Most of us in finance have a preferred area of the stack of processes and transactions that we deal with in our daily lives– mine is where the revenue is collected just after sales has accomplished their role. Credit to Cash, or what we call C2C, has quietly grown an impressive set of technologies, but in my view, the opportunities to optimize this crucial part of the financial value chain are often under emphasized. Outsourcing the function has by far been the most viable alternative for many companies vs. managing it in-house or as a captive center. Increasingly, the hybrid combination of the two paths has gained ground when the entire end to end process is not a fully outsourced. Yet regardless of the paradigm you embrace—in-house, outsourced or some combination—the underlying success drivers are the same. Effective credit and collections management depends on the synergy of key components from platforms and people, with a global process integrated effectively into both. When you get this equation right, you greatly gain more flexibility in your choices and your access to the few highly skilled subject matter experts rather than the many manual transactional process handlers.
It’s fairly easy to identify a sub-optimal credit and collections function. Just look for such footprints as manually intensive dispute resolution cycles, inaccurate cash forecasting, increasing volumes of receivables write-offs and unearned deductions, and lengthening days-sales-outstanding (DSO). These are the “tell-tale” signs of an encumbered or overburdened accounts receivable process. But what makes a good one? Most C2C practitioners will tell you it’s an empowered and knowledgeable team of people, streamlined receivables processes, and the intelligent application of technology to automate processes to drive better outcomes.
Empowering the team
Informed and empowered people form the front line of effective credit and collections management. In fact, functionally, there ought not to be a distinction. The trick is keeping the credit and collections team informed and empowered, particularly as operations grow in size and complexity. This is not always easy, even with a homogeneous, 100 percent in-house team, all located in the same place. Manual collections processes are filled with routine and non-productive tasks. The right information doesn’t always flow to the right places at the right times. And staffers can often lack guidance on how to approach particular issues in order to achieve the best results.
These problems are amplified when you face the need to quickly deploy more resources—either captive, part-time or through an outsourcer—to handle spikes in workload or gain localized coverage. It takes time to effectively communicate account relationship strategies and corporate policies, but time is something you can’t always count on having.
Streamlining the processes
Processes give shape and guidance to a credit and collections team’s activities and provide a context for measuring its effectiveness. But business processes aren’t always perfect. In the revenue and receivables arena, which culminates in credit and collections, processes are frequently disjointed as they cut across multiple departments and span geographies. Sometimes, certain parts of a larger process get automated, but these islands of automation have to be bridged, and that is usually accomplished by manual processes.
All this makes it difficult to effectively provision even a captive collections team with timely and meaningful information. When you have a team that includes an outsource partner, access to long and short term resources becomes a more viable option as a key benefit of such a relationship. Most outsource relationships build upon load balancing structures which enable the deployment of process and technology ready resources.
Leveraging technology for visibility and control
I embrace technology as most of us do- it can empower people and drive more effective processes. But it takes a platform, not a piecemeal approach. In credit and collections management, as elsewhere in the financial value chain, the proper implementation of technology can drive end-to-end visibility, improved controls and ensured compliance – and that’s additive value.
A platform approach, as with Capgemini’s Webcollect accounts receivable suite, provides visibility across disparate systems and processes by concentrating reliable and timely information in a single spot, thus providing a common source for business process pulse checks and for the application of consistent metrics to measure performance. A platform also enables common technologies to be applied to ensure consistent controls and practices enterprise wide, based on common data, rules and assumptions. This can include automated workflows to optimally guide team members through complex processes, as well as the automatic application of business rules to enforce enterprise policies. It’s incredible what can be achieved by centralizing information and automating processes across all relevant systems and departments – and the right technology platform makes the difference in enabling financial data and decisions to be documented and auditable.
In credit and collections management, this can all translate into exceptionally valuable (and seamlessly linked) functionality as:
- Automated credit application and evaluation processes
- Risk mitigation automation
- Customer invoice and payment portal
- Auto cash application and exception processing
- Dynamic rules-based account segmentation
- Comprehensive portfolio management and analysis
- Collections task prioritization and automation
- Automated dispute management and resolution
- Real-time reporting, analytics and alerts
- Technology enabled processes
On a strategic level, an end-to-end technology platform for credit and collection management enables comprehensive process management coupled with unprecedented flexibility for resource allocation and process automation. With optimization through this approach, the reductions of revenue leakage and expense associated with manual processes will result in both internal and external customer satisfaction improvements as well a few restful nights for the CFO.