Considerable credit department time is spent releasing orders. In most companies, checking the order queue is not only the first and last thing the credit staff does everyday, but something that is done periodically throughout the day. On top of that, there are also the rush orders that involve a sales or customer service representative calling you to take a look at a specific deal. Besides the interruption to your other work, the time spent on these types of calls can quickly add up.

Over time, the order approval burden has been increasing. Same-day shipment has required credit departments to more closely monitor the order queue. In a sense, every order has become a rush order, and with that has come an increased administrative burden.

Order approval, though it is an absolute priority, need not be a time drain on your department. To begin with, many of the decisions are obvious and easily made. Many more orders are released after cursory reviews than are put on hold or that otherwise involve a significant amount of handling. Moreover, there are several things you can do to minimize the number of transactions you need to review.

By making system improvements to your order approval process, there is a good chance you can realize significant time savings and commensurate productivity benefits. Here then are ten action steps you should consider:

1. Use Automated Approval Algorithms
Far too many credit departments don't take advantage of automated approvalalgorithms, and many of those that do could benefit from implementing more sophisticated rules. At a minimum, you want any account that is under its credit limit with all bills current to be automatically released. If you assign each account a risk rating in addition to a credit limit, you can also build in grace periods for days past due, allow lower risk accounts to exceed their credit limits by specified percentages and filter out unresolved, past due, partial balances below a specified amount. The idea is to only capture the accounts that deserve to be held. That saves you the time spent reviewing orders that would be released anyway.

2. Use Credit Scoring Models
Combining fresh credit scores with your release algorithms enables you to create a much more dynamic approval environment than one based on a simple risk rating that can very quickly become obsolete in a dynamic business environment. Furthermore, implementing credit scoring within a sophisticated decision matrix. (See the article Credit Decisions: One Size Does Not Fit All) provides you with an order approval structure that can be easily tweaked in response to changing business conditions.

3. Keep Your Receivables Clean
While you can create contingencies within your release algorithms for small balances and such, you can also cut down significantly on the number of orders held up by relatively insignificant open items by periodically cleaning up the small stuff that accumulates in every receivables portfolio. A/R junk tends to slow down all types of receivables processing, so there are additional benefits from adopting this practice.

If you are in a high-volume environment, the risk of loss from a small order is likely to be more than offset by an increase in sales volume to other small accounts and by the efficiency your department gains by concentrating your resources on larger customers.

4. Automatically Approve Orders for New Customers Below a Set Threshold
If you are in a high-volume environment, the risk of loss from a small order is likely to be more than offset by an increase in sales volume to other small accounts and by the efficiency your department gains by concentrating your resources on larger customers. D&B reports that 80 percent of bad-debt losses result from customers that have been doing business with you for more than a year. That is why it is counterproductive to spend much effort on small dollar, new-customer credit reviews. And if they pay you once, they will probably pay you again. If their orders increase, then a review may be called for.

5. Raise Credit Limits
A common cause of orders being held up is overly conservative credit limits. In fact, some credit folk tend to set credit limits on the low end to ensure most orders will get held up, thereby prompting a call to the customer. If you have a pro-active collection process, there is no need to use the order release queue as a collector's work queue.

6. Automate Cash Application
When cash isn't posted in a timely manner, some orders will inevitably get caught in the order release queue for no good reason. Auto-cash, EIPP and other automated remittance processing solutions ensure cash receipts are always up-to-date.

7. Accept Credit Cards and E-Checks
Another way to speed up the payment process, thereby increasing the pool of customers eligible for automatic order release, is to accept credit cards and electronic checks, many of which can be converted into a next-day ACH payment.