Leveraging Technology to Enhance the Credit & Collections Process

As is the case with many process areas, the use of technology to dramatically improve the efficiency and effectiveness of the Credit & Collections process has been the recent experience of companies across the globe.  While ERP systems continue to improve their functionality in this area, there are a number of bolt-on solutions that can take this functionality to the next level while providing a seamless interface to the user.

During a recent Peeriosity Peercast^TM, a global manufacturing company shared its experiences in implementing the GETPAID solution to streamline its Credit & Collections process.  Faced with utilizing five different ERP systems ^[1] in a very decentralized environment based primarily on product lines, this Credit & Collections organization lacked consistent methodologies & standards.  Their collection efforts were completed based on how a credit manager saw fit, which was generally followed by an aged trial balance report with the accounts with the highest exposure amounts receiving ^[2] the most attention.  There were also issues with properly managing risk since the credit files were not kept properly updated, and were sometimes incomplete.

While this company did comparatively well in managing their overall collections performance, with a  Bad Debt As a % of Sales (Bad Debt ÷ Sales) result that was well within industry standards, they realized that they weren’t working efficiently, effectively, or consistently and that an opportunity was available to them to significantly improve their performance in the Credit & Collections area.  To accomplish this, they took a three-step approach:

1. Restructure the Department
   1. Group/Product-based to Task-based
2. Implement GETPAID
   1. Consolidate Receivables
   2. Utilize the workflow of the Collection and Risk Modules
3. Formulate a Living Credit Policy
   1. Tighten Risk Activities – Annual reviews, monthly analysis, and bad debt reserve logic
   2. Tighten Collection Activities – Who to contact, when to contact, and how to contact

Focusing in this research abstract on the second step of implementing GETPAID, some of the reasons that solution was chosen by this company included: 1) Provides true workflows for collection and risk activities, 2) It is a tool to make a reality of who, what, when, and how, 3) Has the ability to consolidate A/R from multiple systems into a single view, 4) Allows for a consistent collection strategy, and 5) Uses D&B numbers as the means to consolidate each customer.  The following is a high-level summary of how GETPAID works:

• Sets Schedule for Collection Analyst
  • Email/Fax
  • Phone Call
  • Letter to Salesperson

• Follows a Strategy based on “Risk”
  • Credit Score determines Risk Grade
  • Risk Grade determines Collection Strategy

The feature company then went on to describe the functionality of the system and how they use it to most favorably impact their Credit & Collections operation. ^[3]

Looking now at the results of a recent Peeriosity poll created using the iPolling^TM technology, the first poll question identified what Credit & Collections solution providers companies were using in conjunction with their primary financial system.  GETPAID was the most popular at the companies that do use a bolt-on solution, with 25% of the responses, while 55% of the companies do not currently utilize this type of technology.

The second poll question then addressed the level of satisfaction experienced by those companies that are using a bolt-on solution provider for Credit & Collections.  Those companies that were either Very Satisfied (30%) or Satisfied (20%) accounted for half the responses, while a surprisingly high 30% indicated that they were unsatisfied with the solution provider. 

Some factors that could possibly contribute to an unsatisfactory user experience for this type of solution include the overall quality and scope of the implementation, the ability of the provider to properly interact with the primary Order-to-Cash solution ^[4], and the commitment level of the company to properly administer the use of it once it is implemented.

As was the case with the company featured in this research abstract, there are a number of powerful technology solutions that can take the performance of most Credit & Collections operations to the next level with a reasonable investment of time and resources.  Making it a priority is likely the biggest challenge of all for many companies.

How effective is your company’s Credit & Collections process?  Are there further improvements to this critical process that can be put into place with a reasonable amount of time and effort?

Who are your peers and how are you collaborating with them?

“Peercasts^TM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion.  Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content.  Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member.  Using Peeriosity’s integrated email system, Peer Mail^TM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees. 

“iPolling^TM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility to all respondents and their comments. Using Peeriosity’s integrated email system, Peer Mail^TM, members can easily communicate at any time with others who participated in iPolling.