When we looked at the organizational alignment of the Credit Function in one of last month’s articles, we noted that Credit was part of an Order-to-Cash process in Shared Services for 39% of companies, with 22% having credit reporting into Treasury. The majority of companies, at 75%, were either very satisfied or satisfied with their reporting relationship. While often stated as together as “Credit and Collections”, the nuances of collecting past due accounts may not be identical to the process for determining credit worthiness and extending credit, which may have a significant impact on where responsibility for the Collections process may reside at a company.
iPollingTM Results Review
Peeriosity’s iPollingTM was recently used to gain insight regarding the organizational structure of the Collections process at our member companies. The poll results indicate that 37% of the companies have Collections fully consolidated in Shared Services, with 5% responding that they are fully centralized, and an additional 5% indicating that the process is outsourced. A significant percentage of the companies (34%) are utilizing a hybrid design in which more than one of the structures is being utilized. Interestingly, just 5% of companies have the process fully decentralized.
When considering the organizational approach for Collections that companies are expecting to take over the next 3 to 5 years, 35% see additional consolidation into Shared Services, with an additional 15% seeing more centralization within a headquarters/business unit type structure. None of the companies anticipate a move towards decentralization. With 30% not expecting any changes and 15% shifting towards more outsourcing, the overall shift is clearly towards consolidation in Shared Services or greater centralization, and away from a decentralized, and likely inconsistent or unstructured, Collections process.
Here are some of the poll comments from Peeriosity members:
- North America is consolidated in a regional GBS site. In Europe, we leverage a BPO, but ownership is centralized under GBS leadership. In Latin America, it’s a combination based on region. In Asia Pacific and Australia/NZ, it is a combination based on country.
- Regional centers for back office processes like Master Data, Credit, and Cash Posting. Localized centers for front office processes like Collections and Disputes.
- Although our Collection function is currently outsourced, we are looking at automation and robotics across all of AR which may impact the Collections process and reduce the outsourced scope in time.
- Combination based on a variety of factors.
- Long-term strategy to be evaluated.
As companies have transitioned to Shared Services the processes that were the closest to the customer were always the last ones to be included. That reality exists today, with an ongoing shift taking place towards Shared Services for both the Credit function and the Collections process. This transition appears to be occurring more quickly for the credit evaluation process than it is for the process of collecting on past due accounts.
What does the organizational structure look like for your company’s Collections process? If your process is decentralized, do you expect greater centralization or a move toward Shared Services during the next 3 to 5 years?
Who are your peers and how are you collaborating with them?
“iPollingTM” 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 MailTM, members can easily communicate at any time with others who participated in iPolling.