Irish Credit Management Training
  • Home
  • Contact Us
  • About Us
  • Education
  • Public Course Dates
  • Consultancy
  • Useful Links
  • Revision
  • Credit Events
  • CICM Qualifications
  • Risk Revision
  • CICM Accounting
  • AICDP International
  • CICM Diploma Costings
  • New Ezine Sign up page

The Legal System

6/2/2015

1 Comment

 
In Ireland we have an excellent system for collecting debts and like everything else it works when it is used correctly. There are many misconceptions and some practices that should be improved. The whole system could be improved and in particular the use of the small claims court for debt collection and the ability of individuals and companies to handle the paperwork for all undefended judgments without the need for a legal firm to get involved in what is mainly an administrative process would be good for starters. For the purpose of this article we will concentrate on the system we have and how it works from start to finish. Forgive me if you know most of this stuff already I am writing for the benefit of the person who has little or no knowledge of the current system.

If you have done everything in your power to collect a debt, if there is no reason you are aware of why the amount hasn’t been paid, or sometimes when there is, if the customer is not engaging with you in a meaningful way, i.e. making payment, there are times you have to make a hard decision whether to go down the legal route or to simply write the debt off completely.

As simple as this choice may seem, there are times when it is cheaper and easier to write the balance off, particularly in cases where the other party simply has no way to pay the amount in question. Once you have established that the money is due and owing, you know the exact legal entity you are trading with, ideally you have the necessary back up documentation, including copy invoices, signed dockets and a record of all the activity that took place since the account became overdue and you are satisfied that there are sufficient funds available to pay the amount in full, including interest and fees and that the relationship is beyond repair and you have no intention of doing business with them again, then the sooner you issue proceedings the better.

The court you sue in is determined by the amount outstanding, The District Court hears cases up to €15,000, The Circuit Court up to €75,000 and there is no limit in the High Court.

Each court has its own rules and vagaries and I have lots of information on the specific processes if you want to find out more, just let me know. There are also some common ground: If you are successful each court will issue a Judgment, this is simply a piece of paper that says the court accepts that the debt is due and owing, it is worthless unless you do something with it. Your options include:

1.       Register the Judgment for publication – it will appear in Stubbs and be on the public record, and as a result will have a negative impact on their credit rating.

2.       Lodge with the local Sheriff, who has power to seize goods to the value of the Judgment

3.       Register the Judgment as a charge against property owned by the company or individual. You can then enforce your mortgage through the sale of the property in question. The reality right now is that no judge would enforce the sale of a family home for the settlement of a debt.

4.       In the case of an individual you can get an Instalment Order, which if it isn’t honoured can lead to committal to prison. It is important to understand that the Instalment Order is an Order of the Court, if the person fails to pay the instalments in accordance with the Order, they are in contempt of court. This is why they go to jail – not for the debt itself.

There are many other remedies, one final point if you are dealing with another business you are entitled to add on Late Payment interest and Admin charges to the account before you take proceedings and the amount should be included in the amount claimed, you are entitled to court interest of 8% on all amounts due from the date of the judgment. Hope this helps your understanding and make sure you get details of what it is going to cost you before you engage any legal firm.


 

1 Comment

The Seven Secrets of Excellent Collections

30/1/2015

0 Comments

 
Today I want to share with you my seven secrets of excellent collections.  Before I do the first ingredient that must be present is the right person with the right attitude, without that everything else will count for nothing. You have to make sure your collections staff are trained and educated to know exactly how to communicate effectively with people and get the required result with a minimum of conflict.

If you or your staff are in conflict with your customers, if a number of the conversations descend into arguments then you know there is a problem that has to be addressed. The collector should be clear, focused and confident, with the ability to stay in control at all times, this can be learned, if the right attitude exists in the first place.

Now to the seven secrets:



1. Using the right words and asking the right questions.
Words are the raw material of communications, you have to use the right words and ask the right questions in order to get the results you desire, if you don’t you will get the results you deserve! There are good words and bad words, some will get instant results others will create conflict. Some are very subtle and others are not. 


2.   Being clear about your desired outcome

Anyone who has been on a course with me will remember my favourite question “So, what do I want?” This question has power beyond measure. Before you pick up a phone or make a call make sure you ask yourself that question first, then make sure the call is maintained in the direction of where you want to go, and if it strays for a time, use that question to bring it back on track.

