The Credit Policy Why it is so important to know your own processes

Transcription

1 The Credit Policy Why it is so important to know your own processes 14th November 2013 CZICM Symposium 1

2 The Credit Policy When was it written? When did you last challenge it? How often have you reviewed it? How often do people refer to it? Can everybody remember everything in it? Is it a document or is it embedded into your daily processes? If you want to deliver business success it needs to be embedded 14th November 2013 CZICM Symposium 2

3 The Credit Policy today s objective This presentation is addressed to senior credit people operating within Shared Service Centres (SSCs) or BPOs It s a big topic you face many challenges in implementing credit policy We only have half an hour In the time available my objective is to leave you with some positive ideas to think about 14th November 2013 CZICM Symposium 3

4 Agenda About Co-pilot Evolution of Shared Service Centres Challenges in implementing Credit Policy How to meet the challenges How to identify and implement the correct solutions 14th November 2013 CZICM Symposium 4

5 About Co-pilot We are independent advisers on credit management best practice Our clients are multinationals, SSCs and BPOs Our focus is on delivery helping credit management visibly deliver to their company s bottom line 14th November 2013 CZICM Symposium 5

6 The evolution of SSCs three phases Process cost reduction Service level excellence Strategic business enablement Where is your organisation? Does the Credit Management function influence/lead this process, or follow it? 14th November 2013 CZICM Symposium 6

7 Challenges in implementing Credit Policy Relationship with Sales Understanding local laws and culture Billing and chasing in different languages Applying consistent risk rules and approach Operating on several different ERP systems Linking to , CRM, sales systems 14th November 2013 CZICM Symposium 7

8 Challenges in implementing Credit Policy Resolving disputes and queries Empowering local people to make decisions Managing tasks by exception and prioritising work Blending multiple sources of information into decisions Ensuring compliance with credit insurance policy rules Credibility within the organisation A couple of scenarios: 14th November 2013 CZICM Symposium 8

9 The CFO phone call Our Key Account, Acme Global has just issued a profits warning - sales are down 10%. What is the impact upon us? Four possible answers: 1. I ll get back to you 2. I m sending you a pdf now it shows you our global position at close of play last night All outstanding balances, payment history, risk profile and history, credit limit history, decisioning audit trail, etc 3. I m sending you the pdf and, as we speak, I am running the new numbers through my risk analysis tool it shows me that the impact upon Acme s financial health is xxx 4. You have already sent the pdf, the analysis and your recommended action - and this is what the CFO is phoning to consult you on 14th November 2013 CZICM Symposium 9

10 PDF example page xxxxxxxxxxxxxx 14th November 2013 CZICM Symposium 10

11 The Sales Director phone call Why won t you give me a bigger credit limit on International Widgets? Answer: I m sending you a Delinquency Report now. It shows that they regularly pay 45 days beyond terms and it shows you how much this is costing us. Our margin on this business is x% If you want a bigger limit you need to negotiate a higher price, or get them to pay sooner 14th November 2013 CZICM Symposium 11

12 Meeting the challenge Leadership and influence is stronger when credit policy implementation achieves: Visible delivery to the bottom line Driving sales growth Driving customer service Reducing costs and improving cash position Effective, real-time, management information (MI) putting yourself in a stronger and more authoritative position because you can view and demonstrate how efficient and effective strategies and processes are 14th November 2013 CZICM Symposium 12

13 Meeting the challenge Best Practice is vital If you run large or multiple ledgers the biggest single impact upon visible business performance and MI will be achieved through deploying credit management software Without it it won t happen 14th November 2013 CZICM Symposium 13

14 Credit risk management software deliverables 3 examples (more at back of hand out) Ability to automate risk decisioning and monitoring on bulk of the risk population ( 80/20 rule freeing up the team to focus on the risks where they add most value) Ability to pull in data from multiple sources in order to achieve best practice risk assessment for all categories sole traders through to large corporates Ability to drive sales growth through: Better identifying good/bad new risks (at point-of-sale if applicable) perhaps permitting higher initial credit limits Ability systematically to pre-authorise increased credit limits for good/improving existing customers And communicating this to Sales Department 14th November 2013 CZICM Symposium 14

15 Collections software deliverables 3 examples (more at back of hand out) Ability to manage collections processes across different brands and businesses Significant improvement in DSO through more efficient collection processes and speedy dispute resolution. This results in enhanced working capital and reduced funding costs Improved customer satisfaction through: making it easier for him to do business with you (EG: small business uses ipad - Click to pay ) enhanced ability to respond quickly and professionally to customer issues - and to see that those issues are managed through to resolution and to customer's satisfaction 14th November 2013 CZICM Symposium 15

16 ERP implementation? Don t go there! How to implement the solutions Credit people explaining what they want to IT people Things get missed or misunderstood Time-consuming internal project Huge costs Changes require another project There will always be things you didn t think of because you didn t know you could have them Specialist credit management software is: Able to work with multiple ERP systems Better (you have to see it to understand how you could improve processes) Quicker to implement Cheaper Future-proof 14th November 2013 CZICM Symposium 16

17 Which software? Available software: Credit risk management software Collections software Cash allocation software Data cleanse software Best Practice will mean that you need different suppliers for each component Align the right suppliers and you can do some very clever and powerful things to drive performance improvement 14th November 2013 CZICM Symposium 17

18 Summary Successful Credit Managers will be those who embed and evolve credit policy & use it to drive performance improvement Credit Managers need and deserve the best tools to do the job technology has to be aligned to credit policy It s not easy and to get it right you need guidance: Where do I start? Risk software, collections software or both? How do I evaluate the suppliers? How do I create a combined solution? How do I move this forward with CFO and colleagues? Co-pilot has unique experience and knowledge and can guide you through this process 14th November 2013 CZICM Symposium 18

19 Credit risk management software deliverables Ability to automate risk decisioning and monitoring on bulk of the risk population ( 80/20 rule freeing up the team to focus on the risks where they add most value) Ability to pull in data from multiple sources in order to achieve best practice risk assessment for all categories sole traders through to large corporates Ability to grow sales through: Better identifying good/bad new risks perhaps permitting higher credit limits Ability systematically to pre-authorise increased credit limits for good/improving existing customers Significantly enhanced ( real time ) management information on a large range of criteria including aggregations, payment behaviour, risk trends, cash flow, cost of late payment Full audit trails Enhanced competitive edge through ability to adapt risk strategies quickly Ability to absorb new acquisitions into system, have an immediate overview of aggregate risk and implement original or house rule sets as you wish Significantly enhanced funding opportunities through real time ledger visibility and transparency Ability to negotiate better credit insurance terms and to reduce risk of claims rejected because of non-compliance to policy conditions 14th November 2013 CZICM Symposium 19

20 Credit risk management software deliverables Improvement in DSO through more efficient collection processes and speedy dispute resolution results in enhanced working capital and reduced funding costs Headcount (reduce, redeploy, or same number for growth) Reduction in bad debt through ability to set different strategies for high risk customers More motivated staff because they have: efficient daily planning for all tasks including follow-ups more information to hand (all on one screen) enhanced ability to respond quickly and professionally to customer issues - and to see that those issues are managed through to resolution and customer's satisfaction Improved customer satisfaction through the above and through making it easier for him to do business with you Ability to manage collections processes across different brands and businesses Ability quickly to absorb new acquisitions into the system and set appropriate strategies 14th November 2013 CZICM Symposium 20