TFM: The Financial Manager November/December 2019

TFM

INFORMATION AND INSIGHT FOR MEDIA FINANCE PROFESSIONALS

NOVEMBER/DECEMBER 2019

THE FINANCIAL MANAGER

THE

DIGI-DYNAMOS A SPECIAL REPORT ON THE FUTURE OF MEDIA EXPLORES HOW DIGINETS HAVE BECOME SO SUCCESSFUL, AND THE CURVEBALLS THEY FACE UP AHEAD.

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AI for Credit & Collections Refining Shared Services Getting Along With Unions Esports Power Moves

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INSIDE THIS ISSUE

The Financial Manager

The Official Publication of the Media Financial Management Association is published six times annually under the supervision of:

FEATURES 10 Please Try to Understand BY JANET STILSON

Union negotiations can get tricky. People who have been on either side of the union/employer “fence” discuss the issues.

MARY M. COLLINS, President & CEO Mary.Collins@MediaFinance.org JANET STILSON, Editor TFMeditor@MediaFinance.org BILL KNIGHT, Art Director wknight5@nyc.rr.com

Limited commercial messages of interest to our membership and readers will be accepted. Rates and specifications on request to:

MEDIA FINANCIAL MANAGEMENT ASSOCIATION

SPECIAL REPORT:

FUTURE OF MEDIA 14 Little Networks That Could BY JOHN S. SANDERS & JACOB B. LOURIM

550 W. Frontage Road, Ste. 3600 Northfield, IL 60093 telephone (847) 716-7000 facsimile (847) 716-7004 and at www.mediafinance.org.

Diginets have pulled themselves up by the bootstraps to become very viable businesses, but certain trends are altering their prospects.

Subscription $69.00 per year. Copyright, 2019. All rights reserved.

18 Speeding the Process BY BILL WEISS

What is MFM?

The Media Financial Management Association is a not-for-profit corporation organized in 1961. The MFM membership includes more than 1,200 of media’s top financial, IT and human resource personnel, station general managers and other media management personnel as well as associate members in the allied fields of auditing, tax, software, sales and the law. MFM sponsors telephone seminars and conferences, publishes special studies and surveys, files position papers with federal agencies on behalf of its members and its industry, cooperates with other media industry groups and helps its members grow and learn both personally and professionally. MFM also is involved in media industry credit matters through its wholly-owned subsidiary, BCCA, which provides members with a Credit Inquiry Service, an annual Conference, directory of Credit Personnel, credit reports accessed via bccacredit.com online credit search, Commercial Credit Reports and a credit and collections handbook. The information and recommendations contained in this publication have been compiled from sources believed reliable. However, no warranty, guarantee or representation is made by the Association as to the absolute correctness or sufficiency of any representation contained in this publication, and statements contained in advertising and articles submitted to the Association are the responsibility of the authors, not the Association or its officers, directors, staff or members. Moreover, this publication is provided with the understanding that the Association is not engaged in rendering professional services through its distribution. The views and opinions expressed are those of the author, and not necessarily the Association.

Here’s the lowdown on how credit and collections departments can benefit from artificial intelligence and robotics.

22 The Well-Oiled ‘Machine’ BY C. ROBIN SZABO

Getting the best results from a centralized operation involves a series of best practices that optimize procedures and communication.

DEPARTMENTS 4 From the President Focus on Customers 6 Dear Expert Esports Power Plays 7 Human Factor Coaches and Advisers

8 Credit Where Due Avoiding ECOA Snags 9 Association News Events and Discounts 26 Last Word Robocall Crackdown

The Financial Manager • November/December 2019 3

FROM THE PRESIDENT

Eyes on the Consumer

In order to win in today’s world, focus on customers first, rather than perceived business needs, and success will follow. that the business units are clients, and the SCC’s goal must be “no one does it as well, for less.” Another feature article, by TFM edimade a point of attending Gary Vee’s tor Janet Stilson, focuses on unions and “Attention Is the New Currency” keynote deserves everyone’s attention. She’s done at this year’s Radio Show. It seemed a sure an outstanding job talking with an HR bet that he was going to say something inter- professional, a news director and a photoesting, and perhaps even controversial. journalist to tease out what is important in Vee’s message, in his quote above, is that labor negotiations. You will come away with the future will be based on giving the con- a deeper appreciation for both sides of the sumer what the consumer wants. Successful discussion. media companies will be those that embrace Three regularly scheduled columns round evolving content, distribution and service out this issue. Sarah Levitt’s “Human Facmodels. tor” submission covers a topic that is close to It’s the same message I read in this is- my heart – coaches and advisors. In “Credit sue’s “Future of Media” articles. Take, for Where Due,” Robin Szabo provides inforinstance, the piece about mation about what must be diginets from Bond & Peca- Backoffice explained when refusing a ro’s John Sanders and Jake for credit. business units are request Lourim. They credit the Finally, “Last Word,” by success of these subchannel shared services Lehrman Senter’s Nancy Ory, networks to both a simple center clients, offers an update on the govbusiness model and “a sur- and the SCC’s ernment actions around ro​prising viewer appetite for bocalls. As she points out, goal must be “no programming reruns.” even when used for a valid At the same time, the au- one does it as business reason, companies thors warn that these busi- well, for less.” should consider the advisabilnesses may affect revenues, ity of using a communication including those from retransmission consent. method associated with scams and fraud. Vee would advise companies to find a way to Vee admonishes media companies to conmake money serving their consumers. sider the consumer. That’s something we also High Radius’ Bill Weiss looks at ways to keep in mind at MFM and BCCA. You say automate the credit and collections func- you want more education and networking tions in a shared services center (SSC). The opportunities. We keep adding them. This objective for deploying the robotic process year we created the BCCA Credit Workshop automation and artificial intelligence solu- (which took place in October), a half-day protions he outlines is to provide a better, faster gram for video games finance professionals experience for those business units. and a Media Tax Summit. (See event informaWhile not strictly part of the special tion about the Tax Summit on page 9.) We’ve report, I would argue that Joost van Dreu​- also created discounted nen’s “Dear Expert” column about the packages for Distance actions of two behemoth esports inves- Learning Seminars. tors surely fits the bill. Not only are there Vee’s final advice for already 900 million viewers globally, van Radio Show attendDreunen argues that experiences with e- ees was “bring value.” sports will help media companies adapt to That’s what we aim for internet content delivery. year-round. Robin Szabo of Szabo Associates expands on the SSC function in his piece about conMary Collins is president and CEO of MFM and BCCA; Mary.Collins@MediaFinance.org. solidated back office solutions. He explains

I

“Art is going to win; it has leverage over pipes.” –Gary Vaynerchuk (a.k.a. Gary Vee)

4 The Financial Manager • November/December 2019

EDITORIAL ADVISORY BOARD MICHAEL DENSON Director, Credit Services NMCP GREG LECHOWSKI Market Controller, Phoenix Bonneville International CAL MOSTELLA Vice President, Treasurer WarnerMedia JOHN SANDERS Principal Bond & Pecaro MEREDITH SENTER Member Lerman Senter PLLC C. ROBIN SZABO President Szabo Associates JAMIE GRANDE MFM/BCCA Staff Liaison

CONTRIBUTORS SARAH LEVITT Magnificent Leadership JAKE LOURIM Bond & Pecaro NANCY A. ORY Lerman Senter PLLC JOHN SANDERS Bond & Pecaro C. ROBIN SZABO Szabo Associates JOOST VAN DREUNEN Nielsen BILL WEISS HighRadius

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DEAR EXPERT

Stepping Up Their E-Game

JOOST VAN DREUNEN explains the significance of two of the newer behemoths

in the esports business.

