Outsourcing Your Order to Cash Functions, by Robert Shultz

This is part 1 of a 2-part series on this topic. Read part 2 here.
Part 1: Seven Advantages to Consider

Overview: Many companies consider outsourcing all or part of the order-to-cash process as a cost-effective alternative to retaining internal staff and infrastructure improvements. This is not a decision to be taken lightly. It requires a thorough evaluation of choices.

I like to look at the entire process from beginning to the end. Start with the development of a price and terms quote. Understand how the decision will impact all the steps leading to good funds sitting in your company’s bank account. All the steps in between are interconnected. In short you have to consider the quote to cash process in total. Ensure all the stakeholders are working in concert to provide your company with efficient support and your customers excellent service.

Any decision to outsource should consider the impact on all elements of the quote-to-cash process. The project leader must take in to account how the decision affects the other stakeholders involved. Senior management, sales, customer service, operations, project management, etc. all either feed into the affected processes or are impacted by the performance results. To ensure success, involve these other stakeholders from the beginning. Their perspective and involvement is critical. Remember, customer service considerations should take a priority seat.

There are numerous factors you need to consider when deciding if outsourcing or improvement of internal operations through automation is best for your company. You will notice many of the decision factors go beyond just the potential money savings.

When done for the right reasons and in the right way, outsourcing can, in fact, help your company grow and save money. Just make sure the decision is deliberate and well thought out.

Advantages:

1. Focus On Core Activities
In periods of rapid growth or, as with many companies in recent years, a reduction in business activity, back-office operations must expand or contract as the business changes. If the back office does not keep pace with the business activity, it can consume resources (human and financial) at the expense of the core activities that have made your company successful. Outsourcing functions like order entry, credit control, collections, dispute management and cash administration can provide opportunity. Remaining internal resources can be refocused onto priority business activities without sacrificing quality or service in the back office.

2. Cost And Efficiency Savings
Back-office functions may be complex and require a level of sophistication in both human and system resources. As your company grows and internal operations expand, management may be faced with a choice: make sizable investments to keep up with the growth, or find a third party capable of taking the hand off. Without the needed improvements, the company may not be able to perform at an acceptable level of accuracy or speed at a consistent and reasonable cost.

3. Potential to Reduce Overhead
Overhead costs can easily run higher than expected. If functions can be moved to an alternative location or partnered with an automation provider, there will be a significant cost savings realized on total overhead.

4. Operational Control
Operations that have costs are running out of control are prime candidates for outsourcing. There is often a lack of compliance control, fuzzy objectives and performance tracking in accounts receivable departments at many organizations, and these are situations where an outsource provider may bring more up-to-date and effective skills than are currently available within the struggling company’s staffing budget.

5. Staffing Flexibility
Outsourcing will allow operations that have seasonal, cyclical or special project demands to bring in additional resources when needed. Excess staff can be released when the need diminishes.

6. Continuity & Risk Management
Periods of high employee turnover can add uncertainty and inconsistency to any operation. Outsourcing Q2C functions may provide the continuity needed to reduce the risk of substandard performance.

7. Dedication of Internal Staff to “High Priority” Core Functions
Critical strategic customers need to be adequately supported. Outsourcing low priority functions and, at the same time, lowering cost will enable highly skilled internal staffers to focus on critical priorities and major accounts.

In Part 2 of this series (which will be posted tomorrow), we will examine preparing for an outsource engagement and the challenges outsourcing Q2C can present. You will learn which factors to consider in weighing an internal vs. an outsourced Q2C solution.

Robert S. Shultz is a founding partner at Quote to Cash Solutions (Q2C) LLC, a consulting firm that focuses on delivering quality solutions that improve client revenue opportunities, cash flow, operational efficiency and customer retention and satisfaction and when needed, management and staff training. He can be reached at (805) 520-7880. For more information, visit Q2C’s website at www.quotetocash.com.

10 Negotiating Tips You Need To Know, by Robert S. Shultz

Negotiation is not a contest to see who can prevail. It is the “art” of getting to the point where two parties can agree on critical concerns. It encompasses employing core negotiation principles, the use of applicable strategies addressing the situation, focus on specific objectives, having a fallback position and, if all else fails, knowing when to walk.

Following are 10 considerations creditors can use to improve negotiation results. This is not complete list by any means. However, these points are critical for a successful negotiation outcome.

1. Don’t alienate the other party: In an effective negotiation, both sides must have the desire to reach a conclusion without alienating the other side. In the end, both sides should be satisfied with the result. If your counterpart seems unwilling to reach a desirable outcome, find points that will gain support and acceptance. Effective negotiation requires knowing how to satisfy a customer’s needs and amicably resolve differences. By being skilled in negotiating you will be able to collect more dollars, improve overall performance, and improve customer satisfaction.

