Accounts Receivable Management and Best Pratices

Act on time to CashOnTime

Best practices No Responses »
Jun 092010

Improve your DSO, reduce the amount of deductions on invoices and process claims faster  

By Ken Young

Claims management is a significant issue that impacts cash flow and the overall corporate profitability. The two main areas that account for these claims are when deductions are taken off payments, and when invoices are unpaid awaiting a credit adjustment.

Credit and finance professionals need to perform a root cause analysis. They must determine the “why” behind the areas of concern, and then put in motion the strategy (or the “how”) in order to prevent similar types of situations from reoccurring.

The deductions fall into three main categories: preapproved credit adjustment issues, unapproved and possibly preventable credit adjustment issues, and unapproved and unpreventable credit adjustment issues.

The preapproved items relate to issues such as pricing, rebate, allowance and co-op advertising.  The problem here is that even though the credit was preapproved for the customer, the credit note was not issued prior to the deduction being made. If the credit had been generated then there would have been a direct offset and no additional time and effort would have been spent on resolving the concern.

The unapproved and preventable type of deduction would relate to issues such as wrong shipments, damaged goods, products out of specification, incorrect bar codes or late shipments. Continue reading »

Posted by mlevasseur at 10:24 Tagged with: , , , ,

Back to basics

Best practices No Responses »
Jun 072010

Once in a while, someone tells a simple truth in such a way that it suddenly appears as a revelation.  This is certainly true of many things we know and forget about until the famous back to basics is abruptly brought back to our attention. This is exactly what does Michelle Dunn in reminding us of the importance of repetition and rigour in the collection process of pass due accounts from clients.

 Early detection, communications and strategy are the key to success as she explains in this article about managing collections.

Thanks Michelle.

Posted by mlevasseur at 14:53

CashOnTime welcomes a new contributor

Best practices No Responses »
May 282010

In order to add a practical and concrete point of view to our discussions regarding collection and credit management, we welcome to theses pages the veteran credit manager Ken Young. Ken will share his thoughts on different aspects of collection and credit management as well as answer questions on these topics.

In his first post,  Ken gives a closer look at good reporting as an effecient mean to manage A/R.

MANAGEMENT REPORTING: Is it providing substantial value?

 Timely, concise and relevant information is the key to successful reporting – not information download and overload.  If a department’s performance is below expectations in any area, then there is a reason for management to pay close attention to the daily operations.  However, if you are consistently meeting your budget and expectations, and are improving compared to past performance, is it really necessary to present substantial amounts of detailed information to management?  What is the value in presenting pages and pages of information? Continue reading »

Posted by mlevasseur at 10:42 Tagged with: , ,

Are you afraid of the cloud?

Best practices 1 Response »
May 132010

In specialized credit and collections forums and blogs you will often read or hear a fairly strong resistance to using e-mail in the collection process and of a reluctance to use offsite software solutions that deal with sensitive financial or client information. People use many reasons to justify this fear of remote IT but the one that is most frequently formulated is the following: Is it reliable? And, more importantly, is it safe?

The ideal way to address these questions is to refer skeptics to the following article featured in the Canadian Financial Post. It is in fact a summary of an interview with the Chief Information and Operations Officer of the country’s top bank who gives a fairly detailed and clear definition of cloud computing and its benefits. Like him, many well-informed observers are of the opinion that cloud computing is here to stay and there are many reasons for this. Among other things, cloud computing is cost efficient, as well as easier to deploy and to maintain than any onsite solution. Furthermore, sharing resources allows for greater performance with the same amount of energy.

But is it reliable? Is it safe? At least it seems safe and reliable enough for a bank. What else could we ask for?

Posted by mlevasseur at 16:30 Tagged with: , , , ,

Accounts receivable are costly, very costly in fact!

Best practices 1 Response »
Mar 292010

Altogether, customers owe US and European companies a total of 5.6 trillion dollars in A/R. Broken down, this amounts to 2.6 trillion for the US alone and 3 trillion in Europe.

Financial institutions, insurance companies and collection agencies strive to insure, finance and collect these vast fortunes of overdue payments, for a fee. Outsourcing A/R’s can be an attractive solution for some companies; however, many suppliers and manufacturers prefer to do it themselves and collect their past due accounts directly from their clients. If well-planned and well-executed, this can generate real gains – especially in this day and age where credit is more and more expensive and increasingly difficult to obtain.

Many factors must be considered before deciding to put in the time and effort to collect in-house. Firstly, it constitutes a good way to keep control over A/R’s which are the key to improving one’s working capital, a much sought after item since the cost of credit has substantially increased in the aftermath of the last financial crisis.

Even though the enormous amount of money we referred to at the beginning of this article applies to economic activity of whole countries, the same principle applies to a variety of companies large or small. Many are forced to find alternate sources of funding to ensure the pursuit of their activities. It doesn’t matter how big or how small the company is, the actual context of the situation requires special attention to be paid to on working capital as it dictates a change in strategy when dealing with suppliers and customers.

The expert of the British Risk Industry Igor LAX of  TENZOR explains the dynamic of credit and risk in the following article that he gracefully authorized a reference in this Blog.

In broad terms, the secret of success seems to reside in a company’s ability to manage the terms of payments to its suppliers and to be paid in time by its customers.

How do you manage this matter?

What do you think of Igor ZAX’s article?

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Posted by mlevasseur at 13:59 Tagged with: ,
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