Dear Expert, What are your thoughts about Microsoft’s Project xCloud and Fox’s investment in Caffeine.tv? Will either one be a game changer? Streaming in Seattle Dear Seattle, Little Lies, #swoon) or a Netflix-type expeMicrosoft’s xCloud promises to deliver rience (“I bet you I can find something in on what I think is the holy grail of cloud here to keep me entertained right now”)? gaming: delivering console-quality gaming As for Caffeine.tv: I never expected one that is platform agnostic. What we’ve seen of the Murdochs to say they’re planning to so far is a lot of PC gaming services that involve a lot of extra steps. We haven’t seen the ultimate (and arguably only) form that matters: console-quality games that can be played around the world on mobile devices. Project xCloud is a tactical response to Google’s Stadia release. To not have Google dictate the narrative and set consumer expectations around cloud gaming, it is critically important that Microsoft keeps pushing. For us mortals, it is a great benefit Microsoft's xCloud is expected to feature Halo 5. to have an eager and well-funded tech firm “deliver compelling experiences in esports, trying to muscle its way into this category. video gaming and entertainment.” 21st It puts everyone on notice and makes them, Century Fox’s $100 million investment quite possibly, try a little harder. in Caffeine includes funding for Caffeine It’s easy to dismiss the Microsoft’s foray Studios, jointly owned by Fox Sports and as a reaction to Google’s imminent release Caffeine, which will produce esports and in November. But team Redmond has been live entertainment content for the social working on this for years. When Phil Spen- broadcasting platform. cer, Microsoft’s executive vice president of It’s a bit on the tardy side, given that Disgaming, started reporting directly to CEO ney+ is launching this month (November); Satya Nadella, the company showed how AT&T’s WarnerMedia recently dropped serious it was about gaming as a cornerstone $500 million on The Big Bang Theory; and of its long-term strategy. Apple TV has stepped up its game. There are some key questions here: once The strategic question is obvious: does it the tech kinks have been worked out, what make sense for Fox to go it alone, or will it type of offering can audiences expect? find out 18 months from now that it should Whenever I log into my cloud service, will just syndicate its content through a more I find a HBO-type experience (high-end popular platform? An important part of content with superstar creatives, OMG Big the answer will have to do with whether it will be different enough. Fox does have a lot Do you have a professional puzzle that of live sports, although much of that may MFM and BCCA experts might be able to already be tied to services like Fox Sports answer? We’ll mine the contact base and find Live and Fox Go. Nowadays everyone has the right person to answer your question. Just contact TFM editor Janet Stilson at their own subscription video on demand TFMeditor@mediafinance.org.

6 The Financial Manager • November/December 2019

offering. (It’s much more exciting to bring new services where there currently are none, like Apple Arcade, the iPhone game subscription service. But I digress.) There's another question: will Caffeine convince the existing audiences for Twitch and YouTube to move over. Just recently we saw Ninja packing up and moving over to Mixer, which worked well for Microsoft. And Twitch barely skipped a beat. I believe that the pedigree of Caffeine’s leadership will likely result in the most beautiful, intuitive live streaming interface as one would expect. Last year Caffeine snagged Jen Folse, a lead designer of Apple TV, and installed her as vice president of product. (Caffeine was founded by two other former Apple TV designers, Ben Keighran and Sam Roberts, in 2016.) Since Folse’s arrival, the emphasis at Caffeine seems to be on delivering the coolest product. But who’s going to watch it? And, most importantly, what are they going to be watching? Yes, there are currently around 900 million people that watch gaming video content globally. And yes, this audience is an obvious early adopter that will help media companies work out the kinks as they transition away from traditional broadcasting to internet-based television. But that means Caffeine will be competing head-on with YouTube, Twitch, Mixer and every other media streaming widget. Fox is investing in a product that is not even live yet while every single one of its competitors has already f leshed out a multi-billion-dollar content strategy. I suggest they order themselves a triple shot of espresso and catch up. Joost van Dreunen leads the global games team at Nielsen and teaches at the New York University’s Stern School of Business. He can be reached at joost.vandreunen@nielsen.com.

HUMAN FACTOR

Finding the Right Guide

Using the support of coaches and trusted advisors can reap huge benefits, but they must be chosen carefully. BY SARAH LEVITT

W

hen it comes to coaching, organizations generally fall into two categories: those that use it for remedial circumstances and those that use it to actively invest in the development of their best people. There are many reasons why remedial coaching isn’t a good bet. For example, there’s the likelihood that it will be viewed as punishment rather than a high value benefit. It’s far better to focus on your best and your brightest, the leaders with the greatest potential. Develop those people, and there will be a giant ripple-out effect from that investment. Your pond will be stocked with top leadership talent. Your bench will be built from the inside. Teams will become more cohesive, trusting and efficient – making the delivery of key projects more rapid and successful, rather than a nightmare of time and money. Talent retention and magnetization will become significantly easier. Making the investment in coaching can truly accelerate performance, success and trajectory. At this point, you may be saying to yourself, “Hey! What about me? I could use that sort of help too.” For leaders in upper levels of management, there are two different kinds of people whose services can be called upon: coaches and trusted advisors. If you’re a CEO or division president, you likely need a trusted advisor – a sounding board, confidante and devil’s advocate. The phrase “lonely at the top” might describe you. The pressures you face may be tremendous, and you may have few, if any, safe places where you can share them. You can’t talk to your senior leadership team or board, really. The

burdens you carry can become heavy. People who match that description need someone who understands the rigors of business and the demands of life, who can share best practices, break down the natural isolation that comes with the role and who solely has your success as their interest. On the other hand, you likely would benefit from an executive coach if you’re a senior executive who’s slated for succession or is preparing for an elevated leadership role. You need to hit the ground running in your new role with clear objectives. A coach can help you set strategic priorities,

and if it’s not there, it will be difficult to get where you want to go. Look for business experience in addition to coaching expertise. This becomes increasingly important the more senior an executive is in an organization – if for no other reason than to have a shared understanding of some of the challenges and pressures that you face. The coach should have experience working at your leadership level. Find out what they helped their clients achieve. Do they want to establish objectives for the coaching engagement with you? Will the coach tell you the truth and challenge you to reach your highest Will the coach tell you the truth and potential with compassion? challenge you to This is an art and it should reach your highnot be underestimated, est potential with both in its importance and compassion? its skill. Finally, find out if the coach believes they’re still learning themselves. Are they trying to get ever better at what they do so they can bring that back to their clients? Admittedly, this may be hard to discern. Use coaching or a trustlead initiatives, influence key stakeholders, ed advisor to set the bar even higher for create visibility, lead a team and fully come yourself and your team members across into your own as a leader who moves with the organization. When you do, you’ll confidence across many different audiences. demonstrate that everyone, including you, Usually a coach and trusted advisor are is still learning and used in succession. You might begin with stretching. executive coaching if you’re new to a role, The return on infor example. After the initial engagement vestment can be sigconcludes and you’ve hit your performance nificant for an organiobjectives, you might transition to a trust- zation if it’s used well. ed advisor who can give you timely input Great leaders yield whenever you most need it. great results. So, how does one select an executive Sarah Levitt works with CEOs and coach? Below are five criteria to consider: senior executives to elevate leadership Above all, whomever you choose should performance and drive business outcomes. She is feel like a good fit, in your gut. Trust is the also the author of Magnificent Leadership. Levitt can be reached at www.sarah-levitt.com foundation of a good coaching relationship, The Financial Manager • November/December 2019 7

CREDIT WHERE DUE

An Opportunity for Trouble

Don’t run afoul of the Equal Credit Opportunity Act. Violations can be costly and will add to your workload. BY C. ROBIN SZABO

I

f you find yourself in the position of denying credit to an applicant, it pays to make sure you are in compliance with the Equal Credit Opportunity Act (ECOA). It prohibits discrimination in any aspect of a credit transaction. And it applies to any extension of credit, including those given to small businesses, corporations, partnerships and trusts. The act makes clear that credit applicants have the right to obtain a written statement of reasons for a denial of credit, and it requires creditors to keep certain records on credit applications. The act is implemented by the Federal Reserve Board’s Regulation B. Violators can be sued in court for actual damages. Punitive fines run up to $10,000 for individual lawsuits and up to the lesser of $500,000 or 1% of the creditor’s net worth for class-action lawsuits. Media companies who supply services to their customers on credit terms must comply with the notification, specific-reasons requests and record-retention requirements of the act.

