insideARM’s Exclusive Interview with Arthur Hernandez, Vice President of Product Development at Billtrust

Last month, I had the pleasure of speaking with Arthur Hernandez, VP Product Development for Billtrust. They are a provider of order-to-cash solutions focused on making it easier for companies to get paid. In my interview with Art, we talk about how Billtrust looks to bring out to the marketplace solutions for credit and collections professionals, and how to continue elevating the role of credit and collections professionals 2020 and beyond. 

Katie Keich: Is Billtrust partnering with existing credit providers today or are you creating your own data?  

Arthur Hernandez: Our software aggregates industry trade-network inputs, bureau reports and other third-party data and creates accurate, up-to-date credit profiles. We look carefully at trade, bureau and other data sources while taking the client’s existing credit risk into account.

Is that a credit application that is going into the software? Or is that just like an app that you would add for access to clients?

Our credit product is an all-in-one solution for our clients. It includes both the credit application, which eliminates PDFs and dramatically decreases approval time, plus the management side where we constantly monitor all of a supplier’s customer accounts, alerting them to any major change or credit event.  

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So when you’re talking about competing with other players in this space—you’re kind of bringing in the Credit product as its own data source.

That’s correct, but, as I said, we do aggregate a lot of information to create a full picture. We’re agnostic in being able to leverage that data and how it’s brought in. But we’re also keenly interested in how the credit professional at the supplier organization makes a decision. Do they just want to auto-approve and facilitate the ordering process, or do they use an exceptions process because the decision is in a gray area, and they need an analyst’s skill set to really take a look at it apart from the machine decision.

Do you feel that most people are educated enough to know that they’re really managing risk at this point versus preventing it? 

If you and I walked into a hundred different B2B corporations, and we asked them to tell us about their risk profile, fewer than 20% of those organizations will say, “Oh, I’m glad you asked that question. Let me pull it up for you.” 

There’s an opportunity for B2B supplier organizations to really be aware of that risk on a strategic level. Many times, we think about risk on an individual decisioning level, but many credit thought leaders really understand how much risk they need to take on to achieve certain growth levels.  

Yes. I love that context because one of the things that we have found in the industry (and something that people aren’t doing enough today) is having these three high, medium and low risk assessments. For example, when an organization is in growth mode, they’re going to be at more of the medium-to-high risk tolerance level for what new business they bring on.

Correct.

When we’re in a recession, our strategy may be, “Okay, we’re not willing to take on a lot of risk.” We’re in a low and what does that strategy look like? We found that a lot of people aren’t creating their credit policies around these areas. I love the idea of how we support that 10% growth and what percentage of the high risk are we willing to take on to support it? I think that kind of matches up with creating your high, medium, and low, risk levels for different times. A credit policy has to be something that is able to be amended and go with the economy and support your credit loss goals. 

When I worked for a logistics company, and we were in growth mode, we took on more risk. We were also able to take on more risk during the recession because we had such low credit losses. That didn’t go without personal guarantees, security deposits, prepayments and looking at financial statements.

I think you have to have a balance of that and I do think that a lot of organizations are missing the opportunity to educate their salespeople here so that it could be a group decision versus a, “Hey, credit said I can’t do this.”

Absolutely. I have an altruistic vision to elevate the role of the credit professional. A lot of times, when we get down to a particular opportunity between sales and credit, it becomes very reactive if we don’t know what our overall risk profile and tolerance is. Instead of sales saying that credit isn’t allowing me to do this, or I’m just going to take on the risk anyway in spite of what credit says, my vision is that the credit professional should be providing this information well ahead of time, knowing what’s going to happen three or six months from now, and indicating what should be considered. Then, it becomes more of a discussion on the business strategy level between sales and revenue and FP&As and the credit professional.

We believe that credit should be pulled before any time and money is invested into a lead. That should be a decision tree that you’re feeding sales based on the risk you’re willing to take with the information you have. Are you encouraging that pre-processing of the leads into the high, medium, and low segments?

Absolutely.  As a solution provider, that’s just part of my DNA and the Billtrust DNA. We identify what’s going on in the marketplace today, from how credit is being done and how we envision it. And based on our observations and our conversations with industry peers, here’s how credit and collections and invoicing can be done better. The technology itself isn’t the end game. It’s the knowing what to do, and the technology is the enabler to do that. 

Credit, if we oversimplify it, is determining how we generate revenue on the sales side and make sure that people keep paying us. In the end, we want to protect ourselves from losses.

The technology itself isn’t the end game. It’s the knowing what to do, and the technology is the enabler to do that. 

How often do you think your customers should be going back into the tool —what’s your percentage that you believe your clientele are using that tool after onboarding today?

