Pacific Business Solutions

2011-03-07T13:56:00.000-08:00

2010 and 2009 - What Kind Of Years?

During the past two years, building on educational efforts, I continued to instruct and facilitate business-related, on-line, face-to-face and hybrid degree and certification programs.

The successful on-line international program sponsored by the FCIB Association (Finance, Credit & International Business) continues to attract global learners from around the world. As co-developer and lead instructor of the course, I have been pleased to see that through the close of 2010, over 1,300 people from 35+ countries have received their certifications.

The CA credit association, CMA, and I found enduring interest from business professionals desiring on-line programs in Financial Statement Analysis and Business Credit Principles part of the "track" to the CBA (Credit Business Associate) designation. Learners from 14 states and Canada have successfully completed these programs since inception. In addition, a private, "in-house" version of these business courses was offered to a major publishing firm located on the east coast.

With St. Mary's College of CA, I continued my adjunct faculty position dedicated to those public and private sector learners seeking the degree of Masters of Arts in Leadership.

Presentations on topics from mitigating export risk to cultural issues in the global business environment were made to business and trade groups in San Diego, CA, Portland, Oregon, Boca Raton and West Palm Beach, FL.

I was pleased to develop and facilitate programs in international business at an executive program at Dartmouth College, Hanover, Mass.

My second year with the Advisory Committee for the Export-Import Bank of the US as one of two representatives for U.S. small businesses was concluded. The experience was enlightening and provided additional insights into the issues that the U.S. needs to address in order to be more competitive in world markets.

Q Finance, a new publication published by Bloomsbury, UK, asked me to write an article, "Essentials for Export Success." Described as a resource for finance professionals, the 2,000 + page QFinance publication provides problem-solving tools with topics covered that include global strategy and performance measures, macroeconomics, mergers and acquisitions, business ethics and export risk mitigation techniques.

Quote to Cash Process Consulting

2011-03-02T16:39:00.000-08:00

Q2C is a company I co-founded with some partners in 2002. We help companies improve working capital management by focusing on all activities within the quote to cash cycle. This encompasses policies and procedures, processes, organizational structure, systems and automation opportunities.

We analyze the current status, recommend improvements and provide implementation oversight.

We deliver improvement in cash flow, accounts receivable management and provide alternatives to secure or finance sales.

If you are experiencing...

Slow A/R turns and eroding profitability;
High level of customer deductions; or
Lack of cross-functional approaches to issues related to credit, billing, customer service, cash management, collection, cash application and dispute management

...we can help! Please contact us or visit the Q2C website for further information.

Our Clients

2011-03-01T16:38:00.000-08:00

Our clients include:

Agilent Technologies
Dole Foods
Dreyer's Ice Cream
Dun & Bradstreet
Euler Hermes Credit Insurance
Hewlett-Packard
Hitachi Data Systems
Honeywell, Inc.
Mail Box Etc.
McGraw Hill Publishing
Medallion Carpets
Safeway Stores
Sanrio
San Francisco Airport Commission
Sun Micro
Weyerhaeuser

Publications

2011-02-07T16:36:00.000-08:00

"Essentials for Exporter Success," published in QFinance by Bloomsbury Press, UK, 2009, describes how taking intelligent global risks coupled with developing relationships leads to rewards.

"The Evolving Role of Credit Risk Management," Risk Management Magazine April 2005 by William Atkinson. Managing accounts receivable is becoming an issue of increasing importance not just to companies’ financial personnel but to risk management as well. With comments by Paul Beretz

"The International Obstacle Course" By William Atkinson. Clearing the hurdles of credit and collections overseas requires training, excellent teamwork, and frequently a third-party's helping hand. With comment by Paul Beretz.

"Cohorts in Learning" By Jane R. Schultz. Paul Beretz comments on the FCIB partnership with Michigan State University to create an unusual online course about global credit management.

"International Skills: Don't Leave Home Without Them. An interview with Paul Beretz" by Sherry Schlossnagle. (Reprinted from the September 2000 issue of Business Credit magazine with permission of NACM.).

"Stop, Look and Listen! : Expert Advice on Doing Business in the Pac Rim" by Paul Beretz (Reprinted with permission from IOMA's Report on Managing International Credit and Collections, September 2000 issue.)

Country Profile: "Singapore: Singapura - the 'Lion' City" by Paul Beretz (Reprinted with permission from IOMA's Report on Managing International Credit and Collections, July 2000 issue.)

Country Profile: "Handling Credit and Collection Issues When Exporting to South Korea" By Paul Beretz (Reprinted with permission from IOMA's Report on Managing International Credit and Collections, February 2000 issue.)

"How to Prepare for a Systems Application Installation or Upgrade" By Paul Beretz (Reprinted with permission of Business Credit magazine, a publication of NACM. The original article appears in the January 2000 issue.)

What We Do

2011-01-01T13:16:00.000-08:00

Want to improve profitability? Pacific Business Solutions evaluates and creates opportunities that will improve cash flow for global manufacturing, distribution, and service companies, both high and low tech.
In addition, Paul provides training, both on-line and in-house for clients in financial statement analysis, business credit, negotiating, international country risk management.

Paul Beretz, Managing Director of Pacific Business Solutions, has successfully capitalized on more than thirty years of business experience providing the following results:

1. Start-up to middle market sized companies:

Initiated tactical and strategic processes for automotive service/wholesale-oriented, twenty-five year old company; guided the new president and three key operations managers to evaluate the needs of the market place and competition, establish personnel performance measures and utilize budgeting and forecasting tools.
Established accounts receivable goals and process improvements for a thirty-year old floor covering distributor; evaluated capabilities of finance and operations organization; instigated an "order to collect" task force that improved customer satisfaction and accounts receivable quality and collections by twenty percent.
Drove and mediated a successful buy-out between two partners of an established, fifty-year old company specializing in fluid handling and sale of processing equipment (a buy-out that had been stalled for two years due to the inability of the partners to agree on the terms).
Formulated an approach and identified issues for a start-up subsidiary of a Fortune 50 company that wanted to establish an on-line auction of accounts receivable.
Created and led management team-building process for a franchise of a national company serving the postal and communication sector; facilitated and established action plans including understanding the business culture, customer feedback and recognizing growing pains that are consistent with an expanding operation.
Edited and enhanced web site content of a fast-growing organization that assists exporters in expediting documentary payments.

2. Middle market + companies:

Formulated a "best practice" strategy to identify and improve processes negatively impacting the accounts receivable for a $1B software provider - the result? Reduced DSO (days sales outstanding) by ten days in one quarter; reorganized the department and re-defined and created new departmental job descriptions; authored a "desk procedure" for world-wide operations which provided - for the first time - a consistency in understanding and maximizing the credit and collection process.
Provided expertise to resolving accounts receivable issues resulting from the merger of two multi-$ B, global manufacturers; assisted the Integration Team to develop world-wide action plans impacting personnel, facility locations and the accounts receivable process.

3. International:

Provided guidance and recommendations to several multi-$B companies in the recognition of economic, country, and cultural issues fundamental to selling products and services in Pacific Rim countries.
Retained by an international trade association to give seminar on "Expect the Unexpected - Selling Overseas."
Presented several company in-house and on-line training program covering international credit risk management.

4. Systems/Enterprise Resource Planning:

Founded and act as facilitator for an organization for companies in northern California who desire to enhance their understanding and application of the Oracle Order Entry and Accounts Receivable module (the group, Bay Area Oracle Receivable User Group, is recognized as a "SIG" (Special Interest Group) by the Oracle Corp.
Retained to present a program to a global organization entitled "How to Prepare for an ERP installation or Upgrade" (My article on the subject was published in Business Credit magazine, the January 2000 issue).

Contact Pacific Business Solutions

2010-03-07T16:49:00.000-08:00

Export - Import Bank of the US

2008-09-22T17:54:00.000-07:00

I was re-appointed for a second year to the Advisory Committee of the Export-Import Bank of the U.S. for 2008-2009. The committee's primary task is to advise the Bank concerning its programs, especially with respect to competitiveness. The committee has been considering a number of areas of opportunity, including identifying the strategies and mechanisms to enable exporters to stay competitive in today's global marketplace. The picture above was taken with the Honorable Jim Lambright, Chairman and President of Ex-Im.