NOTIFICATION

You must inform your applicant of your decision regarding extension of credit, orally or in writing, within a reasonable time. Thirty days is considered to be an acceptable time frame for compliance. Here’s a sample letter that can be used as a template when informing applicants of an adverse action or denial: Thank you for your interest in advertising with us. However, based on the information we have received, we are unable to grant your request for an open account at this time. If you would like the specific reasons why your application for credit was denied, please contact me at the address shown below within 60 days of this communication. We will provide you the reasons credit was denied

within 30 days of receiving your request. Until additional information is received, we will be happy to allow you to advertise with us on a cash in advance basis.

The ECOA notice must be substantially similar to the following: “The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, SPECIFIC REASONS REQUESTS color, religion, national origin, sex, marital If the applicant makes a written request for status, age (provided the applicant has the the reasons within 60 days of being notified capacity to enter into a binding contract); of the adverse action, you must provide a because all or part of the applicant’s income written statement making clear why they were derives from any public assistance program; denied credit and include the ECOA notice. or because the applicant has in good faith The statement of reasons must be specific exercised any right under the Consumer Credit Protection Act. The federal agency that administers Punitive damages run up compliance with this law conto $10,000 for individual cerning this creditor is the Federal lawsuits and up to the lesser Trade Commission, Equal Credit of $500,000 or 1% of the Opportunity, Washington, DC creditor’s net worth for 20580.” class-action lawsuits. RECORD RETENTION

and must indicate the principal reason or reasons for the adverse action. It is insufficient to merely explain, for example, that the action was based on the creditor’s internal standards or policies, or that the applicant failed to achieve the qualifying score on the creditor’s credit scoring system. Acceptable reasons include: insufficient number of credit references; unacceptable type of credit references provided; unable to verify credit references; insufficient length of time in business; insufficient income for amount of credit requested; excessive obligations in relation to income; unable to verify revenues; no credit file; limited credit experience; poor credit performance with us; delinquent past or present credit obligations with others; garnishment, attachment, foreclosure, repossession, collection action or judgment.

8 The Financial Manager • November/December 2019

You must retain records for at least 60 days after notifying the applicant of the action taken. If within that time period the applicant requests in writing the reasons for adverse action or that records be retained, you must keep the records on file for 12 months. You must retain the information beyond 12 months if you receive actual notice that you are under investigation or are subject to an enforcement proceeding for an alleged violation by the U.S. Attorney General or by an enforcement agency charged with monitoring compliance. In this case, you must retain the information until final disposition of the matter, unless the agency or court allows disposal at an earlier time. C. Robin Szabo is president of Szabo Associates, media collection professionals, in Atlanta, GA. He can be contacted at robin@szabo.com or (404) 266-2464.

ASSOCIATION NEWS

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MARK YOUR CALENDAR

MFM Tax Summit: Thursday, Dec. 12, 2019 8:00 AM – 6:00 PM Jones Walker LLP 201 St. Charles Ave. New Orleans, LA MFM is excited to announce the firstever MFM Tax Summit, an exclusive gathering of top media tax executives. Hear from leading experts on the most pressing topics affecting this area of the business; build connections throughout the industry; and tackle shared challenges in vibrant New Orleans. Registration is limited to senior tax and financial executives in media companies only. MFM reserves the right to refuse registration requests that do not meet registration criteria. Planned topics include domestic tax reform; state conformity to federal tax reform; a media-specific look at mergerand-acquisition as well as transaction costs; state income tax apportionment and sales sourcing; accounting methods; and ethics. There will also be a roundtable discussion about federal, state and local issues. MFM Tax Summit’s co-chairs are Paul Nesterovsky, vice president, tax at Sinclair Broadcast Group and Sean Hetzler, director, tax planning at TEGNA.

MFM CFO Summit March 5-6, 2020 Pelican Grand Beach Resort Ft. Lauderdale, FL The CFO Summit is a signature MFM event offering senior media industry finance leaders the unique opportunity to explore big picture issues affecting today’s media businesses. Recognized authorities will share insights on a range of issues, such as the economic outlook, cybersecurity and the political landscape. The event’s roundtable provides a forum for attendees to exchange ideas. Attendance is limited to the most senior financial executives in media companies.

MFM reserves the right to refuse requests that do not meet registration criteria. Registration rates will increase on Feb. 12, 2020. The CFO Summit co-chairs are Marie Tedesco, CFO, Beasley Media Group; Kent Nate, senior vice president and CFO, Bonneville International; and Douglas Lyons, senior vice president, controller and treasurer, E.W. Scripps Co.

ANNUAL CONFERENCE DISCOUNTS Register by Jan. 21 for MFM & BCCA’s 60th annual conference and save more than $500 on standard rates. Media Finance Focus 2020 takes place May 18– 20, 2020, at the Loews Hollywood Hotel in Los Angeles. More than 80 sessions are currently in the planning stages.

More information about these three events is available on mediafinance.org.

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The Financial Manager • November/December 2019 9

HUMAN RELATIONSHIPS

PLEASE TRY

Successful negotiations over labor issues is certainly a touchy subject. So much so that when TFM set out to find managers who have been at the negotiating table with unions, or employees that have been represented by unions, it wasn’t easy to find anyone willing to discuss the topic. But with a little help from our friends, three people eventually stepped up to the plate: a group news director, a photojournalist and a human resources executive. They all requested anonymity in order to speak frankly about their experiences.¶ While the HR exec and group news director said that they had never dealt with a union strike, they have been involved with many negotiations with labor leaders, some of which have been quite tough. The photojournalist has worked at a station where employees have picketed when negotiations failed to yield results. And he has strong views about that, as well as the divisiveness that can occur between union leaders and their membership.¶ The threesome talked over the phone with TFM editor Janet Stilson about their experiences in September. An edited transcript of their conversation follows.

10 The Financial Manager • November/December 2019

TO UNDERSTAND UNION NEGOTIATIONS CAN GET TRICKY. PEOPLE WHO HAVE BEEN ON EITHER SIDE OF THE UNION/EMPLOYER “FENCE” DISCUSS THE ISSUES.

JANET STILSON: What’s the best way to make constructive progress when dealing with unions? What lessons have you learned on that front?

The biggest thing I’ve learned is if you treat employees well, either they don’t need a union or don’t need to rely on a union, if one exists. I think that’s the key that many companies miss. If you take care of your most important asset, your employees, then I don’t know that there’s much more that a union can do for them. HR EXECUTIVE: I don’t dispute what he’s saying, but that’s company line (laughs). What I found from an HR perspective is the importance of GROUP NEWS DIRECTOR:

getting to know the membership and what they want – the union leader, the vocal people. Get them on “your side.” Try to work with key leadership and get them to buy into what you’re trying to do. And find out what they want. They always want something. The relationships are important too. STILSON: With the General Motors strike, there was a period when the management withheld health insurance benefits for United Auto Worker employees. Is that common? HR EXEC: No. I’m not saying that GM isn’t a good

company. But I think a typical company cares

The Financial Manager • November/December 2019 11

HUMAN RELATIONSHIPS

enough about their employees to understand that cutting off benefits is life-threatening to their families. I’ve never worked for a company that would even consider that. A company can be frustrated in not getting what they want, but you could be threatening someone’s life by cutting off their benefits. PHOTOJOURNALIST: One of the things that I did notice, when we were in the middle of a negotiation one time, was my union was playing hardball,

the union is asking for something that’s a complete deal killer? GROUP NEWS DIRECTOR: The one that I remember

most was I was at a station where we were negotiating vacation policy. And all the people at the bargaining table were very, very senior members of the union. We put forth a plan that would respect seniority in a big way but give a little better vacation options for some of the younger, less senior employees.

