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Advanced Credit Control Tips

This post is designed to go beyond the basics of Credit Control and challenge the ways within which credit teams are organised, the technology and strategies they use and the team’s place within the wider business.

Systems and Technology

To manage multiple and sometimes complex collection strategies you will need visibility, functionality and flexibility from your system. Visibility, as you need to see up to date ledger positions, collector productivity and collection strategy lists. Functionality, so that you have workflow automation and flexibility so you can adapt to new circumstances.

Whichever platform you use, you need to have automated query management and escalation functionality which is visible to credit departments AND the team responsible for query resolution. The query management part of your system needs to be able to target query resolution and provide root cause analysis.

Your platform should also allow your customers to access their own accounts and be self served in terms of copy invoice requests, statement requests. Customers should be able to log invoice queries against invoices in order to simplify the collections process.

Customer Base Segmentation

Segmenting your customers by business type, turnover, profitability, risk etc will help you focus resources for maximum return. This provides increased flexibility when setting credit limits and also provides a more tailored collection strategy designed for maximum return from the least cost.

Document Storage and Retrieval

One of the most common reasons for query or non invoice payment is Copy Invoice request. This accounts for approx. 50-60% of invoice queries across various sectors globally. It is imperative therefore that any copy invoices, delivery notes or other supporting documentation is stored digitally and easily accessed.

Pro-active Collections

Pro active calling on targeted larger debts (usually 10 to 15 days before due date) will help verify that all is in order, that the invoice has been received and payment date agreed. Electronic letters with a link to the customer self service area remove the need for this to be done by telephone and helps deal with large volumes of invoice verification.

Call Monitoring & Performance

This is something that is often overlooked in the world of Business to Business collections and more prevalent within the Debt Collections and Business to Consumer world. However, Business to Business calls should also be recorded, scored and fed back to the collectors as part of any ongoing skills assessment and training.

Outsource as an Option

Once you have segmented your customer base the visibility you have may show that the lower volume, high value (and often more complex) customer is the best area for your in-house experts to focus on for collection and query resolution. This may leave significant segments of your customer base untouched in terms of collections.

Consider outsourcing as an option where volume v resource is an issue. Outsourcing with the right partner is often easy and cost effective and can offer you the main benefit of resource that can be easily scaled up or down without the headache of finding staff, paying large temporary staffing costs and training.

Internal Relationships

The credit department should be the process leaders in the business as they have a full view of all upstream process issues that affect payment. Having the analysis and visibility of these issues will allow the credit department to present these to the business with a view to process improvement. It is also important to build internal relationships with sales and any other department which impact the credit function.

Separation of Duties

Cash Collection, Credit Risk and Query Management are 3 distinct functions within the Credit Department. Each function has a different skill set and should have separate processes, KPIs and targets within the Credit Department. In some cases, e.g. where resources are limited, it can be the same people carrying out cross functions. However, it should be absolutely clear which function is being worked on. A blended approach is likely to lead to lack of performance visibility with cash collection taking second place to query resolution.

For further information, please contact johnennis@thorntonhope.co.uk.

Comments: 1 (Add)

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james thomas on November 19 2018 at 10:06

hey very nice article thanks for sharing with us as a bank employee i have seen most of the people are facing the many problems because of lack of financial cedit management I think it will help a lot and the way you are explaining is good and very clear keeps going