My manager recently asked me to deal with a Cforia supplier issue that he was stymied with. He seemed to be stuck in a loop where he received a Dunning call or email every two to three days over the past fourteen months.
Here are the facts behind how this loop was created. During May of 2008, he noticed that our monthly bill to a data archival service was growing bigger every month. After inquirying the data archival service, he learned that the data archival company was storing and charging us for every single backup media that they had ever picked up from us. My manager requested that the archival return all backup media older than two months.
The July 2008 bill from this provider was for the same amount that was billed in May. My Manager refused to pay the bill until he received documentation from the provider that showed when the unneeded archive materials had been returned. Every couple of days, he received a Dunning call from their “collections department”. The call went the same every time, my boss asked for a copy of the storage records to determine the extra archived materials had been returned. A few days later he received another call, from another collector, who did not seem to know anything about the previous call and that a dispute had been raised.
My standard operating procedure for this type of situation is to send a simple one page fax to the CEO of the company, which simply explained the situation and asks for his help in resolving the impasse. This vendor seemed to have a particularily open door policy, because I was directed to the CEO’s voicemail and received the name of his Admin on the first call. Some companies try to protect their CEO’s from bad news, while others want to hear about it. This company was the second type.
The next morning I received a call from the CEO’s Admin, who immediately handed me off to the Director of the AR Department. During the first call with the AR Director, she admitted that they seem to have a problem with Disputed Items ending up stuck in a collections loop. She confirmed that the outsourced some of the simpler collection activities, and in order to protect the privacy of their customers, they only synchronize some of their data to the outsourcer.
This is the loop that was created; you provide a list of customer information and the amount to be collected to a group that is tasked only to collect. This group gets setup to call or email until the amount has been collected or they receive directions to stop calling. This system has a built in tickler that reminds the collection partner to call or write every couple of days. The collection partner is not provided with an ability to escalate a dispute they uncover and suspend the reminder from telling them to call. To add insult to injury, sometimes outsourcing contracts get set up to pay for the number of collection calls or letters sent, rather than the result.
The Director was able to have the Local Branch Manager contact us. The Branch Manager complied with our request for an accounting of the when the media were drawn down through a report that she provided. It turned out that we had not received the excess media back in house during the July 2008 Billing Cycle. This time, the Dispute turned out to work in the suppliers favor. Cforia promptly paid the July 2008 upon receiving the proper documentation.
This type of situation can be averted by several fairly simple system changes. Provide your outsource partners with a system or demand that they have a system that is capable of escalating disputes back to the correct stake holder at your company. Your outsource partner must have a means to capture notes about the nature of the dispute, so that the escalation person can pick up where the oursource collector left off. Customers hate to have to give the same information again and again. This will leave your customer feeling that they are not being listened to, and we know what happens to customers who do not feel listened to.
Finally, avoid writing a contract that pays by the call. When you write a contract that pays by the call, you get lots of calls.
This month Cforia will be presenting a webinar on SAP AR Lean Six Sigma. This information applies whatever your ERP system is. Registration Link for SAP AR Lean Six Sigma Webinar
This webinar is complimentary and may help your company prevent getting your customers stuck in a “Collection Loop”. This will be good for your customer’s well being and your company’s profitability.
