A flooring business with an annual turnover of $90M+ and sixty stores was running a decentralised Collection Model with each store being responsible for its own collections. A National Credit Manager was monitoring the Groups debt exposure. WTC was engaged to formalise the approach to Credit Management and improve working capital.
We spent a fortnight consulting with various stakeholders including finance staff and sales management, reviewing existing reporting, policies and procedures and analysing collection patterns.
Key Issues Identified
- Newly appointed National Credit Manager given little support at store level.
- Lack of a uniform approach to credit management and collections across the Group.
- Very limited interaction between National Credit Manager and stores.
- An obvious need for training - many stores simply did not have the expertise to manage collections.
- Lack of a “cash culture” at both Finance Department and store level.
- Monthly management reporting very basic and in need of improvement.
- Existing credit policy generally not followed and in need of revamping.
Over a four month period WTC worked in the business focussing on:
- Mentoring the National Credit Manager.
- Lifting the profile of the National Credit Manager across the Group and ensuring interaction and cooperation between Credit Control and the stores.
- Driving monthly “Collection Blitzes” to improve working capital.
- Developing training material with the “in house” trainer.
- Introducing a suite of debtor reports to include in the monthly board report.
- Designing credit risk management reports.
- Updating the credit policy and developing a procedures document.
Within four months the following had been achieved.
- 10% improvement in collection efficiency with the company focussed on cash.
- Training material finalised and training sessions organised.
- Credit risk management reporting introduced.
- Updated credit policy being rolled out.
- Regular review meetings taking place between the National Credit Manager and the stores.