California Business Credit Executive of 2008, Presented by CMA

2008-05-12T15:59:00.000-07:00

What an honor to receive the "Credit Executive of the Year" award for 2008" from CMA! I am really humbled by the recognition and now able to join the ranks of past CMA credit execs of the year.
I've spent all of my business life in and around credit management and this award is truly one that I will treasure. Much of my life has been devoted to education - first as an avocation when I was in the corporate world, and now as a vocation as I begin my tenth year in consulting. Besides the undergraduate and graduate programs I teach, I'm very pleased to have been involved in both the development and instruction for on line, certificate eduction. This would include the FCIB International Risk Management program as well as CMA's courses in Business Credit Principles, Financial Statement Analysis and Interpretation and Credit Risk Assessment.
It's a pleasure working with CMA, a vibrant association that is taking the lead in providing timely, on-line education for credit and business professionals.

New Edition of Trade Guide for Exporters Released

2008-04-25T09:17:00.000-07:00

In April 2008, due to the excellent reception by US exporters to the first edition of the Trade Finance Guide, the second edition of the Trade Guide was released.

Since its release in April 2007, over 5,000 printed copies of the Trade Finance Guide (TFG) have been distributed to the public and its online version has been downloaded more than 20,000 times from the US Commerce Department website. The second edition includes a new chapter on foreign exchange risk management as well as updates to all of the other chapters. The additional content is in response to the interest expressed by a number of SMEs (small, medium size enterprises) that wish to export more efficiently in foreign currencies by mitigating the risk of currency exchange loss.

At the request of the U.S. Departmentt of Commerce, I provided overall guidance in the development of this update as I did for the first edition. I worked very closely in the editing with the project manager for the Guide, a senior Commerce employee, who was a student of mine a few years ago in the FCIB on line risk management course.

Q4 2007 Noteworthy Events

2007-12-11T03:29:00.000-08:00

Washington, DC: I was awarded a Certificate of Appreciation by the Under Secretary for International Trade of the U.S. Department of Commerce for my contributions to the Trade Finance Guide, a reference publication produced by the Commerce Department to assist U.S. exporters.

I was elected to a three-year term on the Advisory Board of FCIB beginning in 2007. With FCIB having over 1,000 member-firms in 55 countries, the board will address the continuing development of educational programs while expanding global areas that provide solutions to international business concerns of its members.

Business Credit Principles: Now On Line!

2007-06-13T15:33:00.001-07:00

The very successful, on-line Business Credit Principles course, instructor-led by Paul Beretz, is offered by CMA (the California Credit Association). This program is approved by NACM as certification credit toward the Credit Business Associate (CBA) designation.

To find out about programs scheduled in 2009, check out http://www.anscers.com/Upcomingevents.aspx

Financial Statement Analysis (FSA1) Online Course

2007-06-13T15:20:00.000-07:00

Are you interested in improving your ability to analyze a financial statement? The sessions are held on-line, with Paul Beretz as the "live" instructor, one day a week, from 4 PM - 5 PM, PT, for six consecutive weeks. The course is approved by NACM as certification credit toward the Credit Business Associate (CBA) designation.
To find out about programs scheduled in 2009, check out http://www.anscers.com/Upcomingevents.aspx

Credit Congress Presentation, Las Vegas, June 2007

2007-06-08T15:21:00.000-07:00

Below is the summary of a 3 hour presentation Paul made in Las Vegas at the annual Credit Congress.

Introduction to International Credit
Speaker: Paul Beretz, Pacific Business Solutions, A Q2C Partner
CEUs: .25/Valid for CCE Recertification/3 CPEs

Does your company export goods or services outside the country? Or perhaps you just want to learn more about the methods that effectively identify and apply credit approaches on a global basis in order to expand your own professional skills. This program examines risk attributes that result from country, currency and cultural influences in the global credit and collection process. Legal options for the credit risk manager are analyzed. Risk mitigation techniques such as credit insurance and how to recognize and apply a variety of payment options are evaluated. Utilizing current best practices are considered and enhanced with international experiences from a seasoned credit executive.

International Program Held in the Southwest, May 2007

2007-06-08T14:31:00.000-07:00

Recognizing a need for international risk education in the southwest, Paul presented a program on Export Risk Mitigation while leading a round-table discussion on issues facing those selling off-shore.

International Risk Management Program

2007-06-08T14:25:00.000-07:00

Paul continues to facilitate learners in international risk management through an on-line, instructor led program FCIB's International Credit and Risk Management Online Course that he helped develop in 2003 with Michigan State University, the US Department of Commerce and FCIB, the premier international finance association.
Through Q208, over 1,100 professionals from 30+ countries have received their CICP certification (Certified International Credit Professional). The next program began on Sunday, September 14, 2008. If you missed this, think about January!

International Credit and Risk Management at Dartmouth College

2007-02-12T18:56:00.000-08:00

Paul taught for the second year this past summer at Dartmouth College at the invitation of the National Association of Credit Management's (NACM) Graduate School of Credit and Financial Management (GSCFM). This executive-level program is an invigorating two-week, two-year (four weeks total) program presented on the campus of Dartmouth College. The course, International Credit and Risk Management, is described as follows:

In the global business environment, the professional credit executive realizes that issues of risk management are dynamic. The course is designed to develop both an understanding of the vast changes in the global economy and transitions in the social and political sectors that impact our decisions. In addition, the program offers an opportunity to appreciate what "best practices" will work in the field of international credit and risk management. The concerns for both the global buyer and seller are examined. Country, currency and culture risk attributes are identified with specific examples. Risk mitigation techniques; international law; credit insurance; sources of credit information are considered. Payment alternatives are described and evaluated. The role of banks and how credit professional should effectively relate are assessed. Collection techniques; negotiating scenarios; international ethics and the future of global credit management are additional topics in the program.

. You can apply to future Dartmouth programs here.

Who is Paul Beretz?

2007-02-01T12:38:00.000-08:00

Paul Beretz, CICE (Certified International Credit Executive), is Managing Director of Pacific Business Solutions, a company he created in 1999. In addition, he is a founding partner of Q2C (Quote to Cash) Solutions. He brings over 30 years of global, corporate experience in finance and management with industries such as telecommunications, semi-conductors, forest products, chemicals, plastics and consumer products among others. His expertise includes analyzing opportunities and providing resolutions in the order-through-collect cycle for manufacturers, distributors and service companies located worldwide.

Paul is a faculty member at St. Mary’s College (CA) in both the Bachelor of Arts and Master of Arts in Leadership program. His adjunct faculty postings also include UC Berkeley and Michigan State University. In 2003, under the combined sponsorship of FCIB (Finance Credit & International Business), Michigan State University and the U.S. Department of Commerce, he created a course in international credit and risk management. Paul is the project manager and lead instructor in this online certificate program that was developed for professionals around the world who to export their products or services. Topics addressed cover financing and treasury, risk mitigation techniques, cross-cultural influences, ethics, negotiations, country and currency risk assessment, international trade law among others. By the end of 2011, over 2,000 professionals from 35+ countries have successfully completed the program. Also, at the request of the California Business Credit Association (CMA), he created and instructs in two online certificate courses, “Understanding Financial Statement Analysis” and “Business Credit Principles.” In addition, Paul has been an instructor in international credit for an executive summer program at Dartmouth College.

Mr. Beretz has given over 200 presentations and in-house training programs to Fortune 500 companies, associations and professional groups. He has been an expert witness, written articles for trade publications such as Business Credit and IOMA, quoted by news organizations (e.g., Bloomberg), is a member of the Advisory Editorial Board of IOMA's publication, Managing Credit, Receivables & Collections, edits books on financial management and authored a book for the American Management Association on credit management. In 2009, he was asked to contribute an article on "Essentials for Export Success" for QFinance, a 2,000-page book, published by Bloomsbury Press, UK.