“We try, when we don’t think things are going well, to find a few allies. You can say to them, ‘You know what, this is what’s going on. Can you help us out?’” — HR Executive

and the company looked at some of the things we were getting. [At the time] I could accumulate 30 sick days, but when my company refused to play ball, we had a contract implemented. It wasn’t negotiated. The company basically said, “Here’s what we’re offering, and here’s what we’re going to do.” And I was no longer able to accumulate 30 sick days. I was awarded seven, and if you didn’t use them in a year, you lost them. HR EXEC: Enhanced benefits are something that companies typically require a union to negotiate – like a 401(k) 3% match or 30 days off. STILSON: Have you ever been in a negotiation where

A PICKETING DILEMMA PHOTOJOURNALIST: We had a contract negotiation with the union, and it wasn’t

going well. One of the options on the table was to strike — and that was voted down — and the other was to picket the advertisers. And they went after the advertisers of my company. And as a union employee, I had a problem with that. I didn’t want to go after people who actually submit money at my station. Because if they decide not to spend money, then it’s going to affect me. I had a great personal relationship with my general manager. It got to the point where they were picketing in front of the building and would stand in the way of cars and management. I “I went to the wanted no part of that. I went to the front desk every front desk every morning to make sure my general manager got in safe. morning to make It felt like I needed to defend the people who signed sure my general my check. manager got in safe.” HR EXEC: One of the things you can do is bring in scabs. — Photojournalist PHOTOJOURNALIST: The company that I work for had several other stations. And they threatened to bring one or two people from each of those stations to keep the station running. And it was an “uh-oh” moment for the union. HR EXEC: You don’t want to get to a strike. You’ve got to communicate. You’ve got to know what your people want.

12 The Financial Manager • November/December 2019

It was a fairer plan. And the senior union members at the table refused to present it to their membership, because it didn’t benefit them. It hurt the junior employees. That was frustrating because I naively thought the union would represent everybody. And I realized that the senior people protect themselves. I’m not saying that’s always true, but it was in that particular situation. HR EXEC: One of the situations that makes it more difficult to negotiate is when a union is asking to get more than a nonunion employee receives. When you come to the table, and the maximum vacation for all employees is five weeks, but you want six weeks, that’s hard to do. GROUP NEWS DIRECTOR: Unless they’re willing to give on something else. I suppose it’s possible that if they want six weeks of vacation, they’ll give on the sick-time policy or some other issue. HR EXEC: We realize it’s a negotiation, that there’s going to be some give and take. People always come to the table with way more than they expect to get. I wouldn’t say it sabotages things to ask for the ridiculous. Because when you come in the first day, both the company and the union ask for way more than they know they’re ever going to get. PHOTOJOURNALIST: Most of the people who are negotiating are senior members of a union. And you have to realize that yes, we’re a brotherhood. But they’re looking out for their best interests. Once a person came back to the union members saying the company is playing hardball. But the company made a smart move. One of the main negotiators for the company said, “Look. We’re trying to be fair, here. Here’s what your union is presenting to us, and here’s what we’re presenting to them. You’re welcome to come into my office to

read what your union has proposed that we think is unfair.” There were people who took them up on that. And they went into the office and said, “Wow. This is not what my union’s telling me.” Before I was seeing one side of the story, but now I could see both sides, in black and white. And it created a lack of trust for me. I think that was a rare situation, and a very smart move by the company. STILSON (to HR Exec and Group News Director) : Is

that common, to bring union members into your office to explain your point of view when you’re not making progress with union leaders? HR EXEC: We try, when we don’t think things are going well, to find a few allies. You can say to them, “You know what, this is what’s going on. Can you help us out?” And that goes back to creating relationships with union members. Because sometimes, if the negotiations aren’t going well, you call in a photojournalist who you know you can trust and try to get that person to see what’s happening so maybe they can help out. Being that open is not common. But trying to establish relationships with people that may not think the company’s all bad is helpful. STILSON: How do you think negotiations with unions

will change, or have changed in the recent past? GROUP NEWS DIRECTOR: One of the challenges that

unions face, that the industry faces, is changing technologies, and changing roles of employees. We have to stay up-to-date on industry trends and what’s needed to get the job done in today’s competitive environment. The unions have adapted to that reality. They used to insist that a person could only do one job [such as shooting news footage]. They’ve become pretty flexible. They’ve put their priorities in other areas of negotiations. PHOTOJOURNALIST: One of the things I’ve seen at a company near where I work is, they’ve created – I won’t say it’s a union. It’s a group of employees. And the company treats it as if it’s a union. They’re a nonunion shop. And what that company has done is create something that’s more like a committee. And the [committee members] bring their concerns to the table, just like a union would. They’ve managed to keep unions out of their shop. Because those people are happy. HR EXEC: Are you saying they meet with management? PHOTOJOURNALIST: Yes. So, they get heard, and they discuss what’s going on and how management can make it better. And they have not had a situation, since 1995, when [the group] has said,

“Let’s form a union.” Because management actually listens to them. And I think that’s the key. STILSON (to Photojournalist): Are you glad you’re in a

union? When all is said and done, is it a good thing? PHOTOJOURNALIST: To be honest, I got out. STILSON: Why? PHOTOJOURNALIST: At first, when I sat down and

read the information that the company was shar-

“One of the challenges that unions face, that the industry faces, is changing technologies, and changing roles of employees” — Group News Director

ing during the negotiations, I decided I was going to stay in the union, even though I didn’t agree with what they did. But when that contract was implemented and I took a 17% pay cut, I felt my representation could have done better. I was pissed. I felt like, why am I paying dues every time I work an extra hour, or three hours overtime? You’re going to get more money. [Members] pay a set price of union dues every month. But if I work overtime, my dues for that period go up, because the union takes a percentage of my money. Those of us who got out decided that since [the union] didn’t negotiate a good contract for us, why

“When that contract was implemented and I took a 17% pay cut, I felt my representation could have done better.” — Photojournalist

should we pay dues for this particular year? And the union said, “No. You owe us that money.” There was no more jurisdiction, because we had lost everything. I said, “Why am I paying them money when they can’t protect me from being fired or other things?” HR EXEC: So the union is still there, but you’re not in? PHOTOJOURNALIST: The union is there, but I’m out. I gave myself a 3% raise. The company decided to let the union collect their own dues. So the very people who represented me, and screwed me over, are now going to sue me for money that they say is due to them. And I’m like, “You didn’t do anything. It’s like I pay you to come and work on the house, and you don’t do the work.” That’s the chance I took. I’m a non-represented employee. I’m not anti-union. I’m pro fairness. TFM The Financial Manager • November/December 2019 13

American diginets include (clockwise, from top left) Quest, which televises Modern Marvels; the recently rebranded Court TV Mystery channel; getTV, which has Hot in Cleveland; Justice Network, which runs Cold Case Files; and Bounce, whose programming includes Saints & Sinners.

SPECIAL REPORT: THE FUTURE OF MEDIA

THE

LITTLE NETWORKS THAT COULD Diginets have pulled themselves up by the bootstraps to become very viable businesses, but certain trends are altering their prospects.