3.      Staying focused on the task in hand

I know much is spoken and written about the virtues of multitasking, to me unitasking is the key. Doing one thing at a time, focusing 100% on it, completing it and then moving on to the next most important task is the key to success here. When it comes to collections the task in hand is to collect the money – nothing more or less.


4.        Listening Skills
It is said that a salesman has never listened himself out of a sale! Same goes for credit control, Take time to become an active listener, listen to the words, the tone, what is said and what isn’t said. When listening with a problem solving hat on you will be amazed what can be achieved. 

5.        Knowing the Stages of the call
There are three stages to every call – the opening, the fact finding part and the closing where you get a clear commitment from the customer – each stage is vital to manage effectively and as you go you need to learn how to manage the three elements of emotion, logic and power.


6.       Ending every call with the commitment
The call doesn't end until you have a date, a time and a payment method confirmed with the customer. You have to agree how much is going to be paid, exactly when it is going to be paid and how it going to be paid. Anything short of this is a waste of time.


7.       Follow Up
Follow up, follow up, follow up – exactly when and how you said you were going to do it, your credibility and your results depend on your ability to do this.

Enjoy the process, celebrate your results and know you are doing one of the most important jobs in the business.

Finally, this one isn't a secret at all; to be successful you need persistence, never take no as a final answer. Remember the line from Og Mandino’s book called “The Greatest Salesman in the World” – he was asked how he knew he would succeed and his answer was simple: “I will persist until I succeed.”  


0 Comments

2015 to be a great year for credit professionals

23/1/2015

0 Comments

 
2015 is going to be a great year for credit controllers, particularly the ones who have a recognised qualification in the area. There are more jobs available than ever before, so the career prospects are looking good.

For those of you who are not looking to change, 2015 should be the year when previous pay cuts are reversed and you begin to see some extra money in your pay packet, the tax changes announced in the last budget are going to kick into place from this month, so that alone should leave you better off.

As business improves, so will the demand for credit, so I envisage intelligent companies will take a hard look at how they are currently doing business and how they can integrate the credit function into the heart of the commercial zone, to grow profitable sales and to extend their passion for delivering a quality service to all their customers, by taking into account the quality of the invoices and statements they are sending to their customers on a daily basis.

 I am hoping that 2015 will be the year when senior managers in business finally recognise the contribution a properly managed credit function can make to every business. Those of you who have attended a talk or a training course will be aware of the expanded scope I recommend for the credit role within business to become the managers of the margin. It is in that space that your true value will shine through and you will begin to make a valuable contribution to your business.

The start of each year is a good time to stop and take stock of where you are and more importantly, where you are going. Plan your career, work out exactly what you have to do to get from where you are to where you want to be. If that includes training, education or advice,  I am always happy to help in any way I can.

Take responsibility for where you are now and plan your future with care. The sad fact is most people spend more time planning their summer holidays than they do planning their whole lives. Be part of the 10% of people who are living their lives with purpose.

On the jobs front, I will be keeping an eye on what is going on and through the weekly E-zine I will bring you the pick of them in the coming weeks and providing you with the help and advice you need to get to the next level, no matter where you are now.

One of my favourite questions is “does it make sense?” If it does, do it. If it doesn’t, don’t!

0 Comments

The potential scope for credit within the business 

16/1/2015

2 Comments

 
This week I want to share with you my vision of the Credit Department as it should be structured within companies that are dealing on a B2B basis. There are a number of challenges facing the credit manager today and securing the required people and budget to perform at a level of excellence is the first step on the ladder. So if that is the first step, then we have to go digging to find the starting point.

To me the starting point is to make sure senior managers and even the Managing Director to fully understand what is going on within the department and I know this will sound a little simplistic, you have to educate your MD and Senior Management team really understands the process from start to finish. Most confuse credit management and collections and view the function simply as the process of turning debtors into cash. Hopefully after reading this you will agree with my thinking and put a plan in place to implement the changes.

So what additional responsibilities could the credit department incorporate into your remit?

To me the credit function reflects the customer’s journey with you for as long as they are buying from you and you can increase the value of your contribution to the bottom line of your company.

