Magazine article Business Credit

The Impact of Technology on Credit Managers: The Convergence of Data, Analytics, and Process Automation

Magazine article Business Credit

The Impact of Technology on Credit Managers: The Convergence of Data, Analytics, and Process Automation

Article excerpt

As credit and collections managers survey their profession, they see a ground swell of support for new technologies. After years of declining budgets for IT investment, there is pent up demand for productivity enhancements in the form of centralization, standardization, and outsourcing of financial functions. The reasons are numerous.

* Inaccurate forecasting of DSO, write-offs and loss provisions is no longer acceptable.

* Enterprise Risk Management (ERM) is more important today as memories of Enron, Tyco and other corporate scandals are fresh in the minds of CFOs.

* Sarbanes-Oxley has created an urgent need to implement company-wide internal controls.

Even though the economy has turned, companies are still looking to do more with less. Consequently, the elimination of redundant and inefficient tasks and the automation of repetitive tasks are crucial. Credit and collections managers need to be able to deliver on these needs, while at the same time, managing their continuing day-to-day activities. ROI is also playing a larger role in today's climate. These pressures are creating significant challenges because the state of credit and collections technology for many companies is woefully inadequate.

Among the hurdles are:

Rigid Technology: Despite some recent progress, Enterprise Resource Planning (ERP) vendors lack the full range of capabilities necessary for complete trade receivables management. Frequent, extensive and costly upgrades and customization are often needed. Additionally, many companies still have multiple ERP systems across business units and countries, underscoring the need for a single unifying view.To address these issues, some companies have created a patchwork of third-party software solutions, spreadsheets and home-grown systems that fail to provide a full feature set, do not easily scale with their businesses and lack critical workflow capabilities.

Data Granularity: Although a wealth of credit data sources are available today, many companies still rely on a single data bureau for all credit decisions, and a majority of companies lack an automated scoring process to review accounts. In fact, as evidenced by a recent Credit Research Foundation report entitled "Credit Scoring:The Future of Decisioning in the A/R Process", only a third of all respondents are currently using scoring.The same report showed that the vast majority of respondents rely on a single vendor as their primary source for scores. The complexity and inflexibility of these systems tend to hamper the use of multiple sources of data due to the problems associated with linking and maintaining such sources. Companies only further complicate the situation when they attempt to blend multiple data sources for scoring or automated processing. For multinational corporations, these problems are exacerbated clue to the complexity of managing data on a global scale.

Project Prioritization: ERP upgrades and corporate governance obligations such as Sarbanes-Oxley compliance-including their associated business intelligence implementations-compete for IT resources. IT departments are under pressure, and budgets are still so thin that even projects with strong ROI projections can be delayed significantly.

System Integration: It wasn't long ago that the main questions credit managers asked vendors were,"Does your system do X?" and "How much does it cost?"Today, it is no longer sufficient to have one system that will do "X", and another that performs "Y." Regardless of the type of financing, issuers of credit are realizing that too much time is wasted handing off tasks, toggling between screens, duplicating data entry and trying to keep separate systems synchronized. In the article "Middle Market Lending: Trends in Credit Granting, Loan Operations and Process Improvement" (Business Credit, September 2003),John O'Connor identifies the centralization of financial analysis tasks as being of critical importance for successful middle-market lenders. …

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