A

BY JOHN S. SANDERS & JACOB B. LOURIM N IMPORTANT INFLECTION POINT IN

the evolution of any industry occurs when it experiences a spike in merger and acquisition activity. The diginet industry seems to have reached that historical marker, and its higher profile reveals both its economic promise and management challenges for the future. Specifically, television broadcasters need to keep a careful eye on the degree to which the rise of diginets could disrupt other aspects of their business, including the retransmission fees received from cable, telecommunications and satellite companies, collectively known as multichannel video program distributors (MVPDs). And how the rising number of streaming platforms could also add competitive pressure. To understand the part diginets are likely to play in the greater TV landscape moving forward, it pays to a look at their development and what they’ve achieved so far. The TV broadcast industry’s transition to digital signals, which occurred on June 12, 1999, allowed most television stations to add several digital subchannels to their offerings. Some stations were able to monetize spectrum by leasing capacity to groups distributing specialized programming, like religious and foreign-language broadcasts. The transition also gave birth to so-called diginets, which distribute programming on subchannels in multiple markets. The ramp-up of diginets began relatively slowly and accelerated over the past five years. Starting with the

introduction of the Retro network in 2005, only a handful of diginets were introduced each year. This pace accelerated in 2014 with the debut of Grit, Escape (re-branded in September 2019 as Court TV Mystery), getTV, Heroes & Icons and Rev’n. Then in 2015 along came Laff, Comet, Decades, Buzzer and Justice Network, among others. Many of these diginets achieved coverage of over 80% of the television households in the United States. As the industry increased in breadth and depth, the scene was set for mergers and acquisitions. The first landmark transaction was the purchase of Katz Networks, which the broadcaster E.W. Scripps purchased for $302 million in 2017. Earlier this year, another large broadcast group, TEGNA, acquired the Justice and Quest networks in a deal valued at $91 million. Nexstar Media Group’s recently completed acquisition of Tribune Media included a significant diginet business unit. Among its holdings are Tribune’s owned Antenna TV, as well as affiliate relationships with other diginets, including Court TV. ATTRACTIVE ECONOMICS

There’s a big reason why the diginet industry has grown: its economics are so simple. The networks sell advertising time, typically through national representatives, and hope to build scale by signing up affiliates in a large number of markets, just like a conventional network. Unlike a traditional network, however, incremental costs are minimal. Much of the programming on diginets like Comet (science fiction), BUZZR (gameshows) and Laff (comedies) is archival content that is inexpensive to The Financial Manager • November/December 2019 15

SPECIAL REPORT: THE FUTURE OF MEDIA acquire and historically had little significant use outside of the diginets. While selling commercial and direct response advertising on a national basis through a rep firm involves significant commissions, it also requires little in the way of staff, infrastructure or other operating costs. So the financial reporting requirements of a diginet are less complex than other aspects of the broadcasting business. In many instances, the diginets pay stations for carriage with fixed fees based upon household coverage. Again, this requires little in the way of incremental technical or staff investment. Stations also get a certain number of ad availabilities on the diginets to sell themselves. The combination of a relatively simple business model with a surprising viewer appetite for programming reruns, much of which is nostalgic, has raised the The networks’ visibility of diginets. While no diginets appeared in the top 100 most viewed networks as measured streamed by Nielsen in 2016, eight did so in 2018. platforms will Because their business model is so economicompete for the cal, even smaller players have been able to play same cord-cutter an outsized role in the diginet industry. What most is what a diginet does, rather than demographic as matters who owns it. the diginets. For example, privately owned Weigel Broadcasting in Chicago started and still operates MeTV, which is the most widely distributed diginet in the country with 94% household coverage. It also operates three other diginets. Weigel moved up a weight class when it became part of a joint venture with CBS in the Decades diginet. The early returns of diginets for their owners have been positive. When it closed the $302 million deal for Katz Networks in 2017, Scripps projected $180 million in annual revenue from Katz alone and an increase of $30 million in segment profit. That was not far off, as the company reported $185 million in revenue from Katz in 2018 and an increase in segment profit of about $22.6 million. As they’ve matured and found financial success, some diginets have started to produce original programs. That’s a major change from the dormant and inexpensive archive programming that fueled the genesis of the industry. For example, Katz is producing an original scripted series, Saints & Sinners, for its Bounce network, as well as unscripted trial and true-crime programming for its Court TV and Escape diginets. Then there’s NewsNet. It represents the first time in history that a viewer can watch a 24-hour news channel for free over the air. (Although it has a long way to go in matching the quality of CNN, MSNBC or Fox News.) The diginet launched Jan. 1, 2019 and is now broadcast on 40 stations with five additional commitments, serving 41 markets. MOVING FORWARD

The future of diginets will not be without challenges, however, nor will the potential opportunities be shared 16 The Financial Manager • November/December 2019

equally. For starters, smaller groups will have a more difficult time developing affiliate relationships. Then there’s the impact that the diginets might experience from emerging streamed platforms. NBCUniversal, The Walt Disney Co. and AT&T are all unveiling over-the-top services. While they do not have strong over-the-air presences, the streamed platforms will compete for the same cord-cutter demographic as the diginets. Yet another trend to watch is the introduction of ATSC 3.0, which could be a blessing or a curse for diginets and their owners, depending on individual circumstances. The spectrum efficiency of ATSC 3.0 will, by increasing the number of available channels, increase the demand for programming and put pressure on programming costs. Individually owned stations, or diginets, could be at an increased disadvantage in acquiring programming due to their lack of scale. ATSC 3.0 will allow stations to not only broadcast directly to mobile devices, but also to offer subscription channels, i.e., to become an MVPD. Broadcasters may find themselves able to collect subscriber fees in addition to retransmission revenues. And it’s easy to see how diginets could easily find berths on ATSC 3.0 platforms. But there’s a domino effect that’s likely to take place as the ATSC 3.0-enabled multichannel platforms emerge: the more television broadcasters are able to offer such services, the more incentive there will be for cord cutters to terminate their traditional satellite and cable subscriptions. That, in turn, could undermine the retransmission revenues that stations get from the MVPDs. It’s an important trend to watch, because today, many stations receive about half of their revenues from retransmission fees. And this revenue stream is already challenged by the MVPDs’ dwindling subscriber base. Based upon public filings, traditional cable operators have been losing subscribers at an average 2% per year, and the pressure has been even greater on satellite companies. While there is a cost/benefit issue that will face the industry with variables that are still being defined, it seems likely that TV broadcasters will ultimately manage a migration of their revenues from traditional sources to the more complicated opportunities offered by ATSC 3.0. And diginets could play a key role in that transition. Despite the uncertainties that lie ahead, this much seems clear: the diginet industry has rewarded those who have elected to participate in it. In the short term, it has yielded a profitable incremental business. In the long run, it may prove to be a valuable training ground for a world in which television broadcasters will be required to offer a much more complex menu of programming services than they have in the past. John Sanders is a principal and Jake Lourim is an associate at Bond & Pecaro. They can be reached at johnsanders@bondpecaro.com and jakelourim@bondpecaro.com, respectively.

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E H T G N I D SPEE ESS C O R P

ND A T I D E R WC O OM H R F N T O I F N E BEN DOW N W A O L C S E T H HERE’S T NS DEPARTMEN D ROBOTICS. N A TIO C E E C L N L E O C ELLIG ISS T E N I W L L A I L I C B I BY ARTIF 18 The Financial Manager • November/December 2019

SPECIAL REPORT: THE FUTURE OF MEDIA

I

MAGINE IF YOU CAME INTO

work in the morning, sat at your desk and your virtual assistant asks you where you would like to start your day. First, you ask for information about new credit applications. And she tells you that one of your applicants has come back with a low-risk rating from your credit model but has not shared any collateral as requested. (As a side note, most virtual assistants use female personas, so I’m using female pronouns here.)

