As we set out on our journey to discover what 2018 is going to bring, I would like to give you some of my ideas on how to improve your management of credit in the coming year.
Technology has impacted every aspect of our lives, from the domination of the smart phone to electronic banking, things have moved on so far even in the past few years.
When it comes to managing credit, we are, to a large extent, still in the dark ages.
Credit Terms are no clearer than they were ten years ago and are often not adhered to.
Assigning specific lines of credit to individual customers is still not done by the majority of suppliers.
If we do get a company report to assess the creditworthiness of a new or existing customer, we are using information that is between one and two years old.
We still have invoice queries on pricing, quality and quantity of goods delivered.
We still revert to old fashioned methods of collection from making telephone calls to email sequences to contact customers who have not made payments in accordance with agreements.
We still have a significant portion of our ledgers in the overdue columns.In fact with the advent of the offshore outsourcing culture of locating AP departments in Romania or Bangalore the interaction with customers has got worse instead of better.
I would love to see a technological revolution in the area of credit, where we have:
- up to date information on the current creditworthiness of all our customers,
- An automated system that ensures the price agreed is the price that appears on the invoice.
- A linked PO to payment process that ensures the goods ordered are delivered, billed and paid for at the agreed price on the agreed date and time.
- Transparency on the companies who are not paying their accounts in full as agreed without fear of censure by the Data Protection Commissioner or the Competition Authority.
- An efficient payment posting and allocation system that ensures that payments received are posted and allocated in real time, and not subject to unacceptable delays.
- Visibility in real time of every companies current cash flow position for the next six months.
Maybe I am a bit ambitious, still I believe that the technology is currently available to deliver each of the six points above, and all we need is a new energy and a new resolve to make it happen rather than shooting in the dark as most businesses are currently doing.
There has always been a gap between paying lip service to credit by saying that “getting paid is very important to us” and the follow up action that is required to make sure that every penny extended on credit is safe and collectible on the agreed due date. Just think of how better business would be if we universally adopted this simple method.
In the meantime, there is no substitute to proper education & training in the area of credit and ensuring that your staff have the tools and the knowledge required to perform at a level of excellence. I wish you a happy and successful 2018 and from a business perspective this can be achieved by collecting what you are owed when it is owed and maintaining the goodwill of all your customers. Go for it!
Declan Flood, Chief Executive of Irish Credit Management Training