The topic was addressed during a 26-minute TV set at the last FORUMDIMO TV.
Trade receivables are often the most valuable asset on a company’s balance sheet. It is also potentially the riskiest, especially if poorly managed. It is therefore natural that it should be a central concern for the Chief Financial Officer (CFO), the guarantor of his company’s economic performance. Feedback from Céline Collard – Administrative and Financial Director, SUPPLAY, in a workshop led by Matthieu Eberhard, DIMO Software sales engineer, with Alain Falomir – Senior Manager BFR (Besoin en Fonds de Foulement) at EY.
What is Credit Management?
According to Alain Falomir: “It’s a business process in its own right, encompassing customer risk management – what needs to be done to reduce the risk of exposure of the company’s customer receivables – but also dunning and collection following invoicing. Litigation management, which is crucial, is related to this previous activity. Finally, lettering – the reconciliation of incoming payments with invoices – can be problematic in terms of image if payment has already been made.
In the context of Credit Management, the CFO has 2 major roles: to ensure the company’s financial continuity by controlling accounts receivable and deadlines. But also to foster a “cash culture” within the organization. Credit management is part of WCR, just like inventories and trade payables. However, the cash culture is not as well developed in France as in other countries. We therefore need to raise the awareness of sales people and buyers, who are more focused on more commercial and historical notions of lead times, sales and margins.
For Céline Collard: “Credit Management depends very much on company objectives. Cash culture is very much in evidence in fast-growing organizations, which need financing for acquisitions in particular. Working capital requirements and a cash culture make it possible to avoid external financing and to turn to the banks. This cash culture is also found in companies with a high level of debt, which cannot afford any significant negative variation.”
Covid has accelerated the need to track cash and cash flow
Many companies have had to cover their fixed costs after a drastic drop in business overnight. They have had to revise their financing plans to cover their fixed costs. The fear of customer default has also accelerated this cash culture. Cash culture and sales culture are complementary, not mutually exclusive
Companies have therefore sought to forecast and evaluate cash flow, which is no simple matter. Subsequently, they mobilized in a more or less organized way to raise this cash, even if many benefited from state-guaranteed loans (PGE). Maintaining a “commando spirit” over the long term requires the implementation of processes and tools, and a change in habits.
Animation is key to Credit Management… but you need the right tool
Training employees in dunning and collection is essential. You need good people skills, but you also need analytical skills. Structuring is achieved through people, organization and the professionalization of employees, but also through the setting of objectives and in-depth knowledge of customers. Tools are key to this approach, but they don’t do everything. People must be the 1st link in the chain, as must change and process management. The tool chosen depends on the structure of the company and its customer portfolio, since different types of reminder are used in different ways. In the case of a large volume of contracts, the company will need a high-performance tool.
Céline Collard explains: “At Supplay, the credit department is made up of a credit manager who mainly manages customer outstandings. There’s also an accountant who handles lettering and collections, as well as a collection officer to manage reminders and disputes. Work had already been done on lettering, and then collection. The initial problem was that responsibility for paying invoices was shared between the branches and the head office credit department. We had noted communication and information transfer problems between the two parties. In the end, the volume of invoices was the most problematic challenge, as the company was expanding rapidly. We had to find tools to structure and automate the lettering and dunning processes.
Supplay has prioritized lettering with collection
No good dunning without good lettering! Neglecting the question of volume risked impacting lettering lead times, and therefore collection quality. Supplay had to manage the team’s work overload: automating the lettering process would free up time for dunning. The company selected CashOnTime Collection for collections. Ease of use was a major factor in this choice.
“We wanted to make as little use as possible of our IT teams, who were already mobilized on other large-scale digitalization projects. We deployed CashOnTime Collection in less than two months, on time and on budget, which is rare for this type of project,” notes Céline Collard. “Saas and full web solutions also bring transparency“, says Matthieu Eberhard.
Several steps implemented with the collection tool
The first objective was to be able to record and categorize disputes, track them and resolve them as quickly as possible. The benefits are rapid, with a direct impact on payment times. It is completely independent of the collection period: the fewer disputes there are, the shorter the payment period. “We also want a flexible reporting and indicator tool. Our analysis needs fluctuate greatly depending on the period, the customer portfolio and the region. The tool enables us to produce customized reports autonomously and simply. In terms of KPIs, every morning I look at the amount of payments, the rate of overdue invoices, my ageing balance and the number of invoices in dispute. I also load my credit limits, so I can check which accounts are overrun. I have tailor-made, à la carte reports, including color-coded customer payment habits – in short, information that’s fairly easy to process on a day-to-day basis,” says Céline Collard.
“This information is very useful to pass on to sales staff, so that they are aware of the financial state of the customer’s account” says Matthieu Eberhard. “The CashOnTime deployment project was partly carried out remotely. The new collections manager was able to get to grips with the tool quickly and easily,” concludes Céline Collard.
In the same vein: How does AI optimize your WCR and receivables optimization processes?