The credit model employs a credit limit range from conservative to aggressive, so you instruct her to assign a conservative credit limit based on the missing collateral. She then finds an existing customer that has the same profile as the new applicant and assigns similar credit terms to the new customer’s account. The virtual assistant also notes the new customer’s tax exemption certificate and sets a notification to alert you before its expiration. And after confirming that you agree with her decisions, the virtual assistant then emails your sales department and the

new customer, informing them of the credit terms. Then she updates your system of record with all of the details. Does this seem like a credit fairy tale? It’s not. Credit and collection departments can experience that kind of situation by employing a combination of robotic process automation (RPA) and artificial intelligence (AI). Tasks such as counting money and dispensing cash can be automated using RPA. Generally speaking, RPA involves robots that can mimic well-defined business processes. The processes must be rules-based and repetitive, with pre-defined input formats. The robots must be trained

for each new task. On the other hand, AI involves computer systems that learn, reason, think and perform tasks that require complex decision-making. Here’s an easy way to compare the two: RPA can help with high-volume, well-defined business processes, such as pulling documents from web portals. AI can handle more complex tasks by “learning” and adapting to changes – for example, alterations in a customer’s format for remittance advice when it makes a payment. Needless to say, AI affects our world much more broadly than what happens within credit and collections departments. Uber’s self-driving cars, Siri and Alexa’s voice recognition, Netflix’s

The Financial Manager • November/December 2019 19

SPECIAL REPORT: THE FUTURE OF MEDIA prediction of your next binge watch are all well-known examples of what it can do for us on a personal level. There are even AI-powered coffee machines that (supposedly) learn to make a cup of coffee that perfectly matches one’s preferences. I haven’t tried a cup of coffee from a machine that I like better than my own…yet. I still use the old-fashioned drip coffee maker, but I’m sure over time my stubbornness will be outdone when I finally drink the best cup of coffee I’ve ever had thanks to AI. Let’s get back to the credit department. One reason you should care about how AI and robotics will affect your credit department involves your boss. Given the ever-evolving digital transformation in our world today, it’s likely that if you don’t bring solutions to your CFO, your CFO will be bringing them to you. CFOs know that in order to stay competitive, technology must play a key part in the business plan. Also, jobs are evolving, and if you are doing a job the same way that it was done a decade ago, it’s very inefficient. THE ONBOARDING ASSIST

One of the fastest ways that automation can help credit departments involves onboarding new customers. If you utilize a robotics system, several actions should take place whenever a customer applies for credit. RPA should download credit

data from the available sources you use; extract the data from the reports; go through a scorecard of business rules; and attempt to auto-approve the customer with a risk classification and credit limit. RPA can also ensure that the customer has submitted everything that is necessary (such as financials and collateral). Have you ever had a credit application that came to you missing key information? Those days are over. If you are using an online credit application, all fields and documents that are mandatory must be included or the credit application will not be completed. Artificial intelligence can add even more value. Have you ever had a prospective customer that had no credit data available? AI can help profile the company and analyze how you’re treating similar customers. Then it can create a better model for assessing creditworthiness. BLOCKED ORDER RELIEF

Another way automation can help involves blocked orders – situations when your credit analyst is prompted to look at an account because there is a pending order that needs their intervention or approval. In today’s manual environment, a credit analyst receives notifications from the order management system. He or she then checks data in the enterprise resource planning (ERP)

STREAMLINING COLLECTIONS

T

HERE ARE SIGNIFICANT WAYS THAT ROBOTICS PROCESS AUTOMATION (RPA)

and artificial intelligence (AI) can benefit collections departments. If you’re a collection manager who is working in a manual environment, then your major tasks probably involve: ■■ Determining which customer needs to be contacted; ■■ Deciding how to contact them; ■■ Establishing the tone that will be used in the conversation; ■■ Tracking correspondence by capturing the details and recording a follow-up There is a lot of subjectivity in this process, and employees don’t always follow every instruction without exception. When RPA is added to the mix, it can streamline the process of determining factors like current aging, risk, prior promises, payment history and disputes. Then it can create a prioritized worklist for a collector. This way, only critical customers get a phone call and less critical ones get some automated correspondence. Adding AI takes it a step further. Using all of the historical data available in your enterprise resource planning (ERP) system, AI can predict when an invoice will be paid. It takes into consideration invoice factors, such as previous payment times along with the month or day of week due. It also factors in account-based data, such as the average number of invoices per payment, gap between payments and the percent of payments delayed. You can take things up another level with digital assistants, which can record phone calls, schedule follow-ups on payment commitments and initiate electronic payment requests. That transforms the entire collections department.

20 The Financial Manager • November/December 2019

system to find relevant information, such as how much the customer owes and how much is past due. Next, the credit analyst would likely contact the collections analyst that handles that customer. The collections person would try to get a payment commitment and record a follow-up to ensure the commitment is fulfilled. After that, the collector would communicate the information back to the credit analyst. And the order would be released based on the verbal commitment. Once the date arrives for follow up, the collector would check with the cash application department to see that the payment has arrived and been applied to the correct invoices. Needless to say, this an extremely labor-intensive process that involves up to three different departments (if salespeople also become involved). And it is based on a future promise to pay. One of the ways AI can help is by predicting blocked orders. That’s right. Based on historical data, AI can predict that an order will be blocked before it actually happens. If you combine this capability with financial technology (fintech) software, it changes the entire process. When this happens, AI predicts the order and credit limit approaching, and RPA triggers the “credit limit utilization workflow.” In other words, automated correspondence is sent to the customer in question when an order is on the verge of being blocked. When the client decides to make payment, they are sent a link to pay online. Once the payment is received, it’s automatically applied to the invoice and the credit limit is updated. When the predicted order becomes a real order, there is no holdup or action necessary from the various departments to get the order processed. As you weigh the added benefits of AI and RPA, here’s one final thought: a 2018 study by McKinsey & Co. found that about half of companies they surveyed have embedded AI into at least one corporate process. While Netflix, Alexa and Siri are changing our personal worlds, AI and RPA could make your business life a whole lot easier, and more appealing. Bill Weiss is vice president of business development, credit and collections, at HighRadius, a fintech company that provides AI-based solutions for accounts receivable and treasury processes. He can be reached at bill.weiss@highradius.com.

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The Financial Manager • November/December 2019 21

CREDIT & COLLECTIONS

THE WELL-OILED

SHARED SERVICES ‘MACHINE’

22 The Financial Manager • November/December 2019

Getting the best results from a centralized operation involves a series of best practices that optimize procedures and communication.

M

A N Y M E DI A COR POR A -

tions have widely embraced the concept of shared services over the last few years, particularly in the area of finance. And that begs a couple of questions: has the transformation to a centralized operation been successful? And if it isn’t working well, what can be done to make the process easier? It’s clear that each organization must weather the challenges of shared services and discover its own route to an efficient model. But if they embrace a series of best practices, it will make the whole process much smoother. Before getting into the practices that achieve the best results, let’s look at the benefits of a shared services center (SSC) and the challenges that can spring up.

THE POSITIVES

Shared services benefits generally increase as the operation matures. A well-developed and well-run SSC can improve customer service; lower operating costs; eliminate redundancies; streamline procedures and processes; and deliver better analytics to enable continuous improvement. Service levels are tailored to the actual needs of the business units, and services that fail to add value are eliminated. Operating budgets are often determined on the basis of customer demand, which leads to significant cost savings. Additionally, the organization gains the flexibility to add new business units, acquire new properties and expand geographically at a more rapid pace. Since its purpose is to support other business units, the SSC frees those units to focus on their core businesses and pursue other opportunities. Today’s SSC is expected to provide real value; otherwise, the business units it serves may have the corporate nod to look elsewhere for its services.

