Anyone who has listened to a presentation I have delivered will probably have heard me speak about reporting. Your monthly reports in particular can be a missed opportunity every month. They should report accurately what has happened in the previous month and should also be your action plan for the month ahead.
Beware of negative reporting – most reports contain information about overdue debts, provisions and bad debts. When you look at these three measures they all have one thing in common – they are all negative and focus on what you don’t want.
Your overdue balances are the money you didn’t collect. Your provision is for the money you may not collect and your bad debts are the money you are never going to collect. Why tell a negative story?
Why not change the reports around to include: the amount of money collected in total, the amount of money collected from the three month balance, the number of queries resolved in the month, the amount of money collected from accounts previously provided for or previously considered to be a bad debt.
Why not include a perfect ledger if everyone paid to terms and analyze the gap between perfection and reality, in terms of can’t pay, won’t pay and shouldn’t pay where there are unresolved queries.
These unresolved queries should be a central part of your action plan in the coming month.
Resist the temptation of just having one report. If you want your report to be actioned, then you have to talk to your audience in their own language.
If you are circulating your report to sales people focus on customers, focus on areas that is making them unhappy and could cause them to seek your goods and services elsewhere, this could include unresolved queries, pricing disputes, service issues and customers who will have supplies withdrawn during the month if their account is not brought into line.
If your audience is accountants include lots of numbers, comparisons, this year versus last year, DSO calculations, aged balances, large balances etc as this will give them the information they need to accurately assess the situation.
If your audience is your Managing Director or very senior managers in a large company your report should have a cover page with a simple colourful graph – or two graphs at the most - that is positively framed – senior managers don’t like to see graphs that go down – it makes them nervous. If you are reporting on DSO’s, overdue debt, provisions and bad debts and you are doing a good job then all these graphs will be going downwards. Instead report on cash collected or % within terms which should have a positive impact if you are doing a good job. Some senior managers say they want the detail – if they do that can be attached or included in a separate file for their review – if they have time.
Behind all these reports you should have a set of reports just for you – the credit manager/ controller where you are looking at trends, exposures and any other item that is not an issue right now but could become a problem down the road and you job is to make sure these issues are addressed before they become a problem.
Finally, get your monthly reports out early; I would suggest they are circulated on the second working day of every month, the day after the statements are sent. That gives you the whole month to continue your improvements.