Credit risk management may seem straightforward – implement policies and procedures that reduce risk and bad debt exposure for the company. However, isolated credit risk management like this can severely hinder a business’ ability to meet growth goals. On the other hand, managing credit policy in the context of broader organizational strategy and goals can offer tremendous value across the order-to-cash cycle.
Problems that stem from an isolated credit management strategy
A good way to assess whether your company’s credit management policy may be misaligned with your business strategy and sales goals is to ask the following questions:
1. Are low-risk customers with good payment behavior being prevented from increasing order volume because of insufficient credit lines?
2. Are high-risk customers with poor payment behavior continuing to place more orders because the sales team is trying to hit its volumes?
Answering yes to these questions may suggest that you need to revisit how credit policy is developed and managed within your organization. Here are 3 tips on how to better integrate credit into the order-to-cash process as well as better align credit risk policy with your overall business strategy.
How to ensure that credit management is aligned and integrated with overall business strategy
1. Consistent review of customer-level credit policy and payment behavior
Ensuring that you monitor the payment behavior of your existing customers several times a year and performing annual credit reviews is critical to ensuring your credit policy is aligned with what you are trying to achieve as a business. Credit and collections teams working together to understand why customers are not paying invoices can lead to better, more effective collections strategies. Perhaps the customer is not satisfied with the order or is facing an operational challenge relative to making a payment. Doing these reviews frequently and consistently at the customer level will also surface trends and insights that can be used to better meet the needs of your best customers while also strengthening overall collections strategies and tactics.
2. Sufficient visibility and transparency across the order-to-cash team
Even the strongest strategies and tactics will fail if there is not a centralized 360 view of the customer that every stakeholder across the order-to-cash process – from the customer service rep to the collector. Unfortunately, it is nearly impossible to achieve this holistic, real-time view of the customer in organizations where the order-to-cash process remains siloed and plagued with manual processes. Achieving sufficient visibility becomes even more challenging in situations where some or all of the team is working remotely.
Without an end-to-end order-to-cash solution like Cforia to ensure 2-way data flow across all core business systems, each team is working with a significant disadvantage. A service rep who is helping with an order may not see that the customer’s available credit is insufficient. A collector investing significant time on a particular account will not know that payment was received earlier in the morning.
3. Consider the customer experience even when it comes to credit and collections
Not only does insufficient visibility directly impact operational efficiency, but it also adversely impacts the customer experience. Every interaction a customer has with your company should be consistent and seamless. There is general agreement that a lack of integration and data sharing across the order-to-cash process can be detrimental to the customer.
For instance, you need to determine how equipped the collection and credit team members are to handle the number of customers that you have. You also should use metrics to measure and segment your customers according to specific needs and relationships developed already.
A holistic credit and collections strategy delivers significant value. In addition to optimizing profitability, this approach enables the sales team to more successfully drive top-line revenue growth and the collections team to more effectively avoid collections challenges later in the process. An integrated order-to-cash platform like Cforia, facilitates this holistic approach by ensuring real-time data and customer insights are shared across teams.
Cforia is steadily working towards building the best working capital solutions for order-to-cash services for businesses like yours by increasing account coverage and automating customer outreach through order management, invoicing and e-billing, customer self-service, and other customer-centric solutions.
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