Magazine article Business Credit

Improved Relationships through Agile Receivables Management

Magazine article Business Credit

Improved Relationships through Agile Receivables Management

Article excerpt

In today's nearly real-time business environment, better communication across departments and better communications with your customers is essential Unfortunately, many credit departments are hamstrung by manual processes and struggle to effectively manage these important relationships. The good news is that solutions for managing collections and disputes are evolving to place an increased focus on optimizing both internal and external relationships and procedures. In fact, many companies owe the success of their accounts receivables (A/R) departments to automated software tools that incorporate powerful workflow and business intelligence (BI) features.

Bridging The Department Gap

Jim Torongo, VP Credit at Hartmarx Corp., a Chicago-based producer and marketer of business, casual and golf apparel products, knew that in order to best serve his internal customers, he needed cutting-edge tools. "Using spreadsheets and disparate or inadequate systems was not efficient," Torongo explains. Manual processes and endless paper copies had created a bottleneck.

After implementing a cash application and deduction control solution with BI and workflow features, Torongo's credit department is in a much better position. "We expect a healthy return on our investment," he says. "The cash-application module alone will reduce our clerical staff by two thirds." Employees who used to labor over manual processes can now be redeployed in more strategic areas, where the "human touch" is an asset, not a liability.

The ability to tie credit, disputes, contract, pricing issues, terms and policies into one system is also key.

"Work invested is now captured in a live database, which brings all the key information together in one place," says Torongo. "The bottom line is we are no longer experiencing the frustration of trying to manage 40,000 paper files or the difficulty of trying to connect the dots represented by multiple spreadsheets and ad hoc queries to assess."

Because of the nature of its duties, the credit department is often viewed internally as the "bad guy," especially when it comes to sales. This makes facile and timely communications between departments an absolute must. With the right systems in place, the age-old schism between the credit function and the sales staff can be softened--even eliminated. Customer credit limits can be more accurately established, and credit-related "surprises" that can delay or kill deals can truly be a thing of the past.

Knowing Your Customers

A key aspect of any successful credit function is relationship management, and having the necessary information readily available obviously provides a huge advantage in negotiating and resolving customer issues. Since measuring, tracking and analyzing customer disputes and deductions is a critical task, astute credit departments are using automated systems not only to track and resolve deductions, but also to maintain their credit relationships. Focusing on reducing days sales outstanding (DSO) and bad debt only goes so far, especially if a credit manager is "driving blind." Relationship management software can provide vatuable insight into each customer's credit and collections "life cycle", revealing opportunities to increase sales and expedite collections.

Most credit automation tools provide the ability to develop credit scores for potential and current customers, and then automatically alert credit managers if an account falls outside predefined limits. Since a computer can review thousands of accounts in the time it takes a human to review one, the upshot is that instead of looking at every application and reviewing every account, credit managers can spend their time examining only those that are flagged for whatever reason. …

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