Shared services is particularly well-suited for back-office operations, although expansion to other functions is on the rise. In credit and collections departments, the SSC generally begins with a single function such as order to cash (accounts receivable, credit, dispute/deductions management, cash application). Once that function is successfully running, additional operations such as accounts payable, general ledger, payroll, purchasing and IT may be included.

BY C. ROBIN SZABO

THE CHALLENGES

Creating and implementing an SSC is no easy feat. If your organization is contemplating shared services, know that there will be pain. Some business unit managers may worry about accountability of the SSC and argue that cost reductions will be achieved at the expense of quality. Economic factors, which drive the need to implement shared services, place constraints on doing so. The considerable physical logistics can negatively affect employee morale and headcount. Installation of a common IT system and staff changes can take a hefty toll. Understanding the need for a period of adjustment among business units, many companies allow their SSCs a year or two to come up to speed. After this time, business units that believe their needs would be better served by outsourcing may present their findings to upper management for review. Even with these substantial challenges, most companies with shared services would agree that it was a worthwhile investment in today’s competitive environment. BEST PRACTICES

Whether your organization plans to move to a shared services model, or your organization already has an SSC in place, best practices The Financial Manager • November/December 2019 23

CREDIT & COLLECTIONS must be at the heart of any discussion. The shared services center must be capable of competing successfully on a price and service level with outside vendors. Likewise, business units, also under pressure to perform well in the marketplace, must be free to seek support services that meet the same standards. Without best practices, neither can be accomplished. In their article, “Strategy & Shared Services: Management Fad or Real Value?,” authors DeAnne Aguirre, Vinay Couto and Gary Neilson, senior partners with Strategy&, state that “proprietary standards and corporate culture are out. Best practices are in, if the business units are to gain competitive advantage.” Because internal customers (business units) can specify their service needs, the SSC must meet those requirements and can expect to have its performance evaluated using measurable criteria. Aguirre, Couto and Neilson argue that, when executed properly, the shared services approach combines the advantages of both centralization and decentralization. Through their experience with hundreds of organizations, they have identified six principles for the establishment of a shared services structure in any company: 1. Determine which services to share. The primary objective should be to achieve the lowest cost while maintaining high quality standards. 2 . Develop a service-level agreement. The agreement should specify services to be delivered; specific requirements and parameters; unit and total costs; method of charging costs; and time frame for service delivery. Additionally, it should state the customer’s business objectives; how the services are expected to support these objectives; and how achievement will be measured. The authors stress that the agreement does not need to be overly formal or legalistic, and that rigid specifications can be an obstacle to success. The goal of the SSC must be: “No one does it as well, for less.” 3 . C h o o s e l e a d e r s a n d s t a f f c a r e f u l l y. Leaders of transaction-based services should have the proven ability to manage a large staff and motivate personnel. All staff members must learn new behaviors. A focus on customers and attention to market standards of costs, service levels and best practices must be paramount.

4. Benchmark the shared services organization against outside vendors. In the shared services

model, key performance indicators are identified, tracked and communicated. Shared services conducts periodic outsourcing reviews and provides vendor management assurance. Business lines compete for internal resources, ensuring that resources go where they generate the most value.

TRANSLATION, PLEASE A good definition of shared services comes from the Gartner Group IT Glossary: “Shared services or a shared services center (SSC) refers to a dedicated unit (including people, processes and technologies) that is structured as a centralized point of service and is focused on defined business functions.” Its common operational discipline can be utilized and leveraged across an entire organization. Shared services entered the corporate vocabulary in the 1990s, as big decentralized companies sought to consolidate basic transactional processes such as payroll, purchasing and accounts payable. The shared services center could then sell back those services to individual business units.

5.

Establish a governance board composed o f business unit executives . The board

provides strategic leadership and direction and ensures that shared services are being consistently managed in accordance with internal customer requirements. The board also sets policy; decides whether and how to permit outsourcing; approves expenses and capital budgets; and resolves significant conflicts over such issues as complying with agreements and determining degrees of standardization. 6. Select an implementation approach. Some companies choose to create an SSC first, moving into it a combination of services from headquarters and business units, then redesigning these services based on internal customer needs. Other companies whose senior management may have been initially skeptical about the idea have redesigned the services themselves to find out which were being

24 The Financial Manager • November/December 2019

performed and by whom, who the customers are and how much the services cost. After building the business case this way, commitment to the new model followed. COMMUNICATION IS KEY

The most common approach to establishing an SSC is to create a new in-house organizational entity with its own mission and mandate to provide services to the business units. Generally, this involves a new location, staff and IT. One of the biggest challenges that organizations encounter in transitioning to an SSC environment can be convincing each business unit that the off-site SSC can handle their financial needs. This is where communication best practices are essential. “Buy-in” must exist among management and staff at all levels of finance and sales – corporate, business unit and shared services. Make sure that everyone on the shared services team understands that each property is its client; therefore, it should take a customer-focused approach. The team should be staffed with relationship-driven multi-taskers who are able to communicate effectively with peers, finance managers, sales teams, corporate and customers. And they must focus on providing high quality service. Everyone on the SSC team should have 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” perception, rather than an adversarial approach to credit and collections. Another way to partner with sales is to adopt a reasonable “get-out-of-their-way” policy. One media company’s solution was to automatically grant a $1,500 line of credit to any commercial account. If more was required, the prospect had to complete a credit application, which the SSC promised to turn around within 24 hours. As a result, credibility with the business units was established, days sales outstanding improved and bad debt write-offs decreased. Performance should be assessed on an ongoing basis, using performance metrics for the quality and costs of services as well as benchmarking. The SSC should provide regular detailed reports on performance, which help ensure that

goals and expectations are in sync. Everyone needs to be clear about the division of responsibilities between the SSC and the individual business units. All accounts receivable processes are often handled in the SSC, including billing and all payment applications (cash, credit cards and ACH – automated clearinghouse – payments) as well as adjustment postings. In some organizations, each business unit has the authority to make the ultimate decision regarding credit extension, but the SSC carries out credit investigations and provides recommendations to the business unit. The SSC may also handle collections, working with the business unit and, if necessary, a third-party collector. ESTABLISH PROCEDURES

If the SSC is responsible for credit investigation and recommendations, it needs to understand the philosophy of the organization. Does it put greater emphasis on tight credit requirements and less on collection efforts, or the other way around?

Economic conditions and sales conditions can change, and there should be a sensitivity to those factors. 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. Cash-application procedures are critical. They must involve accuracy and timeliness of information. A method should exist for the initial recording of cash-in-advance payments, whether short-term (one month) or long-term (one year). When an invoice is produced, any payments or credits should be immediately posted and reconciled. With collections procedures, you must be able to see a customer’s full portfolio on all systems of record prior to any contact with the customer. How much is collectable today, in 30 days, in 60 days? Are there any disputed amounts? Do any payment workout plans exist? What is the customer’s credit line and how much has been used? Every 30-day cycle, the SSC should contact any customer with a receivable

THE FUTURE OF SHARED SERVICES

A

2017 SURVEY FROM DELOITTE SHOWED THAT WHILE TRANSACTIONAL

processes remain predominant at shared services centers (SSCs), adoption of more complex, knowledge-based processes has risen considerably and functional scope continues to grow. The survey also identified robotic process automation as a rapidly emerging technology that will fundamentally change how SSCs operate, slashing the effort for routine tasks and enabling advanced cognitive applications that augment or replace human judgment in knowledge-based processes. (For more on how robotics will impact credit and collections, see article page 18.) In their article, “How Shared Services Organizations Can Prepare for a Digital Future,” Puneet Chandok, Hiren Chheda and Alexander Edlich of McKinsey & Co. state that companies should consider ways to digitize back-office functions and optimize company performance. “By incorporating automation, virtualization, advanced analytics and other digital technologies into their operations, shared services organizations may be able to streamline processes,” the McKinsey authors said. By digitizing their shared services organizations, companies can achieve significant savings in both time and money, according to McKinsey research. The three authors recognize the many challenges that companies face in digitizing functions. However, they believe that by partnering with the business units and phasing in elements of the digital transformation based on the company’s near-term and long-term objectives, the SSC can overcome many of these challenges. They also believe that digitized shared services organizations can introduce valuable capabilities into the parent organization, such as using analytic models to assist in business planning. “From their back-office perch, shared services organizations are uniquely positioned to help companies realize their digital strategies, improve front-end customer interactions and increase internal productivity,” the McKinsey authors conclude.

