Business Process Management: A Toolset for Credit Claims Administration

Credit & Financial Management Review, Fourth Quarter 2004 by Dillon, Cassie

Abstract

This article explores the acknowledged success of Business Process Management (BPM) to improve the credit claims function by reducing resolution turnaround and lowering the frequency of needless claims. Preventable credit claims can be reduced through a BPM-enabled retailer compliance program that analyzes claims, expedites determination, validates claim denials with documentation and automates denied claim correspondence.

Introduction

A recent survey by the Credit Research Foundation indicates that deductions continue to average 10% of sales and take 105 days to resolve; 45 days to validate the claim and 60 days to collect. The statistics reflect negligible improvement in preventable credit claims over the past decade and suggest that a comprehensive, process-related approach to credit claims is needed.

In contrast to the perceived potential of EDI to reduce claims by automating the invoice-payment cycle, the success of BPM is borne out by experience. BPM is a complimentary set of software tools that includes Content, Process and Goal Management. Together they provide a comprehensive solution that integrates workflow-enabled business content with ERP (enterprise resource planning) systems, desktop software and the Internet to improve, monitor & manage business outcomes.

The remainder of this article describes BPM relative to credit claims processing, discusses outcomes achieved by some of the nation's largest manufacturers and suggests criteria to use in determining whether your organization can benefit from implementing BPM for credit claims resolution.

Content Management: Eliminate Credit Claim Content Chaos

Business information comes in a variety of electronic formats from traditional COLD (computer output to laser disk), faxed and scanned documents to email, web forms and output from digital cameras, office automation products and PDA's.

The growth of electronic business information has complicated work processes because most ERP systems lack the means to collect, organize and present disparate file types as an integrated element of the work process. In addition, many companies do not scan paper source documents until work is completed (i.e. back-end scanning). Consequently, users print electronic documents to add to paper files - a practice that all but eliminates the benefits of automation. Paper processing is slow, labor intensive, error prone and confounds efforts to synchronize information across concurrent users.

While an organization may not employ all the media types listed in Figure 1, even one manual source can create collection, distribution and evaluation problems that demand substantial human intervention. Given the potential variety of media required for resolution, the credit claims process provides a content chaos case in point.

In the late 1990's, a major cosmetics manufacturer was receiving up to 1,000 credit claims per day. Low dollar claims were written off in order to apply resources to months of high dollar claim backlog. Data collection took up to 30 minutes per claim and was completed in assembly line fashion with each station responsible for a different type of media: fiche, mainframe data, paper claims and telephone requests to shippers to fax POD's. Fiche and mainframe data were printed, matched to the claim and a determination made. If denied, the documents were annotated, copied, mailed to the customer and AR was notified to decline the chargeback. If valid, AR was notified to allow the claim and reduce revenue.

Aware the situation could only deteriorate further, the Vice-president for Credit Services researched BPM solutions. After evaluating software toolsets from several vendors, he selected a toolset and a consulting team to design and develop a solution. Within 6 months of project initiation, credit claims processing was transformed:

* Low dollar claims were resolved within 5 days.

* High dollar claims were resolved within 24 to 48 hours.

* Receivables were no longer overstated.

* Customer cash account manipulation ended.

* More than half the Credit Services staff dedicated to claims resolution was reassigned.

Content Management Tools

The dramatic improvements in processing outcomes were due in part to the elimination of paper, to online access of supporting documentation, and to the automation of the credit claim life cycle. The tools used include the following input technologies as well as custom application interfaces, a DBMS (database management system and document mark-up and manipulation tools.

Business content was transformed by:

* Scanning correspondence and paper claims.

* Transmitting electronic claims (EDI 812) into workflow.

* Downloading shipper POD's from the web.

* Import and conversion of packing slip, invoice, credit memo and chargeback detail to COLD.

* Nightly remittance download and COLD conversion.

* Automated retrieval of archived COLD documents required for credit claim research.

* Creation of an electronic folder with pertinent credit claim documentation.

* Automated output tasks to print, fax or email disallowed claim replies.