Before you even start to read the following ideas I can see a large number of credit managers switching off immediately, we couldn't possibly do that with our current resources, and I agree with you, chances are that additional resources will be required, the reality is that additional resources will not be required in an overall context, it could require resources being redeployed from other departments to strengthen the credit function – properly managed that would be a good thing.

The scope of the credit department should begin before sales and marketing begin their involvement. There is great value in checking out new markets from a credit perspective before any time, effort or money is spent. Any experienced credit manager is in a position to identify the key players in any market and give the sales/ marketing team a graded list based on an agreed criteria of the customers in that market you want to do business with and the ones you will only deal with on a cash or pro forma basis.

At the end of the process, credit management are well placed to offer a simple treasury role for the business. That is by knowing the cash flow requirements of the business in the short and medium term, you can decide how much is required in the short and medium term and make sure there are no significant funds left sitting in a current account, not gaining interest or acting as an offsetting interest on another account.

 If you accept my challenge that the credit manager should be the manager of the margin – these two suggestions will not be as way out as they first appear. Managing the margin is the task of making sure every sale is turned into a profitable sale through receiving prompt payment and making sure that sufficient resources are retained to deliver excellence in business processes every step of the way.

The more areas that are placed under the remit of the credit function and as long as the credit manager in question knows what he or she is doing, the company will benefit greatly from this intelligent, financial, commercial and risk aware approach to business.

It is time for the credit managers to assert their authority and start contributing to their companies at the highest level.
      

2 Comments

Credit Management - the most under rated of all business functions

9/1/2015

0 Comments

 
To me Credit Management is still the most under rated of all business functions. No matter what articles I write or talks I give, people tend to agree with me after the talk or some even drop me a note to say that they have read the article and agree with every word I am saying. Then they go back to their own offices and for the most part continue to do what they have always done in the way they have always done it. There have been some notable exceptions and people who have contacted me sometimes months later to say that they had implemented a number of the changes that I suggested and it has made a huge difference to their business or credit union and they experienced a huge payback as a result.

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.


0 Comments

Managing Credit for SME’s

17/10/2014

0 Comments

 

One thing has always struck me that while small and owner managed businesses talk a lot about credit. They complain about the lack of credit, they moan about cash flow and not getting paid on time, they give out about people and companies who won’t pay their bills, they really don’t do anything about it.

I have been invited to speak at a number of business groups over the years from Chambers of Commerce to Enterprise Boards and I am always amazed at the whole attitude to managing credit. While it may be a popular topic for discussion the reality is often very different when it comes to action.
 

  The job of billing is often pushed down the priority list, and the longer you wait to bill your customers the longer it is going to take you to get paid. You should have a daily invoicing routine or at worst invoice everything weekly. 
 

  You should make every effort to ensure that the invoices are understandable, complete, correct and sent to the right person in the right office on a timely basis. You see, the longer you wait to send out your bill, apart from the obvious, you are sending out a message that getting paid is not really that important to you, and as a result you will be pushed down their priority list in favour of other suppliers who take a more active role in securing payment.


There should be one person in the office who is responsible for this function and following up to make sure payment is received in full and on time. I have seen various methods employed here, sometimes the boss themselves take on the responsibility for getting payment and in my experience this is the worst possible way to do things. The owner is emotionally involved and that emotion can spill over into damaging relationships with valuable customers if it isn’t managed correctly. Another option is to get the receptionist or secretary to ring for payment “when they have time”. If this is the system and the person involved has nor been trained, chances are they don’t really like this part of the job and other priorities seem to take over constantly.

  The third and best option is to have a trained, educated and dedicated person, even on a part time or contract basis, depending on the workload who is responsible for hitting the monthly cash collection targets.   

   

  Even with a dedicated person there are a number of basics that should be adhered to:

 
  1. Clear credit terms that specifies the day and date payment is due from each of your customers..
  2. Cash should be posted and correctly allocated on a daily basis.
  3. Credit Notes if due should be processed as quickly as possible.
  4. You have a clear method for dealing with queries, disputes and complaints.
  5. In addition to sales reports you should also monitor the gross profit by customer to ensure every part of the business is profitable.
 

Anyone who knows me, knows I am a fan of keeping things simple, if you want your business to survive and thrive you have to start by putting credit considerations at the front and centre of your business.