In 2007, Paul was awarded a Certificate of Appreciation by the Under Secretary for International Trade of the U.S. Department of Commerce for his contributions to the “Trade Finance Guide,” a reference publication produced by the Commerce Department for U.S. exporters. More than 100,000 copies have been distributed (in print and via online)to the public. Mr. Beretz served as a member of the Advisory Committee of the Export-Import Bank of the U.S. for 2008-2009. Paul also received the "Credit Executive Award of 2008" from the California Business Credit Association.

Paul earned his BBA from the University of Notre Dame, an MBA from Golden Gate University and the Executive Award at the Graduate School of Credit and Financial Management held at Stanford University.

FCIB Panel: Dimensions of Country Risk

2006-11-16T15:59:00.000-08:00

At the annual global conference of the Association of Executives in Finance, Credit and International Business (FCIB) held in Coral Gables, Florida, November 12-14, a well-attended panel on "Fundamentals of Export Credit Management" provided a wealth of practical, hands-on advice for assessing global credit risks. The full schedule is here.

As a featured panelist I can provide you with more information. Contact me if interested.

Negotiation skills for credit managers

2006-09-30T16:10:00.000-07:00

Here are some slides from the NACM Western Region Credit Conference. The session was entitled, "Negotiation Skills: a Workshop for Credit Managers."

The International Obstacle Course

2005-12-22T13:28:00.000-08:00

The International Obstacle Course

By William Atkinson

Clearing the hurdles of credit and collections overseas requires training, excellent teamwork, and frequently a third-party’s helping hand.

International business represents a substantial portion of total business for a lot of companies. That can be a benefit or a drawback. On the one hand, business from varied markets can be good for a company’s growth. On the other hand, it can create an exposure to more risk than domestic credit and collections.

One significant challenge is managing country risk – changes in a nation’s economy or government, currency issues, and so on. “It is difficult to stay on top of all this,” explains Paul Beretz, founder and managing director of Pacific Business Solutions and a partner with Q2C, Clayton, Calif. “For example, you may have a customer who pays like clockwork every 30 days, but if something changes in his country, that can jeopardize those payments.”

Knowing the ins and outs of international credit and collections can significantly reduce risks. A couple of years ago, for example, Corning Cable Systems in Hickory, N.C., conducted quite a bit of business in South America, using a number of irrevocable letters of credit. While this is a common practice for many companies, Corning gained an edge in payment by using a discounting strategy.

“Even though we were granting extended terms because of the construction times on the projects, the availability of simple documentation and the discounting of the letters of credit allowed us to receive our funds well in advance of the due dates,” explains Thomas Brady, credit manager. The key was utilizing a network of banks throughout the U.S. that the company had established and focusing on those that would discount the letters of credit at favorable rates.

Another challenge with international credit and collections is that very little “generic” knowledge applies to all countries. Each area of the world is unique in many ways, so once the few “basics” have been mastered, gaining expertise in each country, region, or continent is the next step. Following are challenges for international trade in some key areas of the world.

China

According to Jason Probst, director, international business development for D&B Receivable Management Services, Bethlehem, Pa., until very recently the concept of credit history didn’t exist in China. “Most loans were given out based on favoritism or for other reasons, without any credit history, documentation, or financial due diligence,” he explains.

Banks are trying to establish histories to bring some order to the situation. Meanwhile, over the past three years the government has been selling millions of dollars of non-performing loans, or NPLs. Foreign investment firms, including many from the U.S., have been purchasing the portfolios at a discount. “One of these firms uses us to do their NPL collections,” Probst notes.

Corning’s Brady is also aware of the challenges that dealing with China presents. “More and more Chinese companies are requesting credit terms,” he points out. “The problem is often not having adequate information on which to base the credit decisions.”

Brady has found it difficult to get financial statements and other standard information from customers in China, information readily available from customers in the United States. “There really is no credit history available for most of these companies,” he continues.

Even if a firm feels comfortable with these companies and begins doing business with them, they can still run into payment problems. Brady cites a couple of examples: If a firm offers 30-day terms and provides next-day air shipment, the customer may pay in 60 to 90 days. If the firm offers 60-day terms and provides ocean carrier shipments, that customer may pay in 90 days. One reason, he says, is that the Chinese bureaucracy tends to add 30 or more days to the process for importation of goods, customs clearance, foreign exchange approvals, and so on.

To address these concerns, Corning may place Chinese customers on cash terms for small-dollar sales or letters of credit for large-dollar sales. Brady has found that most will accept these terms, because they want to do business with the company. “Even some large accounts – in excess of $100,000,” he says, “will come up with the cash.”

Europe

According to D&B’s Probst, many U.S. companies that begin selling to European companies are shocked when they try to start collecting. “One reason is that the procedures are different from country to country,” he explains. For example, while a dunning letter may be effective in the Nordic countries, it will be discarded in most of the southern countries. In Germany, letters are effective, but phone calls are not. In Italy, neither letters nor phone calls are effective. “In Italy,” he explains, “you need to show up face to face.”

In the late 1990s, European countries began to realize that late payments were a serious problem for the economy – costing numerous jobs and millions of dollars in interest and export loss. The European Commission attempted to implement late payment legislation to set out a clear path for companies to get paid on time. “It’s now four years later, and the legislation hasn’t done much,” says Probst. The reason: It hasn’t been accepted at the commercial level in the countries.

“In fact,” he adds, “payment delays continue to get worse.” In addition, the legal enforcement infrastructure designed to help companies collect actually impedes the collections process in most countries. (The Nordic countries are an exception.) “The European Commission,” he reports “is reviewing the legislation this year with an eye toward streamlining it to make it easier for companies to get paid.”

Mexico

Until recently, electronic invoicing (wire transfers) was not legal in Mexico. Even though it now is, it hasn’t made a lot of difference yet, according to Probst. The most common form of invoicing continues to be manual, face-to-face invoice presentation, most of which still requires original documentation. “Payment is even handled at specific hours,” he continues. “[Creditors] need to pick up checks between 3 p.m. and 5 p.m. on Fridays, or they won’t get paid.” Some large companies are becoming involved in electronic transfers but, according to Probst, it will be years before that becomes the most common form of transaction.

Canada

While other countries can be a problem, doing business with Canadian customers should be a cakewalk, right? Not really. “Most people don’t realize it, but there are some distinct differences between doing business in Canada and doing business in the U.S.,” Probst points out. There’s a significant difference between doing business in French-speaking Quebec, which has one code of law, and the rest of Canada, which is based on British common law. “For example,” he says, “when doing business with companies in Quebec, you must speak in French and document your invoices and contracts in French – unless you have written documentation from your customer that it’s OK to do so in English.”

And trying to collect from companies in the far-flung areas of Canada is no simple task. “Many of the courts,” he notes, “are very remote.”

International Strategies

To navigate through the confusing maze of international credit and collections issues, experts recommend three general strategies: education, internal teamwork and vigilance, and third-party assistance.

Education: “While there are some good education programs on international credit and collections, such as seminars about what’s going on in different parts of the world, widespread education is still lacking,” admits Pacific Business Solution’s Beretz. “In addition, it is difficult for credit people to get together and talk about international trends.”

One program Beretz recommends, both for the education offered and the opportunity to network, is a three-month online certificate offered by FCIB and Michigan State. (See “Cohort Training in Cyberspace” in the August 2004 issue of CCR.) “To date,” he reports, “over 300 people from around the world have taken it.”

D&B Receivable Management Services’ website (www.dbrms.com) offers a lot of information about the international credit and collections scene. In addition, D&B offers a free half-day international collections seminar. For information, contact Jason Probst at: probstj@dnb.com.

Internal Teamwork and Vigilance: “You need to be 100% accurate when dealing with other countries,” emphasizes Corning’s Brady. “Customers will take any opening to delay or withhold payment, and it’s difficult to resolve these when you’re 5,000 miles away and dealing with 12-hour differences in time zones.” He recommends having a good customer service department that doesn’t make mistakes.

He also recommends staying on top of information, especially country risk. One way to do this is to have a good sales force in place in each country where you do business. “They can help you get ahead of any problems before they develop,” he explains.

