A few years ago I was promoted to CEO for a region of a multi-national corporation. As part of the deal my bonus structure changed from revenue generation to profit, cash conversion, and a variety of employee and customer satisfaction measures. Regular meetings with my new CFO and the credit control department started to become more important than meetings with the sales team and major customers. There’s nothing like a change to your bonus structure to focus the mind and re-set your daily priorities.
Soon I became embroiled in weekly reviews of which customers had or hadn’t paid in full and on time and which customers hadn’t paid for so long that the realisation of bad debt was looming. Had we been dealing with a handful of customers and a few invoices per month then the task of sorting this out would be a quick one. The trouble was we were dealing with hundreds of customers and thousands of invoices per month and it felt like we were trying to empty a bath with both taps turned full on.
The CFO calmly explained that I had signed up to a DSO target of 50 days based on a 6-month rolling average and we were currently tracking to 58.1. The next measure would be taken in 6-months and anything over 55 days would be classed as zero achieved. We had retail and B2B accounts across different business units, different countries, numerous currencies and were working with spreadsheets and a hard-working credit control team armed only with a phone, a contact list, and an endless supply of energy drinks. No pressure!
6 months later we came in at an average of 53.7 days and 6 months after that 49.2 days. It felt like success and bonuses were paid out but the daily cost of intensity from the CFO, the credit team, me personally and converting the sales team into credit controllers with threats of putting their accounts on stop every month was a high price to pay.
If back then we had deployed the type of AR automation tools available today we would have moved further and faster with the added benefit of it being a more sustainable process and looking back the morale of the credit team would have been higher and their jobs more rewarding. Not to mention a bigger bonus. Customer satisfaction would also have been higher with a more structured approach to debt collection than the constant threat of credit hold.
Achieving best-in-class credit management today involves 6 key steps.
1 – SET CLEAR GOALS
There are 6 ROI goals you should consider. These are reducing DSO, costs and risks and improving cash-flow, standardisation and customer satisfaction.
Take time out to work out where you are today on each of these measures and which ones should take priority. Buy in at CEO and CFO level is clearly key so hopefully, like me, they are meaningfully targeted on these metrics.
2 – AUTOMATE YOUR PROCESS
If you have thousands of invoices sent to hundreds of customers per month then you can’t do this without some sort of Invoice-to-cash solution. Today there are a growing number of invoice-to-cash software suites that will empower your credit management capability either to solve individual elements of the process or the end-to-end delivery of billings, collections, and allocation. They can be easily integrated with any ERP system and any file formats you are working with and the time to value from sign-up to go live can be achieved in less than 12 weeks. The simple task of getting invoices out of the door on time daily in all format types is the first step to starting your customers’ payment due clock ticking.
3 – ENGAGE YOUR CUSTOMER
Most customers don’t want to be bad payers. Choosing a solution that onboards your customer via a portal provides your customer with a view of their overdue payment and aged debt situation with you their supplier. Engaging your customer in this way effectively recruits them onto your credit control team. They can use the portal to self-serve their invoice retrieval, make payments and initiate queries directly with your credit control team.
4 – EMPOWER YOUR TEAM
I2C SaaS solutions enable your credit control team to take control. Aged debt dashboards updated in real time to show team, department, individual and customer level positions keep the team on target and on track. Document retrieval notifications and query resolution tools enable efficient and effective dialogue with the customer at the early stages of the payment process. Dispute management modules engage your wider organisation to quickly resolve customer queries where other departments need to act. Collection modules provide automated chase paths for multi-channel chase methods (mail, letter, phone call, legal, dunning).
5 – REPORT YOUR PROGRESS
Advanced reporting tools keep departments, functions and the senior executive team informed of live and up-to-date positions to agreed KPI’s. Credit control managers have access to team and individual activity performance in the same way sales managers have performance metrics on sales teams. Used correctly, team and individual performance and morale can be greatly improved.
6 – CONTINUOUSLY IMPROVE
End-to-end AR automation suites mean companies can start with one or two modules to start with and add new modules and features as and when the credit control department can absorb them or as and when company needs change.
ABOUT THE AUTHOR
Andy Bass is the New Business Development Director for Corrivo, a new market leading invoice-to-cash software SaaS solution developed by Data Interconnect who have over 20 years of experience in this space. Andy has held very senior executive positions within the technology and SaaS sector and has first-hand experience of having to deliver against cash collection objectives in complex business environments.
To find out more download our Corrivo Brochure today!