basically their input that guided the strategies, so all they had to do was follow what they told us.

In some places we had to tighten up, especially in Italy and France, where they were very lax in terms of following the guidelines. But now my management staff has a window into what people are doing. If the results are not good in Italy, say, we can look at it and say, "Come on, you're not following the strategies here guys. You've got to send that statement a week before the bill's due, you have to make that call, send that reminder." We went through all that with everybody. You can't just let people decide that they're always going to do it that way because they've always done it that way.

BF: It's all a question of developing the internal culture ...

Prudente: That was the biggest change we went through, changing the culture of our company. It wasn't so much the customers, it was the culture within Future that needed to change -- our salesmen getting offended when you'd call their customer. Well, it's not your customer, Mr. Salesman; it's our customer. We're a for-profit business and we're not going to be profitable if we're not collecting our bills. Sometimes a customer is going to get a reminder to pay on time; that's not offensive, that's just business.

Recently SunGard came to us and said, "You need to be on an intranet platform where your product in no longer client-based." It was a very expensive upgrade for us. My company is usually very supportive, but you started to scratch your head and think, "maybe this just isn't worth the change." At that point we investigated whether maybe we could manage without it. So we went to our users -- and these were the same people that five years earlier had said they weren't going to use it, they didn't need it -- and said, "we're thinking of either changing systems or unplugging it, what's your thoughts?" And I about had a revolt. The people who were the biggest skeptics were now the biggest proponents: "We can't live without it, you can't take it away!" After a time you really win people over. Now it's engrained in what we do.