There are two things that I think about in the customer life cycle, once we’ve made a decision to shift the business entity from a prospect relationship to a customer relationship. One is financial strength or business viability, and two is payment behavior. I always tie it back to the idea that the role of the credit and collections professional is revenue creation and revenue assurance.

If a customer has an issue with the goods and services we provide, we’ll fix the issue.  If there are no issues, then you’re going to pay us based on our agreement. 

If invoices are not getting paid, that’s an indication that either we’re not meeting their needs, or is that something more nefarious might be going on in the background, and we want to uncover that sooner than later.

From a payment behavior standpoint, that’s just a natural consequence of the relationship. Is there a way that I can follow up with all the customers that are exhibiting bad behavior? No, and that’s where technology can help. 

Regarding financial viability, when should we be doing a review, and how do we do assessments regarding payment behavior? That should occur more often, such as monthly or even more frequently.

One is financial strength or business viability, and two is payment behavior. I always tie it back to the idea that the role of the credit and collections professional is revenue creation and revenue assurance.

One thing that is so important to that topic is the terms. For example, you didn’t have a conversation about payment terms and really, that the payment terms that they’re showing in your system aren't the payment terms that work for them. Does the software you have allow the ability to set up alerts based on certain rules?

Yes. A user can be alerted if a customer is, for example, approaching 80% of their credit limit, but we certainly don’t want to be stopping an order if it doesn’t need to be stopped. If somebody is approaching an 80% credit limit, let’s take a look at them and determine if the prescription is to have a conversation with this customer and pay down their existing open receivables so it opens up the credit line or do I know that this particular customer is on an upward trajectory because they’re a solid financial risk. One path we should consider is opening up their credit line so that we can process more orders.

Oftentimes, we can just look at what’s going on behind the scenes, look at our history with the customer and be able to address that credit line without involving them. If there’s a scenario where we need to contact the customer to pay down the line, or maybe we need to look at extending the terms; let’s remember that when we’re extending the terms, we must extend the line of credit. Are we really in need of reaching out to the customer to get something accomplished at this step?

Yes, absolutely. If the customer is not happy about something and they haven’t told anybody else, it’s going to manifest itself as a non-payment.

That is very true. You brought up a really good point with that, though, which is a lot of companies are not staffed to even manage 70% of their receivable on a regular basis. Obviously, AI (artificial intelligence) plays a huge role in trying to cut down the headcount.

That’s right, and you’re tugging at my heart strings here. From that standpoint, it is such a customer-centric role. If I just go outside of my role as the prescriptive credit professional and put on my solution provider hat, one of the things that I want the next generation of professionals to understand is that regardless of the kind of  tools we’re using from a credit and collections perspective, what we do is really human-centric and customer-centric. 

Granted, from an FP&A and budgeting standpoint, we need to strike the right balance. I think managing 70% of receivables is very optimistic. It’s probably more like 50%.

I always make the comparison of a credit and collections professional to that role of a salesperson, in that you really need to manage your accounts.

Absolutely. I talk about this all the time, as well. Sales is the primary mirror of the credit and collection.

The credit and collections professional has to have an account management view of the world. How do we get the right account coverage for what we, as a supplier, want to be able to accomplish? What’s the right ratio of collections team members and credit team members to the population that we have? How do we segment customers? Are they a mom-and-pop shop? Are they mid-market? Are they an enterprise? Each one of those answers determines what kind of a relationship that we build, much like in sales.

Once your customer has an inclination that their customer is going side-ways, what kind of tools does Billtrust have for reporting this? Is this a tool that you currently have, or is that something you’re working on behind the scenes?

From a technology standpoint, that’s one of the things that our credit solution does provide for our community. There’s this concept of a credit group. If I’m part of that credit group and the information is anonymous, those things are certainly available for the other peers within that credit group. But it mimics what happens “in the real world.” 

If I take off my practitioner hat and put on my solution provider hat, the information that’s available within the Billtrust community to be shared really gets me excited. It’s our role to be able to create and show revenue, and here’s something that we can help enable that credit professional to achieve.

My last question for you is what do you think the credit professional’s biggest challenge is going to be in 2020? What is Billtrust doing behind the scenes to solve that?

When a practitioner has selected a good technology, it’s an enabler for them to be able to accelerate their careers and their position within their organization and drive effectiveness and efficiency within their world.

What Billtrust wants to provide is an arsenal to drive the effectiveness of the receivables organization, strategically managing everything in the order-to-cash cycle. .

We want to continue to drive the profession with the right tools for this profession to continue to elevate itself.

Thanks Art, I appreciate your time and Billtrust adding to the conversation. I know we can both agree that the credit and collections professionals are key players in the organization's financial health and success.