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Fort Worth, Texas
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Thales Navigation, Inc.
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Kimberly-Clark Customer Financial Services |
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Do You Know How Much Your Credit Department is Worth?
And more importantly, does your management know specifically what your contributions are to the bottom line and exactly how valuable you are? Here's a template to help you quantify this. One of our favorite presentations at this year's Credit Congress in Orlando was Jay Clark's "Developing a Business Plan for the Credit Department."
Clark, now retired as assistant secretary and treasurer at Hughes Supply (now HD Supply), is currently vice president at JRC Group, Inc. in Florida. In addition, she happens to be married to the former head of credit at Hughes Supply and is also a speaker on treasury and cash management issues. So she fully understands the nuances of credit, but also looks at it through a slightly different and perhaps broader perspective than most.
Clark offered up many good ideas and in this week's letter we'll focus on just one: why you should compile a list of statistical accomplishments for your credit operations.
As part of the long term planning process for any credit department (think of it as your "business"), it's imporant to periodically look back and assess where you have been and how you have done.
In today's environment, that's more important than ever.
First, you'd better be aware of exactly how well you're doing and how valuable you are.
Secondly, your management needs to be aware of exactly what they're getting from their investment in credit and this is one of the best ways to communicate that contribution.
Credit Today's Download Center
Forms, templates, letters, contracts, spreadsheets, security agreements, credit apps, personnel forms, A/R administration, L/C checklists, customer visit report, much more...
Click here to check it out...
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With those thoughts in mind, Clark recommends putting together a list of your statistical accomplishments. It's a good idea to formalize this and do it at least annually.
Here are some of her ideas for what to highlight in such a document. Of course, your situation will undoubtedly be unique, but this will get you started and help you put together a document that works for you:
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Statistical Accomplishments
Fiscal Year 20xx
In addition to the stated objectives for Fiscal Year 20xx, the credit department has completed many other projects and accomplishments. Below is a summary of the major accomplishments and applicable statistical data for credit in 20xx.
For Credit Services
- Utilized [____] during the account evaluation process. This resulted in reducing collection periods by [______] and thereby saving approximately $xxx,xxx in interest expense over an x-month period ($xxx,xxx annualized savings).
- Detected billing errors from xxx vendors resulting in savings $xx,xxx. (this is only if your credit department gets involved in this side of the business, of course).
- Performed analysis with respect to lockbox processing delays. Approximately xxx hours an estimated cost of $x,xxx was spent on this research. The bank is anticipated to reimburse $xx,xxx in fees, $xx,xxx for interest expense caused by the posting delays and $x,xxx for temporary labor.
- Performed analysis with respect to lockbox processing delays. Approximately xxx hours an estimated cost of $x,xxx was spent on this research. The bank is anticipated to reimburse $xx,xxx in fees, $xx,xxx for interest expense caused by the posting delays and $x,xxx for temporary labor.
- Set up credit services knowledge transfer for various departments:
- Cash management department to ...
- Legal department to ...
- Finance department to ...
- Assumed full responsibility to provide cash services to xx subsidiaries
- Completed xx% of the migration from [_______] service provider to [________] service provider for a particular product/service.
- Implemented the following new procedures:
- Written procedures and posting policy for EFT payments received
- Began utilizing standardized forms for ...
She also recommends including specific statistical data such as:
Statistical Data
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Beg |
Net change |
End |
% Chg |
| # of Accts |
8,342 |
1,1000 |
9,432 |
+13.1% |
| Avg Invoices Per Day |
5,200 |
300 |
5,500 |
+5.8% |
| # of New Acc'ts Evaluated |
522 (last year) |
-35 |
487 (this year) |
-6.7% |
| DSO |
47 days |
-3 days |
44 days |
-6.4% |
| A/R |
83 mm |
+1 mm |
84 mm |
+1.2% |
| # of branches served |
12 |
+2 |
14 |
+16.7% |
| # of lock boxes used |
4 |
0 |
4 |
0% |
| And so on depending on your situation... |
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Depending on your department's responsibilities, you should also tabulate and include statistical data on your collection and any other "services" you perform for your firm.
If you're a member of Credit Today Online, you can download the entire template here: Worksheet; Stats & Accomplishments in Credit.
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This month's topic: Extended Terms Requests
Click here to participate!
We're examining:
- Whether there has been an increase or decrease in requests for extended terms recently
- Whether or not credit departments have policies relative to extended terms requests
- Whether or not extended terms impact sales commissions
- What the primary factors are when considering extended terms requests
- Who is ultimately responsible for approving extended terms
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July 2010
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