Pay attention to documentation. “One major difference between international and domestic credit is that the former requires significantly more amounts of documentation,” explains D&B’s Probst. “There are a variety of terms of sale, only one of which is the letter of credit.” In addition, there are more opportunities these days to transmit documents electronically, which can reduce inaccuracies and time delays.

Third-Party Assistance: It’s no shame to lack comprehensive international expertise on staff. In fact, most companies find it to their advantage to utilize a variety of third-party providers who specialize in various aspects of international credit and collections.

“Letters of credit have so many intricacies that it is easy to end up with discrepancies,” notes Beretz. “Few companies want to hire a specialist on staff to handle this responsibility. One alternative is to use third-party providers that specialize in handling letters of credit.”

Some large banks are also excellent sources of assistance. “A lot more banks these days, especially the big ‘money center’ banks, are getting into the business of managing international credit and collections activities for companies as part of their receivables management services,” states Jerry Topitzer, vice president-head of structured trade finance, for JPMorgan, New York. Such services include the creation of export documents as well as taking the receivables created from those documents and providing discounted financing.

Another relatively new service area in the international arena is the credit derivative, often called a credit default swap or CDS. “These can be used in hedging situations for large concentrations of risk in receivables portfolios,” explains Topitzer. For example, if a firm is doing business with a government in an emerging market and can get a ministry of finance guarantee on obligations arising out of the contracts, it can consider buying CDS contracts on that particular sovereign borrower. “In so doing, though,” Topitzer warns, “you need to make sure that you completely understand what the CDS contracts really cover.”

In sum, international credit and collections is a quagmire of confusion and challenges for most credit professionals. Still, because of the potential for increased business that international sales represent, credit professionals cannot afford to ignore it.

Still there’s no need to go it alone. Look for educational opportunities to learn as much as possible. Then, don’t be afraid to rely on third-party specialists to help hurdle the obstacles.

_____

Helping Hands

Every now and then we all need a little help from our friends. Here are some resources to help get over those international hurdles.

FCIB (Finance, Credit and International Business)

An association of executives in finance, credit, and international business. For information on FCIB and its on-line international credit management program with Michigan State University, visit the association’s website: www.fcibglobal.com.

D&B Receivable Management Services

For information on D&B’s international credit and collections seminars, contact:

Jason Probst, Director, International Business Development, via phone: 484-242-7494 or e-mail: probstj@dnb.com

Coface

An international credit services company that provides credit insurance, debt recovery, credit risk information, receivables management, factoring, and receivables securitization. For information on Coface’s Country Risk Conference and its Country Risk Guide, containing macroeconomic and sector information on more than 140 countries, visit the Events section on www.coface.com. For information on Coface’s Country Ratings, visit www.cofacerating.com.

International Association of Commercial Collectors

For help in locating members that are based in and/or provide collections services in foreign countries, check out IACC’s online directory, which you can search by country, at www.commercialcollector.com.

Stop, Look and Listen! : Expert Advice on Doing Business in the Pac Rim

2000-09-22T14:20:00.000-07:00

Stop, Look and Listen! : Expert Advice on Doing Business in the Pac Rim
By Paul Beretz

(Reprinted with permission from IOMA's Report on Managing International Credit and Collections, September 2000 issue).

Understanding cultural nuances can be the difference between success and failure when dealing with customers in other countries. Most international credit executives are well aware of this fact and strive to avoid the obvious land mines. Yet, even the most seasoned international credit professional occasionally stumbles, especially when transacting business in the Pacific Rim, where business attitudes and behaviors are quite different than what most U.S. managers are accustomed to. MICC recently spoke with veteran credit professional and experienced traveler, Paul Beretz, about how international credit professionals could avoid cultural blunders when traveling to the Pacific Rim.

Observation

"In the Pacific Rim business environment," says Beretz, a managing director of Pacific Business Solutions, "the observant credit manager will remember the sign they may have seen at railroad crossings: "Stop, Look, and Listen!" He warns that this includes not only dealing with customers offshore, but also with a company's own "internal" customer, the branch office in the overseas country.

The international credit professional must be aware of many subtleties. To be successful in the Pacific Rim countries, the international credit professional will study behavior, learn about verbal and nonverbal differences that exist, and probably use a "go-between" (a shokaijo in Japan) to help develop the desired relationship. "The credit manager should understand how important the go-between is in the Pac Rim country," warns Beretz. That person may be the seller's country manager, a banker, accountant, or individual in a key position in the country who understands how to help achieve the objective.

Will credit managers understand that an immediate decision-in the expected, American way-may not be forthcoming in a Pacific Rim culture? Open conflict and public emotional displays are also counter to the culture that they are dealing with.

Trust

In the United States, trust is rarely an issue when conducting business. In the Pacific Rim, trust is extremely important and those who ignore it do so at the peril of their business. Trust takes time to build, adding to the frustration many feel when doing business in the Pacific Rim. (The same frustrations apply to Latin America.)

"In the Pac Rim," says Beretz, "cultures depend on trust, or the 'oil of life' as defined in Japan, known as amae." He warns that in any relationship in this region, a feeling of complete trust and confidence must exist, not only so that the other party will not take advantage of him but also so that he count on the indulgence of the other. Most American international credit executives are accustomed to some-thing quite different from this.

Those deemed most qualified for leadership positions in this region are perceived as being dependent on those people beneath them. "This is the purest form of an egoless relationship, which contrasts with the need to repress trust that Western societies foster," he says.

Listening is not easy for many Americans. Interrupting is second nature for some. Beretz says it is undoubtedly the origin for the Japanese saying "hollow drums make the most noise." One of the hardest concepts for Americans to understand is that many in the Pacific Rim will consider a matter for a while before answering. Long pauses tend to make Americans feel that they have to jump in and fill the void. Don't. Let your customer take time to think before answering. Having the international credit executive also think before answering is not a bad idea, especially since the silence will not put off your Pacific Rim host.

Examples of How Observation Can Work

Japan. In Japan, the concept of wa, meaning peace and harmony, is the basis for a working relationship. The highest priority is placed on wa. The Japanese person with closed eyes sitting opposite the credit manager is not necessarily being rude-he may be working towards inner harmony. "Speech is silver, silence is golden."

Korea. In Korea, the priorities are family, respect for authority, formality, and class. Koreans are aggressive, hardworking, friendly, and hospitable. A driving force in Korean relationships (and significant in all Pacific Rim countries to a degree) is "saving face." If no one points out any errors to the people responsible, the person might assume that no errors exist, so no "face" is lost.

In addition, the following provides advice to international credit executives on using an interpreter and on some of the more common mistakes westerners make when doing business in the Pacific Rim. The international credit executive who is aware of the cultural nuances is in the best position to succeed when transacting business in the Pacific Rim. Those who follow Beretz's guidance will have taken the first step on the road to that victory. Those who ignore it do so at their own peril.

How to Negotiate When Using an Interpreter

While English has truly become the international language, in the Pacific Rim, top executives have not mastered (or didn't care to master) it. In these cases, using an interpreter can help. However, the following caveats should be considered:

The presenter (the credit manager visiting his customer, for example, needs to find his or her own interpreter, probably through a go-between in the country.

A written text of the presentation (or at least, the gist of the notes for the meeting) needs to be given to the interpreter.

The English speaker should speak slowly around a single topic, avoid slang and puns, and only use metaphors and analogies with care. For example, would the speaker expect an interpreter to translate "what's good for the goose, is good for the gander" into an Asian language?

Charts and visuals should be used whenever possible.

Monitor facial and nonverbal expressions, and talk to the person, not the interpreter.

Common Mistakes Westerners Make When Doing Business in the Pacific Rim

A little humility. Those who travel from the United States to Asian nations in particular need to stop promoting the United States. ("That may be the way you write a contract here in China, but that's not the way we do it in the United States" or "Can't I find American food anywhere around this place?") These Americans are visiting their host, not the other way around.