balance. The contacts should be prioritized. New customers should take first priority, riskier customers second, high stakes third and slow pays fourth. Routine tasks and reminders should be automated. The SSC should be capable of tracking changing payment behaviors. Electronic red flags should alert you to broken promises, late-pays, short-pays, unearned discounts, percentage amounts of disputed invoices and percentage of receivable portfolios being disputed. Those flags should be visible to collections staff, management and sales. Dispute management and resolution processes should be in place to quickly identify, analyze and resolve the issue efficiently. Ideally, root-cause analytics reduce the incidence of disputes and facilitate process improvement. Aguirre, Couto, and Neilson of Strategy& believe that the further we get from the old notion of command-and-control management, the closer we get to a world in which the market is the test of every aspect of corporate life. The winners, they project, will be those that mobilize capabilities in support of market objectives. “Support services are one more capability, even if the customers are internal,” the Strategy& writers state. “Shared services is a significant step in this process.” For now, 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 in the Internet of Things environment, they also must change to maintain efficiency and control of processes. For many media companies, this involves centralizing some operations, adding areas of expertise and putting technologies in place that facilitate flexibility now and in the future. W hile acknowledging the diff icult change management involved in implementing shared services, these companies also recognize the value of a well-planned solution. Advice from all would be, “At all stages in the process, from conception to implementation, communicate, communicate, communicate!” C. Robin Szabo is president of Szabo Associates, media collection professionals, in Atlanta, GA. He can be contacted at robin@szabo.com or (404) 266-2464.

The Financial Manager • November/December 2019 25

LAST WORD

The Robocall Crackdown

Lawmakers and federal agencies are making it harder for robocalls to get through. Stringent rules govern the practice. BY NANCY A. ORY

T

he Federal Trade Commission (FTC) has launched a major crackdown on illegal robocalls and has recently taken more than 100 actions targeting operations around the country that are responsible for more than 1 billion robocalls. “Operation Call it Quits” is part of the FTC’s ongoing effort to end the scourge of pre-recorded telemarketing calls. Resulting judgments and consent decrees require companies violating the robocall laws to pay millions in forfeitures in addition to reparations to defrauded consumers. Violators also risk costly class action lawsuits, with statutory penalties ranging from $500 to $1,500 per call. An examination of the current state of the law may help reduce the risk of your company inadvertently becoming subject to enforcement action. In case you’re not sure what a robocall is, that’s what happens when you answer the phone and hear a recorded message instead of a live person. Robocalls are generally trying to sell you something and are nearly all illegal. When a robocall uses a fake name and number, it is called “spoofing.” WHAT’S LEGAL, OR NOT?

The federal Telephone Consumer Protection Act of 1991 (TCPA) regulates all automated calls. With respect to any call to a landline, telemarketers need prior consent to leave a pre-recorded message (subject to limited exceptions for entities such as nonprofits, as discussed below). A separate TCPA provision prohibits any call to a mobile device using any “automatic telephone dialing system or artificial or prerecorded voice” without obtaining the recipient’s prior express consent. Under the rules for calls sent to mobile devices, this consent must include advance disclosures that: a) the call is being sent using an automatic telephone dialing system, and b) the consent for the call is not conditioned on a purchase of goods or services.

Be advised that the law treats text messages delivered by an “automatic telephone dialing system” (known as robotexts) as calls. If a robocall is trying to sell you something, it is illegal unless the company has your written permission to call that way. Under limited exceptions to the law, certain robocalls do not require permissions:

If a robocall is trying to sell you something, it is illegal unless the company has your written permission to call that way.

a) messages that are purely informational (such as f light information and delayed school openings); b) debt collection calls; c) political calls; d) calls from certain health care providers (such as prescription renewals); and e) messages from charities, with certain limitations. Federal law requires all telephone calls using pre-recorded messages to identify who is initiating the calls and to include a telephone number or address where the initiator can be reached. Some states have additional laws that regulate or prohibit robocalls. LEGISLATION AHEAD

At the demand of constituents, legislation has been making its way through Congress to try to address the scourge of robocalls. The Senate passed the Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (known as the TRACED Act) in May 2019. The House passed the

26 The Financial Manager • November/December 2019

Stopping Bad Robocalls Act in July 2019. The House and Senate now need to reconcile the two bills. At press time, that was expected to happen sometime in fall 2019. The acts seek to give regulators stronger enforcement tools and also require phone carriers to implement call identification technology. The Federal Communications Commission recently empowered the major telecommunications carriers to block by default illegal or unwanted calls based on reasonable call analytics before the calls even reach consumers. The pending legislation discussed above would require the big carriers to implement this technology – known as SHAKEN/STIR. The technology creates a call authentication system using digital fingerprints, or tokens, to help providers determine if the number that shows up on caller ID is the same as the number from which a call is placed. AVOIDING VIOLATIONS

The best practice to avoid violating the law is to make calls one at a time, with a live person delivering the message. Companies should keep a record of individuals who have consented to be contacted; use technology to screen out mobile telephone numbers that get reassigned to new subscribers; and have a system to track and remove individuals who revoke consent. It is also advisable to seriously reconsider engaging in the practice of using robocalls at all. First, consumer annoyance at the daily harassment of unwanted robocalls is sure to alienate potential customers. Second, you risk tarnishing your brand by using a method of communication that has primarily become associated with fraud and scams. Nancy A. Ory is an attorney with Lerman Senter PLLC. She can be reached at (202) 416-6791 or nory@lermansenter.com.

MEDIA WHYS HAS MEDIA-SPECIFIC CREDIT INFORMATION FROM ADVERTISERS IN THE TOP 100 DMAS. WHAT CREDIT REPORTS ARE YOU RELYING ON?

is the ONLY credit report that provides exclusive payment information FROM Media Companies FOR Media Companies. Our reports include complete credit data from twelve media companies, representing 97% of the top 100 DMAs, and our media partners continue to increase! Analyze how advertisers actually paid other media companies and you’ll have the best information to assess credit worthiness and keep your bad debt low. Plus, our reports include collection filings, tax liens, judgements, corporate linkage, payment trends, and trade data from D&B® or Experian®. Start making better credit decisions with local, media-specific data from your industry association – BCCA.

MORE technique. MORE tact. MORE client retention.

When you know exactly what to do and exactly how to do it, you can be MORE successful. At Szabo Associates, we’ve spent decades learning and refining the tricks of our trade. So when clients come to us for help collecting media receivables, no one can do MORE than we can. There is considerable technique and technology involved in collections. We have the largest media accounts database in the world containing information on over 600,000 media advertising companies. We can immediately access this data, check payment histories and patterns, analyze them and plot the exact strategy needed to maximize collection. No one else has MORE information and MORE knowledge on how to use it.

Tact is equally important. This doesn’t come from a computer or a manual. It only comes from experience. Knowing when to be firm and when to be gently persuasive can make all the difference. Not only can MORE of the debt be recovered, but valuable client relationships can be preserved. At Szabo, our job is to recover your money without losing your clients. We have the technique, the tact and the experience to do both. It’s why Szabo can do MORE.

Szabo Associates, Inc. 404-266-2464 www.szabo.com info@szabo.com

MORE is better than less.