ROM's Services Reduce Receivable Levels and Financing Costs	View or download this article in PDF format
as published in "Controller Magazine"

Twenty-four hours a day, seven days a week, the Associated Press writes an average of 20 million words a day for its thousands of members. AP founded in 1848, is the largest and oldest news organization and wire service in the world. From its headquarters in New York, AP provides news, photos, graphics, audio, and video for 6,000 radio and television stations and 1,700 newspapers in the United States. With another 8,500 newspaper, radio, and television subscribers in 112 countries worldwide, AP is the backbone of the world's news information system.

Given this volume, the Pulitzer Prize winning news organization has to focus on its core business to get the job done. "As opposed to hiring people when the collections volume backlogs or gets high, we need an outside source to conic in and handle the accounts accordingly" says W. Scott Johnson, AP's assistant treasurer and credit manager. So in 1996, AP began temporarily outsourcing its collections to Receivables Outsource Management, Inc. (ROM). "We basically gave them an entire package of instructions that they used to make phone calls and resolve the problems with the account in question," says Johnson.

Working from off site, ROM's collection staff contacted AP members and focused on providing service to members with outstanding accounts, rather than overly aggressive collections. "AP has a symbiotic relationship with its members," says John Healy ROM vice president. "So alienation was their biggest concern." ROM's staff would contact the members to see whether payment had been made or misapplied, address account disputes, and give members copies of their outstanding invoices or statements.

And AP's customers responded well to ROM's service oriented approach." It was an excellent situation for us — well worth it, without a doubt," says Johnson. "We got clear of a lot of volume that was causing us a backlog, and that's the main reason that we brought them in. Once they cleared it up, we were able to handle it more efficiently on this end."

Portfolio Analysis
and Long Term Partnering

More than just outsourcing, ROM provides an integrated set of services and assessment tools that improve operating systems. ROM's professional staff uses quantitative analysis and research, strategic development, structure and process dissection, and perspective and decision making evaluations to help companies permanently improve their operating effectiveness and performance — not just to solve an immediate need.

Whether a company is liquidating, attempting to turn performance around, trying to develop a long term strategy for customer satisfaction, working to identify cash application problems in the short term, or staffing up for cyclical or seasonal growth, ROM's professionals can perform portfolio reviews to uncover the source of the problems. "Each engagement is unique," says Healy. "We work to identify what the problems are and bring our expertise of the receivables end to resolve a client's problem area."

ROM dramatically reduces Days Sales Outstanding (DSO):

Client Initial DSO Levels Resulting DSO Levels Reduction in DSO Levels Percentage Reduction in DSO Levels Magazine publisher 68 days 36 days 32 days 47% Big Six accounting firm 101 days 68 days 33 days 33% Multi-national media company 64 days 52 days 12 days 16% Printing equipment manufacturer 71 days 41 days 30 days 42% Average 76 days 49 days 27 days 35%

Based on these statistics, ROM could help a customer with $25 million in accounts receivables realize a gain in working capital of almost $9 million. At an average interest rate of 8 percent, this translates into almost $700,000 annually in interest savings alone.