Brad Lohner Interviews Jay McKewon
We had a small window of time to pick the brain of Jay McKeown, who as most of you know is a well-known and highly respected authority in the credit industry. Today we cover advice for business owners and credit managers going through an economic downturn, wisdom for younger managers getting into the credit industry, as well as things like advice for sales managers and embracing new technology. We are so grateful to have had an opportunity to glean from Jay's decades of wisdom. It was such an insightful conversation- thank you Jay for sharing!
Transcript - Jay McKeown Interview
Brad: Computer, good. It says we're recording so we're on. Okay! So, yeah. So we will get started. So good afternoon Jay, thanks for agreeing to join us here today to impart some of your wisdom for us. And I see, I just noticed before we got on the phone call here- did you know that you and I share 432 LinkedIn connections?
Jay: I had no idea that we did that.
Brad: That is a lot of connections that you've been involved in, and obviously me too. So you've been at it for a while.
Jay: I've been at it for a while. I think I have something like 3500 LinkedIn connections these days.
Jay: And some of them are people I know very well, and some people... not so well. But LinkedIn I think has been a very effective tool for reaching out in a number of different ways.
Brad: I try to, any time I'm in a different city, I try to reach out to my connections and see if they're interested in grabbing a cup of coffee. I may know them professionally over the phone or whatever, but it's always nice to get a face-to-face meeting too. So, you and I have met a couple of times.
Brad: So let's talk a bit about your credentials. So you've been at it in the credit and collection space, more the credit space, for a number of years now. And you've worked with some pretty significant creditors out there, maybe tell us a bit about your background.
Jay: Ok, sure enough. I started doing trade accounts receivable in 1988. My wife and I decided to get married and I had to get serious about a career and this is what came up. And I'm like a lot of other people that way because, nobody sort of grows up thinking "Wow, I'm going to be a Credit Manager." The story for many of us, in fact for most of us, is that they sort of fall into it. Something happens, one thing leads to another and the next thing you know they're doing this kind of work. And I think people stay because of how much they enjoy it and in some cases they love it. And that happens to be the case with me.
So, as I said I started my first job in 1988 in Edmonton, working for a division of Westinghouse. My boss came to me on the first day of work and said listen, here is a course that I want you to take and it was the old MCI designation course, which is now known as the CCP Course through the Credit Institute of Canada. And I earned my designation in 92'. Since then, my wife and I and the rest of the family have moved around the country, in a number of different cities, moving from position to position. I guess the last big position that I held was with Shell Canada as their downstream Credit Manager, for Canada, operating the credit and accounts receivable for a number of lines of their business including things like fuels and lubricants.
Brad: Right. So you mentioned the acronym CCP, what does that stand for?
Jay: Certified Credit Professional, and it's the designation that's offered by the Credit Institute of Canada. And it's a good shorthand because you'll notice when you look at postings advertising for applicants, in a number of them you will see CCP preferred, CCP desired, CCP required. You know, that you either have the designation or be working towards it. And I think having that CCP designation is a shorthand that employers use to know that the person they're getting has not just experience, but also an education that backs up that experience, and makes them a more well-rounded credit manager.
Brad: Right now I'm sitting in Richmond Hill Ontario. I'm out here doing some work and I'll be here for probably the better part of the summer, and I always like to keep my eye on all the different job postings, whose hiring, whose not. And you're right; a good majority of the positions that are outstanding, have, you know they either have a requirement to have a CCP designation or to be working on it. So, you know, sounds like a good way to go.
Jay: It does. And if someone were to ask me, you know "I'm doing this kind of work, I've been at it for a while" say 3 years, 5 years, whatever. My advice to them would be: try to find a way to get the designation program fitted into your life, into your schedule, because once you have that designation that's a stepping stone that could lead to all kinds of good things.
Brad: Now if I recall you've got a special title there with the Credit Institute of Canada?
Jay: President and Dean. The Credit Institute was founded in 1928, and so some of the position titles are... not what you would find in the current lexicon of abbreviations and titles. But, President and Dean means simply that I am the chair on the national board of the Credit Institute. I've been serving on the national board now for about 7 years, and really enjoy the work. It helps to keep me grounded and helps to keep me involved day to day with what's going on with our membership.
Brad: Cool! So you're obviously well-credentialed and the perfect guy to have in this interview. So the purpose of today's interview is to talk a bit about credit, and the recovery side, and credit risk management strategies that companies can use today to help them through the period we're in, and into the future. So let's dive in! I think there's five questions we want to have a look at.
Jay: Yep, sure!
Brad: So Jay, during your career, you've been through a couple of recessions now I'm sure, so coming out of this latest challenge, what advice would you be giving a credit team right now?
