From Sales Order to Receipt of Payment
For 60 years, the business unit Publisher (or VVA, Vereinigte Verlagsauslieferung) by Arvato Supply Chain Solutions has provided its clients in the publishing and book industry with fully integrated solutions that cover everything from the order to the receipt of payment. VVA’s order-to-cash model has always been at the forefront of this industry and has attracted numerous imitators. Due to the legal regulation of financial services, the VVA model remains out of reach for competitors.
Outsourcing has a long tradition in the publishing and book industry as publishing distributors existed long before the idea of a contract service provider was invented. Due to the strong fragmentation of the market, at the beginning of the 19th century there were thousands of small and medium-sized publishing houses that could not afford their own logistics. As a result, service providers that performed services for several companies established themselves at that time and also regulated payments. This is how companies like Vereinigte Verlagsauslieferung (VVA) emerged in Germany. Today, it provides a smooth order-to-cash cycle for more than 200 publishing houses, from order to payment. And with great success. VVA now has a market share of almost 20 percent.
Boosting Synergy Potential
Alongside client support and comprehensive logistics services, financial services play a particularly important role. VVA’s factoring model is the key component here. This is only possible because VVA is the sole provider on the market with the relevant approval from BaFin, Germany’s Federal Financial Supervisory Authority, and is therefore subject to supervision by the Bundesbank (Germany’s central bank). This enables VVA to buy up claims arising from its clients and ensure that the publishing houses receive their money first, independent of payment by distributors. The business pays VVA, which also manages dunning and collection services in addition to receivables management. VVA recovers the money from its client only when a payment has actually defaulted, unless the client has taken out a del credere risk insurance policy for payment default with VVA.
Within the scope of factoring, VVA offers additional financing and, in extreme cases, covers the entire period between the claim arising and the receipt of payment by the business. “Pre-financing through VVA has a long tradition in the book industry. Our clients can finance new titles in this way. We only profit from cash flow at a later stage,” says President Stephan Schierke. Above all, the creditworthiness of the clients that are supplied is crucial. Generally VVA has known the details of their credit rating for decades.
However, factoring is only offered in B2B business. In the case of private customers, VVA operates accounts receivable management on the basis of the publisher's customer accounts, rather than acting directly as the VVA.
Prefinancing by VVA has a long tradition in the book industry. This enables our customers to finance new titles. We will not be serviced from cash flow until later.”
VVA’s clients do not just benefit from the company’s financial services, but also from bundling. This comes into play in shipping – with the packaging items bundled across the network of publishers – as well as in accounting and payment processing. “For example, we ensure that our clients’ terms of payment are standardized,” explains Stephan Schierke. “This means that the due date is always set on a specific day of the month.” With immense advantages for booksellers: They receive a collective invoice and can settle the individual orders from the past weeks from VVA’s 200 publishing clients with a single payment. The sales tax entry is also reduced to one entry per month. These are just two examples of the enormous synergies of VVA’s industry solutions, which benefit everyone involved.
Using Expertise Across Industries
“Of course, this bundling strategy is also of interest to other industries,” says Stephan Schierke. “For example, I imagine that the entertainment industry will soon turn away from the client management principle with strict division of individual clients. Payment regulation will be an issue at that point at the latest, so that each claim does not have to be individually booked.” Even though larger companies do not always like to be given deadlines, most VVA clients have had very good experiences with them. “Publishing houses who have already worked with us even ask other providers about the VVA model. We have set an industry standard, as it were.”
Although VVA’s model has existed successfully for over 50 years, we continually advance development and search for new business opportunities. “Even if we are currently focusing more on large market players, we must not lose sight of the small companies,” says Stephan Schierke. “They may be small individually, but all together they are attractive if we want to continue growing in the future. Ultimately, we want to actively keep abreast of every change in the publishing world so that we can always offer our clients a complete solution,” says Stephan Schierke.
VVA took this approach years ago with games to accompany books, from which the toy business emerged with a current market share of seven to eight percent. “Since then, more and more publishing houses are entering the non-book sector and are offering items such as dolls or other merchandise to go with books. We are willing and able to provide our comprehensive order-to-cash services in this area as well.”
Other solutions for the publishing industry