Idioms. Why are we not more conscious of the use of idioms? Idiomatic phrases are extremely difficult for non-U.S. people to understand. Just think how a customer sitting across the table in countries such as China, Japan, South Korea, Vietnam, or Taiwan may react when phrases such as "better late than never," "in the long run," "put it on the back burner," "get the ball rolling," "get to first base," "quick on the trigger," and "beat around the bush" are used.

Business cards etiquette. Does the westerner stop to appreciate the significance of the "name" (business) card in Pac Rim countries? The high number of visitors to Asian nations who do not have the native language printed on business cards (especially if one does extensive, repeat business in Japan or China, for example) is amazing. The card is presented with both hands, with a slight bow or ojigi ("oh-jee-ghee" in Japanese). The name of the other person's company is looked at closely, and the cards are not written on or put away during the meeting. An insult tendered at the beginning of the meeting-even an unintentional slight-can destroy the chance for any successful outcome.

Group consensus. Japan's cultural roots have a strong middle management that has deep working relationships and seniority in rank. Japanese managers look after subordinates. Management is participative, problems are solved by consensus, and there is no open expression of conflict. A humble attitude by public figures especially is still considered an essential virtue. Westerners should realize that apologies in this culture may be real as well as "pretended" in the same way that Americans brag about their imagined skills. The purpose of the Japanese apology is to avoid ill will, friction, and anything else that may be seen as wrong.

International Skills: Don't Leave Home Without Them

2000-09-22T13:36:00.000-07:00

International Skills: Don't Leave Home Without Them

By Sherry Schlossnagle

(Reprinted from the September 2000 issue of Business Credit magazine with permission of NACM.).

I asked Beretz to comment on the current changes occurring in the international credit industry.

"The key word here is consolidation -- both international and in North America," he replied thoughtfully. "More and more credit jobs are being consolidated. As a result, the role of the international credit manager is not only becoming more decentralized with those managers outside the country reporting back to the chief credit manager, but it is also evolving more into the role of a risk manager that may include insurance and cash management along with the credit function."

Beretz believes that it is imperative for all credit managers to begin to develop international skills. In light of this necessity, he emphasized the value of participating in FCIB. "FCIB can play a very important and pivotal role in the development of the international credit professional's career. It not only attunes the credit manager to an awareness of international business; it also provides tools, and educational and networking opportunities."

If you have not had the opportunity to read Beretz's publication, "How to Prepare for a Systems Application Installation or Upgrade," or his "Country Profiles" on how to handle credit and collections issues in South Korea and Singapore, then put them at the top of your To Do list. Not only do these articles offer a wealth of valuable information to professionals in the credit management field, they are also thought provoking and extremely well written. You can find them, as I did, on his website www.pacbizsolutions.com.

As a member of the Advisory Council, Beretz discussed some of the challenges that FCIB faces at this time. "Our primary focus should be how we recruit and retain our membership. FCIB is in the process of investigating a variety of new products that will address the needs of global clients. It is also discussing the development of new educational projects, as well as how to revitalize the existing ones. The issue of `time commitment' of members is another very important consideration -- more important even than cost, I think. We must be very accurate in targeting those products and services to meet membership needs since professionals are becoming more selective in attending meetings and participating in programs.

The second challenge we face has to do with the issue of `global awareness.' As businesses continue to expand globally, it is critical to their success that they understand what their international customers need and how to conduct business in the customer's own environment. FCIB can play a role in assisting members who want to achieve an expanded level of awareness.

The third challenge is the continued development of the Internet application to link members to more new products and services, as well as to facilitate and enhance the online communication process. It is important that FCIB continues to update its Internet applications and solutions and expands its web site to meet membership needs."

Regarding the value of the FCIB Certified International Credit Executive (CICE) designation, Beretz believes the new professional designation has provided an excellent vehicle to recognize and reemphasize that international credit management is a very specialized area of knowledge critical to business. "The CICE not only adds to the professional's credibility within the company and the industry, it is respected in other cultures as well."

Beretz began participating in FCIB in 1983 while he was working for the forest products industry. He has continued his FCIB membership in the semi-conductor and telecommunications industries in the `90s. "I knew next to nothing about international credit management when I first started out, so I went to FCIB for help. Of the many benefits available through FCIB, the two I value most are the networking and the educational opportunities. The professional network that I have developed through my participation in FCIB over the past 17 years is invaluable. I can call any number of people at any time and say that I have a client doing business in, let's say, Ethiopia and ask them about the credit situation there. These resources have the most current and accurate information available." Beretz was also quick to note that he utilizes the FCIB Country and Customer reports that are unique to the industry and provide very specialized information.

"I try to attend as many FCIB-sponsored regional and global meetings as I can. There is a tremendous amount of knowledge and wisdom shared at these meetings. Being privy to this very specialized information makes me more globally aware than I could possibly be otherwise. If international credit managers intend to operate successfully within a country, it is imperative that they be aware of and sensitive to the differences in cultures and customs."

As Managing Director of Pacific Business Solutions -- a consulting firm that evaluates and creates opportunities to improve cash flow for global manufacturing, distribution and service companies -- Beretz has successfully capitalized on more than 30 years of business experience.

For start-up to middle market sized companies, he has initiated tactical and strategic processes, guided management to evaluate the market place and competition, established personnel performance measures and utilized budgeting and forecasting tools. For middle market and larger companies, he has formulated "best practice" strategies, reorganized departments, and re-defined and authored "desk procedures" for worldwide operations. On the international level he has provided guidance to several multi-billion dollar companies in the recognition of economic, country, and cultural issues fundamental to selling products and services internationally, particularly in Pacific Rim countries.

Beretz received his BBA from the University of Notre Dame and an MBA from Golden Gate University. He has been an adjunct faculty member at the University of California, Berkeley and currently is an instructor in management and finance for St. Mary's College, Moraga, CA and the University of Phoenix. In addition, he speaks frequently covering a wide range of topics from cash flow management techniques to customs and practices in international business. He has written articles for trade magazines such as IOMA's Report on Managing International Credit and Collections and NACM's Business Credit, authored a book for the American Management Association and edited books on financial management.

I remarked that a business background such as his own was probably one of the major criteria for hiring someone to work in the credit profession. "On the contrary," Beretz replied, "I place great value on a strong liberal arts education. It is becoming increasingly more important for credit professionals to have well-developed verbal and writing skills, as well as an acquaintance, if not a familiarity, with other philosophies and cultures. A good liberal arts education should provide all of these. I can educate bright employees on the technical side of the business, but I can't teach them to be articulate or good writers or make them critical thinkers. If I can have both, then I have the best of both worlds."

Regarding his greatest professional challenges, "Two immediately come to mind," he replied. "First is the constant `selling' of credit within the organization to make certain that it is understood. The astute credit manager will always keep going back to ensure that upper management understands what the credit manager is doing with the receivables. You can't take that understanding for granted. It is an ongoing challenge to keep the appropriate people educated.

The second challenge deals with the issue of isolation. Credit people are often very alone because the company in general doesn't really understand what they do. There is this `shroud of mystery' surrounding the credit operation. To address this isolation problem, management should support credit managers in their desire to join professional associations where they can network, share problems and discuss common issues. FCIB, of course, is the perfect example of an association that offers such networking and education opportunities for credit professionals."

Over the years Beretz has been a speaker at numerous FCIB and NACM conferences and meetings. He will be leading a panel on International Credit Scoring at the FCIB Global Meeting in New York City in November 2000.

Sherry Schlossnagle is a freelance writer based in Laurel, MD.

Singapore: Singapura - the "Lion" City

2000-07-22T15:26:00.000-07:00

Singapore: Singapura - the "Lion" City

By Paul Beretz

(Reprinted with permission from IOMA's Report on Managing International Credit and Colections, July 2000 issue. Prepared by Paul Beretz, Editorial Advisory Board Member of IOMA'a Managing International Credit and Collections publication).

Have you ever landed at an airport - either in the United States or overseas - where your subsequent ride by bus, limo, taxi, or private auto to the downtown business area did not pass through slums or derelict factories with "for lease" signs? Probably not very many. Well, welcome to Singapore! At this airport, with suitcase in hand, climb into a clean, an air-conditioned cab that will take you to the downtown area of Singapore on well-paved roads lined with orchids! Yes, orchids, the national flower!