Jay: There's a number of pieces of advice that I would be giving them. The first is... and this is one I would suggest that people keep in the forefront of their minds, is to trust themselves. Yes, there is a difficult situation in front of us, and all indications are it may even become more difficult over, say, the next 9-12 months. I know I was in a session that the credit institute offered on bankruptcies last week, and our subject matter expert was a fellow whose spoken at the Credit Institute functions a number of times in the past. His name is Lou Brzezinski. And Lou's point was the number of federal programs that are currently supporting small and medium-sized businesses that are still operating, are still paying out money. But that's going to come to an end at some point around September. And that's where we think, or I think, a number of businesses are really going to hit the wall.
So going back to my original point, people that are in credit management positions, first of all should realize you're not there for no reason, you're there because you're accomplished, you have some expertise, you have some education and you should, you should take some confidence from that. And I guess my point about trusting yourself here is to follow your instincts, understanding that not every situation is going to pay off the way you might want it to, but trust yourselves.
Jay: I would say the second thing is that there's all kinds of options to learn more about technology, about the current market situation, and that people watching should take advantage of every opportunity to keep themselves as current as possible on what's going on today; how we've got different applications and software that can help credit professionals address problems in front of them, and continue to move forward with that ongoing education. I talked about getting a CCP designation, and that's great. I think its been a big help in my career, but the fact of the matter is you're never gonna stop learning. There's always going to be more to know, changes in the legislation, changes in business practice, changes in technology, and the best way you can help your employers maximize their return from their receivables is to be on top of all of that and be current.
Brad: Mhmm, mhmm. Well, maybe, we had a list of questions but maybe let's jump around a little bit since we're on the technology topic.
Brad: What kinds of technologies you are watching right now that might help to automate some of the processes in credit management and have a positive impact?
Jay: Well I think that there's three different areas for technology. One is in cash application, and this is probably some of the lowest hanging fruit when it comes to technology and automation where people can adopt automation and application that will help them apply cash much more efficiently and much more productively than was the case in the past. When I was working with Shell, at one point, say 2009, we had a 10 person cash application team. And by the time I left Shell in 2018, that group was down to about 4 people. And those 4 people were not only getting the job done but they were probably getting it done a little better than they had in the past and the difference was the software that Shell had adapted to make that cash application process work better. Now, I'm not advocating that we take on software so we can eliminate people's jobs. What I'm trying to highlight is, that there are some powerful tools out there that can magnify and amplify what a credit team can do and that we should take advantage of those tools.
So the first one as I said is in cash application. The second one has to do with collections. And I'm not suggesting that a credit application or a software can do the collections for a company. Where I think they can help is to make sure that where you have a collector on the phone, they are focusing on interacting with customers, and both getting prepared for those interactions and then taking note of what the results of that interaction were. What the software can do is help identify what our priorities should be, what's the first call you should make, whats the second and so on, so that the collector is focused exclusively on making that call and making it as productive as possible.
Jay: And I think the last area for expertise, and I think this is what scares credit people the most, is in credit assessment. You know, I'm still convinced that nothing is going to do away with the 5 C's. What I think is going to happen and what is already happening, I believe, is that software and applications that are available are making it easier for credit professionals to take information whether it's crunching from a financial statement, or the results of trade credit references, or the results of a credit report from one of the major houses that provide them, and boil that down to information that you can use. There will still be a role for the credit professionals to play when it comes to "well, do I think this recommendation makes sense? Should we make an exception? Should we go higher? Should we go lower? What's the advantage to doing that?"
And I'll go back to what I said before. I think there is value that a credit professional can add to their organization by being on top of this technology because if all things are equal, they would be the ones leading both the selection and the implementation of this kind of software.
Brad: Mhmm, mhmm.
Jay: And there is a number of exhibitors that come to, for instance, the Credit Institute national conferences that offer these kinds of tools, and I think our members should take an interest in them so that they know what they are and how they work and what enterprise platforms they function with. You know, is this particular application a partner with SAP or with JD Edwards or with Oracle which are some of the main ERP's that so many companies out there are using.
Jay: So, I think there's room as part of ongoing education, but I think also as part of our own relevance, for us to be on top of this technology so we, as I said, can help select, implement, and run it. I think we should master this technology, I don't think we should be afraid of it.
Brad: Fantastic. Well that's good. I was thinking about this, especially now, businesses that I'm talking to are going to be scrambling for some revenue, trying to get some revenue in the bank, cause as you said, I mean this COVID cash cycle, I call it COVID cash, is going to be gone soon, and so then what? What does the complexion of the marketplace look like? And so, I guess my question is, what advice would you give sales managers to help them produce profitable sales and reduce risk in today's climate?
