This document discusses factors that influence credit and collections processes. It provides examples of case studies where companies implemented action plans to improve their days sales outstanding (DSO). For Alamy Limited, focusing on core collection activities, credit management, and ongoing process improvements helped reduce DSO from 60 to 41 days as turnover increased 400%. For Unit4 Business Software, enhanced reporting, improved processes, credit checks, and dispute management helped reduce DSO from 77 to 51 days despite a 25% rise in turnover.

1. MCICM(Grad) FACP(Grad)

2. Index
 Influencing Factors
 Company Diagnostics/Planning for improvement
 Case Study

3. Influencing Factors

4. Credit Approval
The following should be taken into account here:
 Credit Checks and ongoing evaluation for all new/existing
customers(where appropriate)
 Utilization of Credit Limits to manage risk exposure
 Credit Limits and Payment Terms agreed with the
customer from the outset and adhered to within the
business
 These factors should form a key part of a Business Credit
Policy document- outlining processes and procedures in
full- signed off by key stakeholders and reviewed
periodically

5. Invoicing
 Invoices should be prompt- ideally issued electronically
ensuring any undeliverable are followed up
 Aim for an invoice error rate of <1%
 Ensure payment terms are clearly stated and layout is user
friendly
 Payment method choices should be clearly stated
 Promote automated payment options(Direct Debit)
wherever possible
 Provide incentives for prompt payment and penalties for
late payment if appropriate

6. Query Management
 Aim for a query rate of less than 1% of invoices
generated
 Include in T&C’s that only the queried element can be
withheld
 Highlight top query types by value for prioritisation
 Agree internal SLA’s within the business for resolution
 Monitor query types on an ongoing basis- and action
root cause resolution
 Ongoing weekly reporting highlighting problem areas
and performance against SLA

7. Collections
First Line
 Well trained and focused staff
 SMART targets and objectives
 Emphasis on “Big Ticket Items” each month for maximum
impact
 Progressive and tailored dunning cycles
 Effective and supportive follow up systems
 Ensure staff are fully focused on core activities
 Adequate software
Second Line
 Ensure correct partners in place
 Ongoing DCA/Legal portfolio Management

8. Process/Systems/Reporting
 Ongoing Process improvements
 System efficiencies/improvements
 Improved Customer Satisfaction/Relationships
 KPI/Query Management reporting

9. Company Diagnostics/Action
Planning

10. Debtors Analysis/Action Planning
 Undertake debtors analysis to ascertain reasons for
current DSO
 Draw up and agree action plan with the business for
improvement
 Concentrate on quick wins and high impact areas first

11. Case Studies

12. Alamy Limited
Background
 DSO in August 2005 was 60 days- this was reduced to
41 days by June 2010
 During this period the turnover increased by 400%
 Staff costs during the period rose at a far lesser rate
than turnover- at around 100%

13. Alamy Limited contd
The below factors were prioritised as part of the action planning by estimated
impact
DSO reduction was achieved by:
 Focusing team on core collection activities
 Performance management/Target setting
 Redesign of Dunning Cycles(by customer segment) and follow up system- from
order to litigation
 Identifying big ticket items and concentrating on these for maximum impact
 Credit checking and ongoing Credit limit management
 Introduction of Business Credit Policy and the associated procedures
 Ongoing process improvements/adoption of “Best Practices”
 Improved inter company and key Client relationships
 Sourcing and implementation of new Credit Management Software
 Ongoing query root cause resolution leading to invoice accuracy going from
85% to 99.5%
 Reduction in query turnaround times

14. Unit 4 Business Software Limited
Background
 DSO as at August 2012 was 77 days, reduced to 51 days
by December 2014
 Turnover across the period increased by 25%

15. Unit4 Business Software Limited
The reduced DSO was achieved by:
 Enhanced Management Information to establish and highlight problem areas
 Focusing team on core Credit Control activities
 Introduction of individual targets/performance management
 Introduced weekly updates with the Credit Controllers covering the big ticket
items
 Automated Dunning Cycles implemented streamlining existing processes and
maximising ledger coverage
 Dispute management system introduced which led to a 66% reduction of the
value in query- despite turnover increasing during the period by £20m or 25%
 Improvement of customer/internal relationships encouraging cross team
working
 Ongoing process improvements/streamlining/adoption of best practices
 Credit checking and ongoing risk management limiting exposure where
required

16. Unit4 Business Software Contd
 Speeded up invoice despatch and improved layout and design, ensuring clarity
 Introduced late payment fees where applicable
 Appointed Debt Recovery Solicitors for utilisation where applicable