One of the more "western" cities in Asia (a fact which some North Americans may like or not like), Singapore is the "end-up" place before traveling home that I recommend to the harried business traveler who is trying to squeeze too many Asian cities into too few days, attempting to script the Pac Rim version of "If This Is Tuesday, It Must Be Belgium." I suggest that the final leg of an "Asian swing" be Singapore. The food, culture, and signage (in English!) is very western and late-night activities - for both men and women - end safely with a 4 a.m. walk back to the hotel!

Singapore is an island about the size of Chicago, 244 square miles, located off the southern tip of the Malaysian Peninsula. It's a beautiful place: nature preserves on the central plateau are home to 139 species of birds, small forest animals, trees, and more than 700 pant specifies. Men, don't bring your sports jacket, and ties are often not worn. You will wear short-sleeve shirts, as temperatures range between 78o F and 82o F all year round. Women, you will be treated with more dignity than in many other Asian locales.

The Economy

Singapore, although the smallest country in South East Asia, has a prosperous entrepreneurial economy. In the 1980s and 1990s, economic growth averaged more than 8%, and Singapore even appeared to escape the Asian economic crisis of 1997, with the nation experiencing 7.8% growth. By the end of 1998, however, recession had taken hold, and unemployment doubled to 4.5%.

Most of the trade in Singapore involves receiving exports from other countries and re-exporting them. Petroleum is the largest industrial activity, but the city/state republic has become an import financial and manufacturing center. The key semiconductor industry should remain strong, as Asian demand for wireless telecommunications and office machine equipment is heavy. New orders for electronics from the United States reflect the demand for these products, with industrial production growing of 15% over a year ago.

The "official" economic growth for this year should hit 6.5%, according to the minister of trade and industry, Khaw Boon Wan. While there may be a slight slowdown in the second half of the year, the overall growth in the electronics and chemical sector should continue at a consistent growth of 7% for the balance of 2000.

Currency

Since the Singapore economy is so reliant on trade, government officials carefully monitor the exchange rate of Singapore dollars to maximize the competitiveness of exports in world markets while guarding against the threat of imported inflation. A weaker dollar increases the competitiveness of exports because it makes them cheaper overseas. However, it also makes the cost of imported goods more expensive, which is potentially inflationary.

Fortunately, price pressures have been relatively tame in Singapore so that the Monetary Authority of Singapore (MAS), the country's central bank, has been content to keep the currency weak while the local economy got out of the 1997 Asian financial crisis. In April, the Sing dollar had risen sharply, raising speculation that the MAS may be moving toward a tighter monetary policy to hold back inflation.

"Let My People Go!"

During the first quarter of 2000, Singapore Telecommunication lost opportunities when British-owned Cable and Wireless walked away. Ditto two Malaysian companies, Binariang and Celcom. Rupert Murdoch's News Corp has cancelled plans to create alliances because the companies in question were not publicly held. Currently the government holds $50 billion worth of stock - one quarter of the Singapore market - from wafer fabs to shipping lines to banks. Unless the state gets out of business, it will not achieve the knowledge-based economy it seeks. While the government has recently removed limits on foreign equity investment in sectors dominated by state-controlled companies (banking, telecom, and transportation), it continues to own interest in companies that run subways, seaports, and power stations.

Credit

Recent surveys from companies based in the United States show over 75% are selling on open-account terms, usually from 45 to 90 days. Letters of credit are not uncommon, but competition for exports from outside Singapore may make obtaining security on credit transactions difficult for the company selling to Singapore. Singapore is very English-language friendly and, in the Pac Rim area, presents a rare opportunity for the United States. Credit managers telephone their customer to resolve payment issues (if one doesn't mind making telephone calls late at night from U.S. time zones, here's a hint: Always send an e-mail to your customer first, outlining the issues and asking for confirmation about a time to place the telephone call).

Joint ventures, while sometimes made difficult by the government, exist in enough Singapore markets so that prepared financial statements that Big Six accounting firm audit and that the West is familiar with are available (with figures usually denominated in Sing dollars). Credit insurance cover is available though the normal U.S. agencies and channels.

Living and Customs

Singaporeans consider their nation to be unique because they hold to traditional Asian values of a strong work ethic and, consequently, they have a reputation as one of the world's best work forces. Those who have been in the credit profession have heard of the "C's of Credit" - character, capital, capacity, and conditions - that are usually considered when assessing risk probabilities. In Singapore, look to the "C's" as personal lifelong goals of the new generation of Singapore citizens: career, condominium, car, cash, and credit card.

This includes the value placed on education, obtaining homes that are nicer than government built "flats" or apartments, cars (very expensive), and cash or credit cards to validate the level of consumption important to upwardly mobile people of the country.

Greeting customs vary. Singapore is a city with Malay, Chinese, Tamil, and English as official languages, and greetings match the diversity. Chinese people shake hands, with a slight bow. Malays greet with the salaam, where two people bring right palms together, as if to shake hands, then slide them apart and touch his or her heart. Indians join their palms together in a prayer position and say Vanakkam (Tamil for hello).

Country Profile: Handling Credit and Collection Issues When Exporting to South Korea

2000-02-22T15:28:00.000-08:00

Country Profile: Handling Credit and Collection Issues When Exporting to South Korea

By Paul Beretz

(Reprinted with permission from IOMA's Report on Managing International Credit and Collections, February 2000 issue. Prepared by Paul Beretz, Editorial Advisory Board Member of IOMA'a "Managing International Credit and Collections publication.)

Rebound, what a rebound! And for you basketball fans, we are talking about key indicators in South Korea, which will show considerable improvement over this New Year from the decline that began in late 1997. But, as in basketball, never think the game is over until the final horn sounds. Two years after South Korea went to the IMF and received $58 billion, President Kim Dae-jung declared last November that South Korea had overcome the Asian currency crisis. His rationale:

The economy should grow 9% this year compared to a 5.8% contraction in 1998.
Inflation is expected to be less than 2% for the year.
Unemployment is down to 4.8% from almost 9% after over 22,000 companies failed in 1998.

However, credit managers are aware that the chaebols (conglomerates) still control many un-profitable businesses, although they have promised to restructure by the end of 2000. Direct for-eign investment in South Korea hit a record high in 1999, helping to push country year-end for-eign reserves to a high level.

Credit

Customer and bank risks will continue, which should require close analysis for finance managers. Many credit managers indicate continuing issues with the South Korean banking system. Careful credit analysis is essential (only accept certified financial reports), and while credit rating agencies have upgraded Korean sovereign debt to investment grade, LCs generally are still appropriate. Should the LCs be confirmed? Take my advice and ask your U.S. bank if it confirms LCs to South Korea-if the answer is yes, then don't confirm your LC (but certainly insist that it be irrevocable).

Open account is suggested only when a strong distributor relationship exists with the South Korean customer, where you know company management and have access to regular operating results. There are banks that will buy discounted paper for open-account sales. Those companies selling only on LC, however, would be wise to stay close to both their customer and the coun-try's economic situation, as competition will undoubtedly heat up. This normally puts pressure on the credit manager to look at open account in order to maintain the company's market share.

Credit Insurance

Ex-Im Bank is offering cover for private and public sector buyers (http://www.exim.gov/).

Always Be Aware of Your Neighbors!

For most of the 1990s, many economists and officials in the United States and South Korea were predicting that North Korea would "implode" from a decade of economic disasters. How-ever, the once-slipping North Korean economy has shown a remarkable turnaround-a strength-ening military, support from China, and the possibility of improved relations with both the United States and Japan. North Korea has seen five years of floods end, which had impacted food and fuel availability.

The concept of reunification with South Korea may be shelved as the potential for increasing hostilities could detract from the economic recovery that is taking place in South Korea. South Korea has reopened an operational plan known as "5027," which calls for a counterattack if North Korea were to take serious military action. Those interested in a further analysis of the history, economics, politics, culture and-according to the author-demise of North Korea, can read The End of North Korea, by Nicholas Eberstadt (AEI Press).