Jay: Well, I think part of the ways to do that is, to recognize that it is easier, cheaper, and more productive to retain a customer than it is to go out and find new ones. I think, just a number of thoughts and in no particular order, I think that the credit and sales teams should be working very closely together. And what that means in one sense is, I think the sales team should be getting their leads pre-qualified by credit before they hand them out to the sales team to try to convert those into sales. This is a way of heading off any problems where, customers got payment issues in the past and we may have to look at alternate arrangements, or even things like cash in advance if we're going to contemplate sales with them. So, pre-qualify.
I think the second thing is that there should be ongoing touchpoints, sales meetings, whatever it is that include the credit team, even briefly, to talk about what's going on with the accounts receivable. Because I think there's an active role for credit to play with sales and for sales to play with credit, when it comes to the exchange of information. Part of it has to do with, OK, how are we doing with our accounts receivable? But the other part of it from the sales side is what do we hear on the street? You know, are one of our customers going through a particularly acrimonious divorce? Is this going to affect the way this company is owned? Has one of our customers had a tragedy and someone in their family passed away? Was that person a big part of their organization? Is there a succession going in a family-owned business where someone has started a business, founded it, built it up and is passed on and now a second generation is coming in to try to run the business and what do we think of their management expertise? Those kinds of things.
So I think a big part of what sales management, what I would advise sales management to do, is to be as close as they can be with credit and with their accounts receivable so that they're working together, rather than at cross-purposes. And all too frequently you find a situation where, yeah, it's an old thought: sales and credit get along like oil and water and yadda yadda yadda. But the fact of the matter is, if credit in particular puts in the effort, there's a real opportunity to become a trusted advisor within an organization, and salespeople come to appreciate that position as time goes by.
So I'll give an example. I've made a lot of customer visits in my career, probably upwards of 2500, and in each of the positions that I went to, when I started to suggest "hey you know, I should go out and see some of your customers", the first answer from sales is "whoa, wait a minute". The second answer from sales is "well, OK, but we're going to want to send somebody with you to keep you on your leash." But the third response is over time, when people come to understand that you're not there to wreck their business relationships but to help them, is they want more. And in a number of positions that I've held, what sales was asking by the time I finished my time with a particular employer was more customer contact. Because if you think about it, a lot of our customers are on the phone, talking to their inside sales reps, they maybe see an outside sales rep once a month, once a quarter, twice a year that kind of thing, and it is frequently the case that adding an additional person like someone from credit and accounts receivable represents another way that your company interacts with your client.
The other thing is advice. You know, a lot of small businesses out there are doing their best, they're trying to get by, they're trying to maximize their market penetration, their trying to maximize the amount of dollars that they make. And sometimes they are looking for advice that credit and accounts receivable can help them with. What about banks? What about A/R insurance? What about other programs that may be out there? And, we may not be experts in all of these areas but chances are we know somebody who does have that expertise. And we can help connect those people so they can move on to bigger and better things.
So anyway, going back to the question, I think, I think the deal with sales management is that there is an opportunity to maximize dollars, build business relationships that last, and that aren't just based on, you know, you've got the hottest price this week, by working together with credit. And part of that is credit's responsibility to manage but also some of it belongs to sales. If there is a willingness on both sides I think it can be a very effective one-two punch.
Brad: Cool! You know you touched on something that just made me, while you were talking about the credit and the sales side, I'm thinking about business owners, OK, I mean, you know any business out there that runs on a line of credit, who has a bank to answer to who has signed off on bank covenants, things like that. This has gotta be bit of an unnerving time for some of those guys. What steps should a business owner be taking now to make sure his A/R is in top form and what are the banks going to be looking at do you think?
Jay: Well, I think the first thing I would do is be in touch with the bank. I would think that--
Brad: Proactively, you mean?
Jay: Proactively be in communication with the bank to find out if the rules have changed a little bit or if there's exceptions gonna be allowed for a period of time because this is an extraordinary circumstance. Most of the banks are in the same situation as most suppliers out there. They don't want to be in a position of suing their customers, they want to find ways to work with them. So work with them. So my first piece of advice to a business owner is, you maybe not spend all day every day in front of your banker but you should spend some time in front of your banker to make sure that they understand your needs and you understand their needs when it comes to your covenant, when it comes to how your A/R's gotta perform, in order for you to continue and have access to your line of credit.
Jay: So that's the first thing. Know your bank, know the situation, and frankly know what the rules are. I think the second thing is, if the credit team is doing their job, then your A/R is going to look a little worse than it was but not completely ugly. Don't get me wrong. There's going to be some companies out there that have completely ugly A/R. But if the credit team has been on their game doing what they are supposed to do all along, then the fact of the matter is you may see some deterioration but not you know, something that's going to get flushed down the toilet.
