I will suggest a few:
1. Cash Accounts. If you operate cash accounts then the balance on every single account should be zero every single day. No exceptions. You need to print off a report of these and escalate on a daily basis as appropriate.
2. Unallocated Cash. If customers are paying you money and you cannot match it to specific invoices every time you have a problem. You need to put a process in place that ensures you investigate the cause of the non allocation. If a credit note, debit note or journal entry is required it should be done on the day the cash is received so the cash can be allocated properly. Avoid simply allocating cash received to the oldest invoices, although this will paint the best possible debtors ledger, your job is to maintain the integrity of the ledger and that means knowing exactly what every person owes you and the precise aging of the balances.
3. Accounts over 90 days. This takes on greater significance if you are using invoice financing or have access to credit insurance because this is the stage invoice financiers will want their money back and the insurance company require a report from you. In both cases you have to take swift action. Failure to report an overdue debt to the Insurance Company in line with the schedule of the policy could result in a claim being disallowed. In the current climate credit insurers are looking for any legitimate reason not to pay a claim, so it is up to you to play by the rules.
4. Days Sales Outstanding. While there is a lot wrong with this simple measure, it gives a clear picture of the overall performance of the credit function. If you say that increased sales can affect your DSO’s that means you are calculating them the wrong way! Measure this month versus last month and the same period last year to get a better handle on the overall performance, taking into account seasonal factors.
5. New Accounts – should be closely monitored for at least three to six months from the date the account is opened to make sure they are complying with the agreed terms. Failure to do this could encourage bad habits from your customers and if they think they can get away with not paying – they will!
Other areas you might consider:
· Accounts within Terms.
· Accounts approaching their Credit Limit
· High Risk accounts
· High Value accounts
· A particular sector or country experiencing problems at this time
The list is endless, but hopefully this reminder will help you gain better focus on the areas that really matter. Then decide when it is appropriate to run the reports i.e. daily, weekly or monthly and then do it!