2. Practice effective communication: Successful negotiation involves effective communication between the parties. To eliminate communications roadblocks, consider the following:
• Listen first. Pick up on what is said to clarify or modify your position.
• Find a basis for common understanding.
• Clearly state your case and what you want.
• Recognize the style of the other side and communicate in a fashion they can relate to. Don’t be intimidated or overwhelmed by aggressive behavior coming from the other side. Keep focused on your objectives and remain calm. If things become unprofessional with no change of behavior in sight, be prepared to walk.
• Deal with the decision maker. Invest your time with someone who can make a decision.
• Ask probing questions that cannot be answered with a “Yes” or a “No” and make the other side explain the answer.

3. Avoid elevating issues into a conflict:
• Find common ground: Both parties should have a strong understanding of one another’s needs.
• Break down issues into manageable/understandable pieces: Sometimes an impasse can be avoided by breaking the issues down. Start with what you can agree on. Attack the easiest issues first. You may find when the easy issues are resolved most, if not all, of the big issues have evaporated.
• Build a track record of trust: Once you have agreed on issues where some give and take was possible, a trust develops between the parties

4. Practice the “Four C’s” of negotiating: These points describe an approach. Not everyone you come up against will use this approach.
• Caring: Be sincere. Listen to the other party and be interested in their issues.
• Calm: This is a tactic that will encourage the other side to state their position and objections without undo emotion. When they are excited and you are calm, it tends to bring them down.
• Clear: Confirm the other party heard you and clearly understands your position. To avoid misunderstanding, restate what you hear. Repeat what is said and keep repeating until you get it right. It may take several tries.
• Comprehensive: Prepare yourself as best you can under the circumstances, time constraints and information available. Think about: Possible “What Ifs” and “What Nots.”

5. Prepare yourself in advance of a negotiation:
• Do your homework and learn everything you can about the other side. Try to understand their motives and objectives. Determine what you want to accomplish. In face-to-face meetings, have an agenda handout or an executive summary.
• When the negotiation starts, have all the necessary documentation in front of you. Have a plan for your initial position and your final position.
• Have a primary and secondary goal: A primary goal is a necessary outcome. A secondary goal is what you can accept and still meet your company’s needs.

6. Understand your “Best Alternative to a Negotiated Agreement” (BATNA): This is the course of action you will take if the current negotiations fail and an agreement cannot be reached. This is different than your “walk away” point. Very often if a win-win cannot be achieved, going for a “no deal” could be the best answer. You can’t win every time. There may be business factors that override a negotiated settlement if one cannot be reached.

7. Define the negotiation scope and approach: This will depend on several factors, each of which must be considered as you enter any negotiation with a customer.
• What are the key issues or obstacles that need to be addressed? Is it payment? Does the other party need additional information to meet your request?
• What are your restrictions? (Time, costs, etc.) Are you up against a deadline?
• Is this a major issue or a priority for your company? Should you spend a little or a lot of time dealing with this?
• Can you trade on an issue that you feel has limited importance to win on a major one?

8. Know who you will be negotiating with: What is their negotiating style? Determine how you expect them to approach a negotiation? Work to establish a rapport at the outset of the negotiation. Separate people from the problem. Remember, negotiators are people first. In most supplier/customer negotiations, the negotiator has two basic interests: The issues at hand, and a desire for a continuing relationship between the parties.

9. Understand the business and future relationship potential: Is this customer of strategic importance to your company? Review your company’s historical relationship with this customer. Is the issue at hand an anomaly, or is it a repetitive issue? What is the revenue and profit potential in the future? Is the relationship worth saving?

10. Be culturally sensitive:
• Don’t Apply the Golden Rule: “Do unto others as you would have them do unto you.” Use the “Platinum Rule” – “Do unto others as they would have done unto themselves.”
• Understand what is offensive: You might be comfortable looking someone straight in the eye, introducing yourself with a firm handshake, being direct and open and getting right to business. Other cultures encourage other behaviors.
• Be sensitive to the appropriate sequence of business and negotiation: It is not appropriate in some cultures to first do business and then develop a relationship. You are expected to develop a relationship and then do business. You need to understand what goes first.
• Understand the “real” message: Cultures vary in the way they communicate their message. You must be sensitive to these differences to understand what they are telling you and react effectively.

Effective negotiation is truly a combination of art and science. It takes planning and effort to reach a result acceptable to both parties. In doing so, business between the parties can continue. As a supplier, you can collect more cash and keep more customers.

Robert S. Shultz is a founding partner at Quote to Cash Solutions (Q2C) LLC, a consulting firm that focuses on delivering quality solutions that improve client revenue opportunities, cash flow, operational efficiency and customer retention and satisfaction and when needed, management and staff training. He can be reached at (805) 520-7880. For more information, visit Q2C’s website at www.quotetocash.com.