So I guess my second piece is, what's the state of your A/R now? What steps and what kind of a team do you have in place to deal with it? And I guess the second thing is, or second part of that is, do you need to make some changes? Are there some services you need to get? Do you need to see about an account monitoring service from one of the major credit reporting agencies that can help you identify problem accounts early? Do you need to think about handing your accounts over quicker to an outside collection agency? I know one of the things I'm guilty of as a collector, and I think most collectors are guilty of, is they hang onto files too long. And I think part of the deal for keeping your accounts receivable clean is that you need to understand what the criteria is you're gonna use to send an account off. Whether it's to legal or to third-party. And go there when you have to.
And I'll go back to the thing about trusting yourself, you know, some of the decisions I've made in my career, I've made a decision, I talked myself out of it, did something else, and lived to regret it. What I think business owners need to do and credit people need to do in trusting themselves is, if you've established a criteria for moving accounts to third party, do it.
Brad: Stick with the policy.
Jay: Stick with it. And maybe that you're gonna allow, a little less time. I think Met Credit had a blog post that said "60 was the new 90" for days past due, and maybe you should think that way. Maybe that account should go sooner than it used to in the past.
I guess the final piece has to do with triage. In every customer portfolio there's going to be customers that you can work with, where you can do something productive and effective, and where you maybe are going to help them work their way out of a problem, but there's also going to be customers you can't work with. And part of the job for the credit management team and for the business owner is to try to figure out which accounts fall into which category. And for the accounts that you've decided you're not to work with, do the most effective thing and that is, hand them off to someone like legal, like third-party collection, who can effectively recover as much money as possible.
Brad: So get that leverage from outside professionals. Yeah. Makes sense.
Jay: There's expertise in a lot of different places that you can find it. It may be that you don't absolutely know everything for instance about what to do about a bankruptcy filing, in house. Fine. Pay a little money and get someone from outside your organization to deal with it for you, because that way your team can focus on the things they are good at.
Brad: Yeah that outsourcing topic is a whole other topic all by itself, which we can maybe get into some other time. Let's wrap it up cause I know your time's valuable here. I was thinking about this question the other day. You know, hindsight is always 20/20 right? And if we had a chance to kind of do things over, what advice would you give your 30-year-old self?
Jay: What advice would I give my 30-year-old self? I would tell my 30-year-old self not to waste time thinking about an MBA.
Jay: I spent a lot of time thinking, "Well, I should go out and do that"... no. In the final analysis, the credential that helped me the most in my career was that CCP. And I think the thing that will add value to that CCP is to stay as current as possible on... what's the latest accounting standard? What technology is available? What are the latest best practices in credit and collections? What changes in legislation are coming up that you can possibly take advantage of? Whether it's, you know, an increase in small claims limits, or that kind of thing so that you're not, you know, ultimately reduce the cost of recovery on legal files, those kinds of things.
So I would tell my former self not to spend time wishing that I would become an MBA but rather, focus on the things that it turned out I was actually very very good at.
I guess the other thing is, embrace what you love. And it's easy to say and not so easy to do, but if you're doing something that you love chances are you're going to be very very good at it. And if you follow that maxim then you have an opportunity to become a subject matter expert. Someone people look up to, and in house, become that trusted advisor that I mentioned a little bit earlier.
Brad: Right, right. Well very good. Well Jay thanks so much for joining us today we really appreciate that. Some good savvy advice for both the credit professionals, the young ones, older ones like myself even, and of course business owners too, so we appreciate your input there and thank you very much.
Jay: Brad, appreciate you having me on today it was a pleasure. If there's any follow-up you want to do later on let me know. I hope you have a great day, and I'm sorry to hear you're in Richmond Hill I mean, maybe things will look up and you'll get to Winnipeg.
Brad: I was through Winnipeg on the way to Richmond Hill here, and, I drove out instead of flying of course, and I gotta tell ya, I had no idea that Eastern Manitoba and Northern Ontario are so pretty. Wow! So anybody watching here, if you haven't done that drive between Toronto and Edmonton or anywhere across the trans-Canada, I highly recommend it.
Jay: Absolutely. We've done it a couple of times and it's beautiful country.
Brad: Alright well listen, you have a great day
Jay: Alright Brad. Thanks again. It's been a pleasure. You have a great day.
Brad: Take care, you too now.
Thanks for checking out Brad Lohner's interview with Jay McKeown. Brad is the founder of PCM Corp, a credit and collections agency in Edmonton Alberta.