CM September 2020

PANEL BASHERS
“I attribute much of my career success
to the CICM community where I am
always able to draw upon knowledge
and skills from the extensive array of
members and partners.”
Nigel Fields FCICM
“Money owed by customers is an asset
and for every day they don't pay, this
is a drain on your cashflow and profit.”
Matt Godby MCICM(Grad)
WELL, the simple answer is no! As with any
area of a business, there are a range of
measures that can demonstrate success – or
failure.
A fully functioning credit management
department will be using a range of
measures and targets that don’t necessarily relate the ageing of the
debt book. And with it being in the ‘pounds and pence’ business,
these can be tangible measures that don’t open themselves up to
interpretation.
Here are a few ideas from my experience. These should always
be transparent to the credit controllers and built into any annual
performance reviews:
Panellist Matt Godby.
MCICM(Grad)
MATT GODBY
Matt is the Principal at Godby Credit Management, an
order to cash specialist who helps businesses across the
country to get paid on time by their customers. Matt has
more than 25 years’ experience in credit management,
having started his career with Cargill Plc. His expertise
spans multiple industries, from telecoms to fashion,
healthcare to logistics. As Matt says: “Money owed by
customers is an asset and for every day they don't pay, this
is a drain on your cashflow and profit.”
If you’d like to join our panel of experts, or
if you have a question to ask, contact the
editor at sfeast@gravityglobal.com
• Cash collection. We all know that a sale isn’t a sale until it has
been paid for. A successful business relies on cashflow – not just
sales – to grow. Cash targets should be put in place for individual
credit controllers and the department as a whole.
• Segmentation. Most debt books should have somewhere around
20 percent of the customers making up 80 percent of the debt.
There can often be a long tail of smaller balance customers, who
may not get called at all. It’s important that the top customers get
proper focus, whilst managing the whole debt book. So, targets
could be based on your top 20 customers (priority), with a slightly
different one for the long tail.
• Customer calls. Relationships aren’t built on emails. It’s crucial
that the credit controllers are making calls to customers. You get
a much better feel of customers by having conversations and
that means you identify risks of problems earlier. Set a minimum
number of calls for each credit controller to make and regularly
monitor/discuss compliance.
• Risk. The primary and only reason for a credit management
department is to protect the risk of the business. This means
not only ensuring customers pay to terms, but also making sure
the risk analysis is robust enough to understand their financial
position. This means credit checking all new customers and
importantly, having the authority to refuse those that present
greatest risk. Existing customers should also be credit checked
regularly – your own payment patterns should be built into this.
I’ve created measures with my credit teams where their portfolio
of customers are credit checked at least every six months.
• Customer credit limits. Credit limits exist to control your
business exposure to bad debt. It is therefore crucial that credit
limits are kept up-to-date across your whole customer base and
therefore reflect their current financial circumstances. This links
directly to my risk comments above and so, when credit checking
is done, credit limits should be updated routinely. It’s prudent to
inform customers of their credit limit. It’s also very important that
the business takes credit limits seriously and when customers
reach it, necessary action (on hold, payment) is taken.
Any targets and KPIs need to be fair, reasonable and measurable.
I find that implementation is best achieved through agreement
with staff, balanced with the commercial requirements of the
business.
Advancing the credit profession / www.cicm.com / September 2020 / PAGE 35