 Before I finish this article there are a few more questions I think I should ask:
 
  1. Do you have a new account application form for every new customer?
  2. Do you perform some kind of checking to ensure they are worthy of credit?
  3. Do you have written terms and conditions (that you haven’t robbed from someone else!) that are suited to your business?
  4. Are you aware of all the different ways available to you to finance your working capital, other than relying on an overdraft?
  5. If there are old debts lying around – what are you doing about them?
  6. Do you need help in getting it all together?
 

You have worked hard to build up your business, you have put in huge time and effort into getting customers to buy your goods or service and that work is detailed in your aged debtors’ analysis. The balances on your debtors ledger are just one short step away from cash, that one short step is the one that trips up most businesses. In business, you can lose money many times; you can only run out of money once.


If you need any further information on getting cash flowing through your business at an increased rate, feel free to contact me any time.

Declan Flood FIACP, FICM
The Credit Coach


 

Tel 087 244 7052

Email: declan@thecreditcoach.ie  

0 Comments

Action Based Reporting

3/10/2014

0 Comments

 
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.


Write Off Controls

I am often amazed at how long it can take for balances to be written off the ledger and then how easily balances are wiped off as soon as the decision has been made.  I have no doubt that balances are written off that could be collected if the proper systems and procedures were put in place.

In most companies it takes the signature of a senior accounts person and two directors to pay a supplier or raise a cheque and banks are reconciled and cash accounted for on a daily and weekly basis.

At senior management level there isn’t the same tight control on every single outstanding amount on the debtor’s ledger, the fact is that every balance on the ledger is potential money to the business, and this money should be treated the same as all other money.

What back up do you require before you write off money?

If a company has gone into liquidation – you should have a copy of the notice of Creditors meeting, a copy of the statement of affairs showing your company and the balance you were owed that should match the amount being written off, and if possible an update report or letter from the Liquidator stating the likelihood of you receiving payment and/or a printout from the Companies Office showing the correct status of the Company.

If a company has gone into Receivership, part the existing account, open a new one for the Company in Receivership, get the Receiver to recognize your retention of title for any goods you have there at the time and make sure he is personally liable for any debts that are incurred as long as they are involved, and offset the margin made on these sales against your specific provision for the debts of the original company. As soon as the receiver has got what they came for continue your collection action against the original Company for whatever amount is outstanding.

In the event the debtor is “gone away” - I have seen a bunch of envelopes attached to the write off request as full back up. This is too simple, if the owner is a sole trader they are still personally liable for the debts they incurred, get the home address from your account application form or other sources and make contact directly to make arrangements for the money to be paid. If the debtor is a company: are they trading somewhere else, have they moved or are they gone?

If the write off is due to a dispute, should it be taken off the account by means of a credit note? Usually write offs don’t affect sales, so the salesperson has the full sales amount in their figures and if you offer commission they have received commission on the full amount. By issuing a credit note you correct the sales figures and reduce the liability for commission, and reduce your bad debt write off’s.

Finally have a rolling system for formally writing off balances, preferably on a monthly basis. Even quarterly is better than annually. If you have a long list at the end of the financial year there is a greater chance that something could slip through the net that should not have been written off in the first place.

A debt is a debt, even if you write it off at some stage you can reactivate the balance at a later stage if the customer’s circumstances change. You should keep an eye on the “Satisfactions” section of your weekly Gazette to see a list of these.

A note about “Statute barred” some people think that this means that a debt is wiped completely after seven years, this is not true – it only means that you could be barred from taking legal action for recovery of the debt if it has gone unrecognized for that period. One other thing to note is that “Statute barred” is just a defense. You can still take legal action for a debt that is ten years old, it is up to the debtor to lodge a defense of “Statute barred” and we all know that 90% of judgments are not defended.

Finally, make sure a note of the amount and circumstances of the write off are clearly documented on the account – NEVER delete the masterfile record – just in case they come back at a later stage looking to do business with you. Diddle me once – shame on you. Diddle me twice – shame on me!

0 Comments

Realistic Bad Debt Provisioning

19/9/2014

0 Comments

 
One of the jobs that is often left to Finance is the whole area of provisioning. I think this is a mistake – The Credit Controller or Credit manager responsible for the collection function has to be involved in the process.