Culture and Courtesies

In Korea, priorities are family, respect for authority, formality, class, and rank. Koreans can be aggressive, hardworking, friendly, and hospitable. In social settings, always remember to pour the drink of your Korean host (whether the person is from your local Korean office or a cus-tomer). Koreans will negotiate with Americans from a position of strength. Compared to the Japanese, they have a negotiating style that seems more straightforward to Americans.

Koreans respect status: In Seoul, hire a chauffeur and emphasize your link with Fortune 500 companies. A bow is the traditional greeting, usually accompanied by a handshake between men. Professionals meeting for the first time exchange business cards, presenting and accepting the card with both hands. A common greeting is Annyong haseyo? (Are you at peace?).

The Future

Looking briefly at three major South Korean industries should give the international credit manager some idea of what may unfold in 2000.

Automotive. Prior to the Asian financial crisis, the Korean auto market was closed to out-side investors. Western automobile manufacturers now indicate Asia will account for the bulk of the auto industry growth-Korea is very attractive, especially due to a local, low-cost manufac-turing labor base for exporting to the rest of Asia, Europe, and North America. A large debt-$5 billion-continues to be owed by Samsung Motors to over 10,000 vendors. (In mid99, Samsung Group's automobile company became a political challenge that could have hurt President Kim's economic reforms since they could have added to the loss of jobs.) The Daewoo Group is at-tempting a restructuring of debt to foreign creditors at the beginning of 2000 and recently has been courting interested automobile manufacturers from the United States and Europe.

Semiconductors. The industry is now beginning to show turnaround with the rest of Asia semiconductor manufacturers. However, the NASDAQ slide during the first week of 2000, fueled by high-tech stock swings, bears watching as European and American companies consider investment in new and existing facilities of Korean semiconductor manufacturers. The NASDAQ is a good indication for South Korean markets, as the Korean composite index often follows its ups and downs. Overall business from North American semiconductor suppliers selling to South Korea is up 25% to 40% over last year.

Telecom-Internet. The worldwide growth and competitive aspect of the Internet during 1999 will provide opportunities in South Korea for partnerships, mergers, and acquisitions in 2000. In January of this year, South Korea's Hanaro Telecom signed a $100 million contract with Hewlett-Packard in project finance for Internet data.

Useful Web Sites

http://www.koreaemb.org/
http://www.tradeport.org/ts/countries/skorea/
http://www.chosun.com/
http://www.pacbizsolutions.com/

Useful Numbers

American Chamber of Commerce in Seoul: 82-2-752-3061
Consulate at Pusan: 82-51-246-7791
Embassy of the Republic of Korea in Washington, DC: 202-939-5600
FCIB: 410-423-1840
Pacific Business Solutions: 925-672-2644

How to Prepare for a Systems Application Installation or Upgrade

2000-01-22T15:41:00.000-08:00

How to Prepare for a Systems Application Installation or Upgrade

By Paul Beretz

(This article was reprinted by permission of Business Credit, a publication of NACM, and appears in the January 2000 issue of Business Credit magazine).

Have you found yourself in the position of being advised that your company is either installing or upgrading an ERP (Enterprise Resource Planning) application from a company such as SAP, Oracle, PeopleSoft, Baan, or JD Edwards? All of a sudden, you meet IT people from your company that you never saw before; consultants contact you and want to set up appointments; steering committee and action-group meetings are created to add to your already impossible meeting schedule: all the while, you are supposed to be managing your business and keeping staffing levels under control!

What are the various ways to manage the impact of the install or upgrade project in your department? How do you get your staff to maximize the features of the tool that is supposed to solve all your business process problems? How can you anticipate customizing issues that you may have to face? How do you keep your sanity? Most importantly, what are the post-install and upgrade solutions to issues that will maximize your opportunity for success?

Whether an Install or Upgrade, It Will Be a Long Trip

It would be a perfect world if you had the people with the combined qualities of both understanding your business processes and experience in all facets of an ERP cycle. What's clearly evident in any installation or upgrade is that there is never the proper level of resource allocation or a clear identification of business requirements or comprehensive training programs that exist. Just as important, the best people in the department will be called upon to lead and be involved in the project.

Time management of the regular workload becomes critical - not just to achieve the business performance expectations, but to acknowledge the stress and morale problems that the ERP event creates. Experience shows that ERP, whether a first time installation or an upgrade to an existing system, is a time commitment of one year or more.

Additionally, without the confirmed buy-in and support from senior management, the project has little chance of being entirely successful. Throughout the entire project, remember that ERP is not just "new software", it will change the way business is executed!

Who actually owns the ERP project? It should not be the IT (or IS) department. While they are critical to the success, it is the business unit who needs owners or "champions". The magnitude and weight of the daily work activity that must continue while the ERP is underway usually suggests the need for a clear definition by phases of the project. Rather than trying a "Big Bang" approach (where the entire ERP and its applicable modules are scheduled for the same time delivery schedule), the total strategy should be scoped, with time lines, milestones, team structure and identified final deliverables. The Wall Street Journal carried a number of front-page stories during the past year related to the problems associated with trying to implement and execute completion of the entire order through delivery, finance and manufacturing cycle on the same date.

Establish an employee reward system that will be presented on completion of the project. It should be consistent with all departments - cash, stock and similar recognition. The awards should be given selectively to those who have gone "above and beyond" during the project phases.

What about your time commitment? Even if you are the director or manager of the department, plan to allocate 20 to 33 percent of your total time to the project. Do not make the mistake of delegating the leadership, for example, to a manager in finance who agrees to lead the A/R, A/R GL process - you will need to be pro-active as the manager of your specific discipline. Without an early, hands-on approach, you will not be equipped to recognize and understand the areas that break down or that require direction. At the onset of an initial ERP installation, I had worked long and hard with my staff to define what we needed for the proper accounts receivable aging report. However, I later learned that I did not get specific enough with the consultants and IT group. The result for the first six months following the installation was an aging that did not properly reflect cash or credits and brought unwanted attention to our group. In the early stages of the project, the manager needs to understand and document the business needs of the organization, emphasizing its strengths and weaknesses, both functional and informational. By working with the IT organization, project plans with specific design and implementation schedules should be agreed upon.

Building The Team And Planning Effective Communications

How do you select the right people? I have always sought out the busiest. These are the same people who will say "but I already have too many priorities!" You should be able to determine who they are in your own organization. What about those who will be assigned from IT or the major players in the other organizations that will interact with your function? Too often, the VP, director or manager initially gets involved but delegates to those who are not decision makers or to those who don't have the level of dedication to liaise with your own group. The ERP process will transform your business and people's careers. This is inclusive of how orders are taken, how invoices are generated, how collections are accomplished and what people want to do in the company after the project is completed.

Effective organization of the project means the team has to be identified by major stakeholders (e.g., business and IT project leaders, and one leader in each discipline finance, manufacturing, sales) with functional leads within each specific discipline. At this stage, specific resources - people who are technical experts - need to be identified and assigned roles in the project. The IT organization may have the right people in place, but it is more likely that outside contractor consultants will be hired to work with IT and the functional groups. I made it a requirement that my organization had input in the selection criteria of the consultants. I personally participated in interviewing prospective consultants to gauge their fit with my organization. As the team is developed, so are the communication vehicles, frequency of meetings, published minutes and most importantly, conveyed project status to management. As with the rest of our daily business activities, senior management wants no surprises whether they be in cost overruns or unanticipated resource needs. They will want specific dates for project phases, milestones and a clear understanding of the steps that lead to final implementation of the ERP.

Be sure to maintain an attitude of "over-communicating" to senior management so you can eliminate the uncomfortable need to explain unexpected events that will require their approval of more people and additional training dollars. By effectively communicating with your own group, IT and those organizations that impact your process will you have a chance to succeed. A well-planned initial "kick-off" meeting sets the proper tone. Responsibilities and roles are defined, cross functional issues are addressed, the lobbying for availability of a "war room" or separate testing facility begins and various reporting templates and forms for tracking issues are developed.

