The 21 st Century Credit Manager Czech Institute of Credit Management Mark Harrison BA (Hons) FICM...

The 21st Century Credit Manager

Czech Institute of Credit ManagementMark Harrison BA (Hons) FICM (grad)

Founder & CEO www.creditcee.eu

http://www.creditcee.eu/

Value of Debtors

• How much % of assets is debtors on Balance Sheet?

• Typically > 30%

Phases of Credit Management

Credit worthiness testing

Credit decision

Collateral (guarantees/underwriting)

Credit monitoring

Collection handling

Insolvency proceedings

3

Measures etc

• Working capital

• CA - CL

• Liquidity ratios

• CA/ CL

• CA- stock /CL

CzICM 7-8 November 2012

Days Sales Outstanding• Definition:The average debt period in days, called Days Sales Outstanding, referred to as an average

number of days, from the invoice date until payment.

• This ratio indicates, in what relation outstanding customer receivables to turnover for the last accounting periods are.

• It represents the average length of debtors and is an indicator of the efficiency of the collections

• Formulas

• DSO = average amount of receivables of the last 3 months x 90 / turnover of the last 3 months

• DSO = current o/s balance x 365 / turnover of the last 365 days

• DSO = receivables at the end of period x number of days period / turnover within the period (without cash sales)


Provisions

• What do you understand by Bad debt provision?

• Calculations can be:

• % of total debtors

• % of over 60 days

• Actual known cases

• Combination of above

• Reduces sales and profits PTPI /EBITDA


Cost of Credit

• balance outstanding 5,000,000

• interest @ 11% 550,000

• daily cost of credit 1,507

• dso / cost of credit 45 67,808

• dso / cost of credit 42 63,288

• saving 4,521


WHAT IS A CREDIT MANAGER?

• A Debt Collector?


DEBT COLLECTOR



• A Salesperson?


SALESPERSON



• A Banker?


BANKER



• Perhaps even Customer Service?


CUSTOMER SERVICE


THE TEAM


THE ROLE OF THE CREDIT MANAGER

• To promote the highest possible volume of profitable sales, over the shortest period of time, with the minimum of bad debt

• That involves risk assessment, credit control, accounts collection, and above all, customer service


A COMPETITIVE WORLD

• If we get it wrong, our competitor wins

• A changing world: new business replaces old business at an ever increasing rate

• Now over 4.8 million small businesses in UK

• 18% fail within 12 months

• 40% fail within 2 years

• 50% fail within 3 years


Credit Manager/Customer Service

• The “go between”• Main point of contact• Who’s interests are being served?• A Sales function or a Finance function?• A Customer Service function• Linked closely to query resolution• Assistance benefits both supplier and customer


A COMPETITIVE WORLD

• There will always be someone else ready to pick up our customer when we fail him

• Big is not always beautiful• Success is based upon customer focus• It should be just as easy to get it right as it is to

get it wrong• Getting it wrong is dead easy!!


First rule of credit

• Never assume!!INSERT BENNY HILL CLIP HERE How do you know your invoices

are…………….. printed posted received opened correct


Benny Hill tells us not to 'assume'.mp4

HOW MUCH CAN GO WRONG?

• Price• Discount• Shortage• Damage• Model• Size• Colour• Early delivery• Late delivery• Credit terms• Credit limit• Wrong delivery

• Special deal arranged with Sales• Wrong rate of VAT• Errors in extension• Wrong address• Wrong description, or misleading

description• Insufficient details• Customer order number• Unable to match to order• Unable to match to quotation• Wrong name

Every invoice you send represents all that is good or bad about your company

AND THERE’S MORE

• The way we respond to customer complaints

• The way we resolve customer complaints

• The way we listen to customers

• The way we talk to customers

• The way we communicate with customers

• INSERT COASTGUARD CLIP HERE

• And take emails for example……………


German Coast guard trainee.mp4

E-MAIL If you don’t stop, think and check, you could say something you don’t

mean…………………………………………………………………… By the time he was admitted his rapid heart had stopped, and he was

feeling better The patient has a chest pain if she lies on her left side for over a year The patient states that there is a burning pain in his penis which goes to his

feet The patient has no history of suicides She slipped on the ice and apparently her legs went in separate directions

in December Between you and me, we ought to be able to get this lady pregnant The patient left the hospital feeling much better except for her original

complaint


MEETING CUSTOMER REQUIREMENTS

• Keep customer focused

• Internal reorganisation is “internal”

• Cost savings must not damage customer interface


THE LANGUAGE OF CUSTOMER DISSATISFACTION

• Silent

• Vocal

• Vitriolic


KEEP REFRESHING THE SKILLS BASE

• Script without understanding - NO

• Knowledge and experience - YES

• Cost versus efficiency - NO

• The wrong decision for the right reason ?!


NOT MY JOB

• “Dedicated” customer service

• Has this had the effect of saying to all other employees – customer service is not my job?

• Someone else’s responsibility

• NO NO NO!!!

• Major reason why the Credit Manager is at the heart of customer service


THE COST OF NOT GETTING IT RIGHT?

• Lost sales

• Damaged goodwill

• Tarnished reputation

• Word of mouth

• Falling profits

• Redundancies

• Insolvency


THE CREDIT MANAGER

The key to the success (or failure) of any business which survives and prospers through the granting of trade credit

The real B2B banker – forget RBS, Allied Irish or any other amateur operation

The focal point for all customer contact The one person in the whole organisation who can unite all

functions with one common aim – meeting customer needs

2nd rule of credit????

3rd rule…


Rights

• Right goods

• Right place

• Right time

• Right price

• Right colour

• Right quantity

• Right quality

• ALL add up to the right to be paid

• Why give any customer an excuse not to pay?

• We have only ourselves to blame


Any questions?

Never doubt that a small group of thoughtful,

committed people can change the world. Indeed,

it is the only thing that ever has

Thank you


The 21 st Century Credit Manager Czech Institute of Credit Management Mark Harrison BA (Hons) FICM...

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