The simple fact is that it works; it really makes a difference to the entire business to put the credit agenda at the front and centre of the business. In the following articles I am going to stretch the boundaries of the traditional credit function and show you where you can expand the limits of credit for the benefit of the whole business. The traditional view of Credit is that the credit function exists simply to effect collection of the money that is owed to the business; my view of credit is that it is a lot more than that.
At the start the credit department should vet all customers and potential customers to ensure they are credit worthy and are in a position to pay all their bills as they fall due and more than simply being able, they are also willing to pay all outstanding accounts in a timely manner. Some companies are good at vetting potential customers at the start and then fail to put a process in place that makes sure all key customers and high risk customers are checked on a regular basis.
The credit function should be responsible for setting correct Terms & Conditions making sure they are both enforceable and enforced. More importantly your terms and conditions should serve your business, so in the event of a dispute you can rely on them to resolve any dispute you may be having with your customer, and if they are approached in this way they will be of value to you.
At the centre of the business, the credit department should be charged with all interdepartmental communications that deals directly with the customer. This includes details of all discounts, promotions and special offers, all delivery requirements and how the customer wants to be billed in terms of frequency and method.
The credit department should be responsible for billing and making sure all invoices raised are timely, accurate, complete and understandable and sent to the customer in a way that suits them, this also applies to statements. The simple rule of billing is that it should always be “right first time – every time” as mistakes and omissions can be very costly in the long run.
Whether you are a sales or service company or billing fees there is a right way and a wrong way to approach this, and in the coming weeks we will explore each of them to make sure you are ahead of the game as long as you take on board what we cover and implement the necessary changes.
When it comes to reporting there are lots of things you should report on, and lots of areas you should not report on. We will spend some time looking at the reports that should be generated, the reasons behind why we are generating these reports and more importantly – what we hope to achieve as a result of producing the individual report. Some see a report as a historical document that simply states how things were at that moment in time; I see reports as the basis of future action plans and excellent reporting is the key to the effective management of the function.
The benefits of adopting this new approach will be seen in all other areas of the business:
· If your invoicing is correct, the accuracy of your stock control systems will also increase
· If your pricing is correct, so are your sales analysis and management accounts
· If your promotions are documented, you have a better handle on your marketing
· If your terms are clear there is less room to fight with your customers
· The less queries you have to deal with, the more time you can devote to serving your customer
· The more time you devote to keeping your customers happy, the better it is for you.
I hope you enjoy these articles, and I hope that you will implement some changes in how you do things as a result.
Just to let you know as well, I am available to spend a day or a half day in your Company to review your current processes and make recommendations as to how you can improve your credit function, that is guaranteed to improve cash flow, customer satisfaction and overall profits. You can contact me on 087 244 7052 and you may be amazed at the cost! Talk soon.