In addition, director-level team meetings, super-user meetings, and functional and track lead meetings are defined. Questions need answers. When will the cutover occur from the legacy system to the "new" system? What about date for completion on the business impact of the time of month or quarter? Consider rescheduling vacations and advising the staff of required weekend commitments, particularly in the testing phase. Always remember the regular production of current business information will be impacted. What about the effect on your overseas offices? Even if the project is in North America, don't ignore the off-shore locations and bring them in at the end, especially if a world-wide ERP approach is in the cards at some future date.

Customizing Reports

You probably have customized reports in your system, whether you are already on ERP and upgrading or moving into the world of SAP, ORACLE, or PeopleSoft for the first time. How do you convert the reports that you "need" to run the business? Do you replicate everything or trash what you have because you believe that ERP will solve your problems? Most experienced implementers of systems recommend that you establish a list of all your customized reports and categorize them as "critical, need to have and don't know." Evaluate and question your staff on the content. Test the reports you currently utilize and don't assume that customization will be available in the upgrade or install, or that it is cheap. This is a great opportunity to develop reporting improvements by combining and eliminating reports. This also means employing the management concept that avoids accepting responses such as "we've always had this report". This is one of those times you're paid to be a manager - don't leave it to an individual or departmental vote to determine which reports stay or go. Use your judgment based on asking questions about the output and actual need for the report. Democratic principles do not always work in the world of effective management!

Testing, Testing and More Testing

Experts say that testing is probably the key to the outcome of a successful project. At the beginning, it may be difficult to get your IT group and your department together on defining the needs. Often, the tendency is for the business unit to abrogate responsibility and, by default, IT provides facets of the testing criteria. Do you want IT to determine that because a screen looks the same as before that it hasn't changed?

Management support, at all levels is critical for the commitment to testing. The manager also has to be aware of the daily work requirements that will prevent a user from moving to the training room for the scheduled testing. An "Issues Tracking Logo" becomes a critical tool to determine how successful the testing process works. This report, which usually is developed with guidance of the IT group, indicates the status of each issue identified in the testing process, and can be traced by date, action and when it is closed.

Cathy Cakebread, a consultant who founded Agate Systems in San Mateo, CA, has an excellent approach to testing. She was a key developer in the original A/R module with Oracle more than a decade ago. She stresses two levels of testing in any ERP system: "Break It" and "Simulated Close". "Break It" has two aspects, to confirm that the product works as expected and to try out the new features and ways of doing things in an uncontrolled environment. This means running every report, scenario and process until they work. This is where all interfaces should be tried.

All multi-step processes can be tested along with defining what a successful test is. The "Simulated Close" tests everything in a controlled setting replicating period end and validating reports and system interfaces while looking for glitches. The simulated close usually starts after you have identified and resolved all the bugs in the "Break It" test. It's also an opportunity to determine the major basic reports you need to run your business. It is usually recommended to keep three to five in number. These reports will contain balance and transaction data so that the accuracy of the detail can be measured. Copy all the details and run the reports against the upgraded data. Compare results - they should be identical!

Report the Bugs

"Bugs" are those programming glitches that create user problems within the application. Often the manufacturer will catch the bug and issue a patch until a "new, improved" version is worked on. However, the user will recognize the bug and note the transactions and interfaces causing problems. Usually an astute IT organization will have a form available to log the problem. I've always been an advocate of assigning specific "exterminators" who are responsible to both log and track bugs in each business group. Once trained, the "exterminator" can log what, where and the situation or event that occurred when the bug was discovered. This process includes use of screen shots and examples of the problem. The IT organization should get a list of patches available from the ERP provider and check the known bugs and related patches, using the patches in a test environment only. As the business user, don't ignore the bugs. They can create major production problems unless detected and reported early in the testing process.

Training

Start training early in the ERP process and understand that training needs to continue beyond the life of the ERP project. An effective ERP training program means dollar commitments as well as time and facility availability. All users, regardless of job level, need to schedule training time. Ideally, a "war room" has been previously designated with posted schedules. The time slots include access to specialists and consultants who know the program. Training in the branch offices can take on interesting dimensions.

Once, during an ERP installation in a company's Asia Pacific office, it was discovered early in the process that despite the availability of personal computers on each desk, 50 percent of the staff did not have a basic understanding of the system - including how to turn the unit on. Needless to say, this put a severe crimp in the training plan! Consider creating your own training manual. This should encompass a write-up of the "big picture" so current and new users understand the scope of the project in addition to specifics about what screens are used in the department. Description of the modules that are to be implemented, with a list of in-house personnel support and consultants, should be shown.

An effective training program is future-oriented as well. It anticipates additional upgrades and enhancements that will undoubtedly take place. This means that the manager has to commit resources to ensure his or her staff makes adequate time for training throughout the year, even after an installation or upgrade is completed.

Are You Ready to Sign-off on The Project?

If you've ever wanted to feel like an NFL quarterback at a pressure-point in a football game, your opportunity will arrive along with the sign-off date. You are requested to acknowledge that everything works to your satisfaction in the ERP process.

Who do you trust? Have you completed enough testing and was it thorough? Has everyone been trained to your satisfaction? Have the other groups who impact your operation done their job so that the information and transaction flow will give you the data expected to run a better business? A final functional review of the components in your area is always appropriate prior to signing off. Make sure people are scheduled to begin the install or upgrade. Do not change variables. Use the same parameters that were used in the testing process. Compare results and don't forget to run back-up reports.

Most importantly, celebrate! Plan an all-hands dinner, distribute t-shirts and meet with the other directors to determine how much, in the way of financial rewards, should be distributed. Publicize on the company Intranet. Get senior management involved and let them cook at a barbecue for the employees.

Life After the Installation or Upgrade of an ERP System

An enterprise re-source plan is just that, a plan. It is not so much a project, because it is never really finished. It's a true journey, with constant change inclusive of upgrades, testing and people.

People will often want new assignments - returning to the "old" world of entering orders or calling customers for money may not be enough. Headhunters thrive in the post-world of ERP. Managers must prepare for the fact that they will likely lose people unless they keep them challenged. Many companies establish permanent ERP teams who assist in the process when acquisitions or overseas locations are at the stage of an install or upgrade. A national consulting firm recently said that companies should be ready for a drop in performance after an ERP project goes live. Their survey indicated one in four companies, 25 percent, could document a decline in individual and company performance. Why? Because everything is different now. What can be done to deal with the change in performance and to ensure that the company remains up to date in maximizing attributes of the system? Most of the ERP user companies belong to "User Groups". Unfortunately, they tend to be driven by and directed toward technical folks. While the meetings deal with specific topics such as accounts receivable, the actual users who face the screen everyday, are poised to enter orders, collect money, schedule manufacturing and shipping. They have little or no exposure to these organizations.

In Northern California, I've had success in spearheading the formation of a Special Interest Group (SIG), specific to Oracle_the Bay Area Oracle Receivable User Group. By coordinating administration with the local Credit Managers Association, quarterly meetings are held, with the agenda determined by a volunteer steering committee composed of other local Oracle users. A key to success of the group is to locate a consultant willing to participate and who is knowledgeable of the modules.

Additionally, the vendor in this case also happens to be located in Northern California, which has resulted in participation by the ERP supplier. We have invited their developers and experts in the order through collect modules to participate in the meetings. There's nothing like networking and sharing ideas with a group of companies who work with the same ERP tool. We've held six meetings since 1998, with as many as 98 people from 40 companies in attendance. Participants include credit and receivable managers, order administrators, general ledger and IT experts. When someone says "I can't write notes on my screen for collection follow-up" and a user from a different company explains in 30 seconds how that activity works, the value of the organization is more than validated.

Topics have included how to use the various screens, reporting, forecasting, bolt-on reporting tools, e-commerce, cash application, credit tools, invoicing and billing. In general, the goal is to share "best practices" of the members to others who have the same ERP.

In summary, be committed to the ERP project or you may feel at some point as if you will need to "be committed". Apply all those manager attributes to the project. Plan, lead, organize and control. Train, test and do more training and testing. Consider getting involved in a special interest user group. You are not alone!