Fintech Insights

Is your credit and collections team having a crisis of confidence?

May 04, 2017

According to FIS’ 2017 Credit & Collections Market Study, only 12 percent of credit and collections professionals believe that their performance is above the industry average, and a striking 32 percent have no idea. So why this lack of confidence, and what can be done to overcome it?

First, there are huge opportunities to improve process automation. While the majority had achieved some degree of automation, credit and collections managers should be reviewing processes and controls across their organization to identify scope for improvement, and discussing opportunities with technology providers. After all, only five percent indicated that they had fully automated their order-to-cash lifecycle, and even those respondents admitted to having spreadsheets in their process somewhere.

Second, many credit and collections teams find it difficult to collaborate effectively with other parts of the organization, such as sales and customer service. This has implications for exception management, particularly disputes. Disputed invoices are a major cause of increased DSO and cash flow uncertainty, and can have a negative impact on customer relationships. They can also have a negative impact on internal working relationships, if tasks and responsibilities are not clear. Currently, fewer than half of those surveyed have automated, work-flow driven processes to separate a disputed amount from an invoice amount, route that dispute to the relevant resolution team or individual, prompt the appropriate approvals and take action to collect the undisputed element of invoices. Such processes would make each person’s actions for disputed invoices clear, and allow resolution to take place more quickly, while the collectable portion of the invoice is chased. This is particularly effective when using mobile tools for tasks such as approvals, alerts, monitoring disputes, etc. to keep the right people engaged in a convenient and efficient way.

Third, it doesn’t matter how quickly invoices are paid if the payments are not being allocated promptly to customer accounts. Many companies have reported backlogs in cash allocations, which skews DSO figures, results in incorrect collections actions and queries, and blocks new customer orders as credit limits are unnecessarily utilized. Currently, a third of companies indicate that cash allocation hit rates are only 50 percent or less, and fewer than one in five have achieved a hit rate above 90 percent.

These will not wave a magic wand over credit and collections performance, but they can be useful places to start. Working with technology vendors to identify priorities and “quick wins” can help to increase confidence, while also demonstrating the value of investing in credit, collections and cash application capabilities, not only for the credit and collections department itself, but across the wider business.