It is all too easy for finance to review the provisions when monthly or quarterly accounts are being finalized, and if the profit figure at the bottom is smaller than expected, the person responsible will look for some soft targets to increase the reported profits in line with expectations. If you think this couldn’t happen ask your financial accountant if it could! 

In my tenure as Credit Manager, I owned the provision figure as much as I owned the ledger balance and any changes had to be agreed with me first.

The reality is that in your medium to large Company, if there is a significant bad debt, the first question that will be asked is “Is it provided for?” – If it is there will be no serious repercussions, if it isn’t and that amount will hit the reported profits of the current month, then you have a problem of a completely different scale. News of the loss will be debated hotly in the boardroom as it has ruined the whole months figures and when that happens someone will come looking for someone to blame. Any ideas who that might be? Probably not the sales person! 

If you have a Credit Policy, and you should, you should have a clear outline of your provisioning policy. You should have specific provisions against specific balances you know are very high risk. You should also have a general provision with agreed %, preferably split between high, medium and low risk accounts. You need to look at previous performance, your current ledger risk profile and the market conditions in each industry sector in arriving at your figures. You should also take into account the age of the debt. The Credit Management Handbook tells us that we can expect to get 80% of debts more than 60 days overdue, 50% of debts more than 180 days overdue and only 10% of debts more than 360 days overdue, this can be used as a simple rule of thumb to give you a starting point in building accurate provisions.

You should also have some trigger for writing off old balances you know you will never get. Too often I see balances four or five years old still on the ledger and worse still they are still printing and posting statements to them on a monthly basis adding cost to an already lost cause.    

You should get some third party opinion before you write off old balances (maybe from The Credit Coach!), if there is one thing worse than keeping a balance on your ledger too long and that is writing off a balance that is collectable, if a different approach is taken.

There is a wealth of services available to you through The Credit Coach and BusinessPro to help you make informed decisions every time. The information is there and it is in your own interest to use it. 

If you do nothing else having read this article, have a look at your current bad debt provisions and see how they compare to last years write offs, and ask your self are they realistic.

0 Comments

Cash Flow Forecasting

12/9/2014

0 Comments

 
One of the jobs your Credit function should perform for the business is cash flow forecasting. There are lots of different ways of doing it, and there are lots of variables, but the best way I have found to perform this function accurately is to start with two main sources of information: your current Debtors ledger and your sales budget by customer by month.

If you look at your aged ledger for the past twelve month ends you can calculate what percentage of each bucket you collected every month. This will give you a clear indication if your collections are getting better or worse. For example if your Gross sales for June were €14,789 and the June Ledger is:




Balance     Current      1 month     2 months   3 months+

29,058       12,356       7,832        1,235        7,635

 

If your July gross sales were €15,276 and ledger looks like:

 

Balance     Current      1 month     2 months   3 months+

29,995       12,989       8,256        1,752        6,998

 

There are a few deductions you can make:

June invoices paid in June amount to 2,433 (14,789 – 12,356) or 16%

July invoices paid in July amount to 2,287 (15276 – 12989) or 15%

You collected 4,100 (12,356- 8256) of June money in July or 33%

You collected 6,080 (7,832- 1,752) of your May money in July or 77%

You collected 1,872 (1,235+7,635-6,998)of your April+ in July or 21%

You can also see the very prompt payers, your cash or prepay amount each month, in this case account for around 15%. If this trend is consistent throughout the year you can factor these %’s into your target.

  The next call you have to make is are you going to do the same as last year or better or worse depending on the economic conditions and what you are prepared to allow. Unless you are going to something drastic like engage The Credit Coach to help you reduce your debtors balance, work on the basis that you will perform in the coming year at the same level as you did last year. 

Then all you have to do is start with your current ledger as follows:

       

                July           August               September         October    

Op Bal       29,058       29,995               x                              y     

Sales         15,276       per budget         per budget         per budget

Cash          14,339       per %’s              per %’s              per %’s     

Cl Bal        29,995       x                     y                              z

 

This way you can build up an accurate forecast of what you can expect to collect every month, and build in some margin for slow payers as long as you match your figures back to the previous year’s actual achievements. Check the Days sales outstanding for each month to make sure the figures make sense before you present them.

A word of advice: if you are asked to prepare a budget, never over estimate what cash you are going to collect, as long as the targets are accepted at the start and delivered month after month, everyone will be happy.

