In Focus Collections
Left-right: Simon Bayley; Steve Bramley; Tariq Ali; Tom Edmunds; Wendy Warrington >>
same money and make considerably more! If that is the case, then as the
credit manager I am not even going to be in the conversation.
GB: In my experience, it is more about when you are doing your projections and bad debt provisions, in that, businesses look at what is the likelihood of default from the onset. For example, if the write off rate is say x%, the business will use this to determine their pricing, knowing there is provision to write off x% built into their model. I think this is why some firms’ do not invest in improving their write-off provision. I think firms should aim to improve their bad debt even if they are achieving the profit targets. This does not necessary mean investing in more systems and resource as bad debt could be improved by simply outsourcing to firms focussed on helping business reduce bad debt.
NSF: I was at a working capital meeting with a major accountancy firm recently and they were saying that they have done two case studies with companies that have tens of thousands of customers and they are still not getting their invoices out on time and correctly, this then causes complication and then they cannot collect the cash, in a timely manner. You think to yourself: why are you not investing in this and ensuring that it is a simple process. Not being able to invest is a false economy because it is not expensive for the benefit that it brings.
SB: If you are given a budget of, say, £10m and you have one person coming from credit control to say that, ‘for that £10m I can generate an extra £20m’, or whatever it might be for the bottom line, but the next person is the sales director and they say that
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they can get £20m of new customers, then people naturally will gravitate to the ‘shiny thing’, which is new business. Now that is wrong, but people will always spend money on the front end. Working on the sales side, I can see the fallibility in this logic: on the sales side, I will deal with the customer for 24 hours, but the collections team will be dealing with them for five years.
MP:When people say that they are finding it hard to get the investment, then I will
and reporting through, otherwise people will start to ask why we are spending the money on you when we do not get any fraud.
Working on the sales side, I can see the fallibility in this logic: on the sales side, I will deal with the customer for 24 hours, but the collections team will be dealing with them for five years
always ask how good is their reporting through to the directors about the value of your area to the business. And if you need additional investment, then there is another element: to be able to say, ‘if we have this investment, then it will improve us by this amount, and then we can yield an extra profit or revenue into the company’. Because part of the work I used to do was in fraud prevention. So if you are very good at fraud prevention, then you can have all the systems and controls in place that will mean new business can begin rolling through without any real delays as you are doing the checks, and you will still end up with low levels of fraud. You need to have very good systems
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PH: Is credit particularly bad at justifying its worth to the business? I feel that I am and one of my challenges in the next year is in terms of justifying the risk function in our business. On the one side, in terms of risk, I can show the downside, in terms of bad debts and write-off history, but what I would really like to get to is to look at the upside. If we have everything in place, and you invest in the credit control and risk function, what is the upside outcome and how much more profitable could we be?
MP: Compliance is another big part of this. A lot of compliance really comes under the terms of treating customers fairly, and the purpose should be to show the business that if you are compliant and you act in that way, then you will probably have customers who respect you far more and then those customers, even if they are in financial difficulty, might be more likely to start paying you or keep paying you even at a reduced amount.
AB: A good credit professional is a blend of having to have a huge range of skills and areas of knowledge, but also knowing when it is appropriate to get a real expert in. You need to be able to take a view of how early in the piece, say, you will want to bring an external agency in or a lawyer, how far upstream will I make that call? When do I need to go to the head of sales and have a serious conversation? This balance is the key thing, rather than the credit professional trying to act as a surrogate head of sales or a surrogate paralegal. CCR
March 2020
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