From a reporting perspective, when you group your customers into their payment terms: say half pay the end of month following, half pay the month after that you can create a perfect ledger -  for July it would look like:

July perfection:

 

Balance     Current      1 month     2 month     3 month+

19,167       12,989       6,178        0              0

 

Perfection is defined as 15% paying in the current month, 50% of the balance paid at the end of the following month and 50% paid the month following that.

You can now see that there is 10,828 outstanding that shouldn’t be there and that is what you have to address from a management perspective: Why is that money outstanding? Is it disputes? Is it slow payers? Is it unofficial agreements? If you have payment plans in place your 3 month+ column could have a reducing balance and as long as they are abiding by the terms of the agreement I would include these figures as within terms.

0 Comments

Internal Communications

5/9/2014

0 Comments

 
Here is a controversial suggestion for larger companies to make their Credit Manager the Head of Internal Communications. I can see the accountants and heads of Finance reading the last line with horror, and their disbelief is only surpassed by that of the Sales Team.

The simple fact is whether you recognize it or not – your Credit staff are in contact with your customers more than anyone else in the business, and if they are trained and educated like they should be they also care more about your customers (who they would see as their customers) than most other people in the business. 

If you see your Credit function merely as a debt collection role you could be missing out on some great opportunities. By definition your credit controllers spend a large part of their day dealing with queries, disputes and complaints. This can be viewed as a negative or as with anything else in this world it can be viewed as a real positive as well.

Whatever goes wrong in your business from wrong product delivered, damages, pricing issues, unhappiness with the service received, false promises made by sales reps eager to make the sale. Issues with Purchase Orders, Contracts, shipping, discount rates, rebates, order entry or anything else including IT issues, all have one thing in common – they will all end up on a credit controller’s desk at some time in the form of a disputed or unpaid invoice.

You see, your credit staff know everything that is going on in your business, and they know everything that is going wrong as well. Question is: have you spoken to them lately? Have you a system that reviews all the queries and disputes received on a daily, weekly or monthly basis?  

If you answered “No” to either of these questions you could be missing an amazing opportunity. Talk to your credit staff before you ever engage business consultants – they know the real story. If you are the frustrated Credit Controller or Credit Manager in the company who is nodding in agreement with everything I have said and think “If only they would listen” – give them a copy of this article to read and get their feedback.

Now to get to the subject of the article, most problems that exist, most queries that you deal with, most disputes you encounter, all have one thing in common. They come about as a result of poor internal communications. If there is a pricing dispute a different price was communicated to the person in the customers AP department to the price entered by the person responsible for updating the price files in your company – no matter how many steps exist between these two people – it is a communications issue.

In fact, every single issue or problem that exists in your company today could be put down to poor communications.

The person who gets all this information first hand – the Credit person

The person who has to sort it out – the Credit person

The person who knows who to go to – the Credit person

The person that will finish the job 100% - the Credit person

The person that feels most of the pain when things go wrong and has to clean up after everyone else – the Credit person, so if this is true for you can you think of anyone else who is more qualified for the role of Head of Internal (and maybe even external!) Communications.

All your staff have a lot more to offer than they are currently allowed to contribute, it is time to make some changes that will put the customer at the front and centre of everything you do and by taking these issues seriously you are demonstrating your commitment to delivering excellence to your customers in a meaningful way and not just some glib slogan dreamt up by a PR agency.

If you agree with what I am saying and think you would benefit from some training in the area, drop me a line to Declan@thecreditcoach.ie or phone me on 087 244 7052. I am happy to help in any way I can.

0 Comments
<<Previous
Forward>>

    Author Declan Flood

    Lifelong Credit Professional dedicated to improving the standard of credit.

    Archives

    August 2018
    July 2018
    June 2015
    April 2015
    March 2015
    February 2015
    January 2015
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013

    Useful spreadsheets for you?

    Picture
    I have created 9 useful spreadsheets for credit professionals. Get the details of what is included here.
    Picture








    Declan's book is now available on pdf for €5.00

Irish Credit Management Training, 
121 Lower Baggot Street, Dublin 2, D02 FD45 
Tel 01 659 9466   Fax 01 659 9401       Email: info@icmt.ie
Copyright ICMT 2019

Contact us