Credit Management Consulting

A $100M turnover building services company was faced with a DSO of 76 days and an over 60 day debt of 30% of the ledger. WTC was engaged to fix this problem.

Approach

Working closely with the Credit Manager we sat for a week in the Collections Team reviewing the ledger, observing collection practices and talking to Collection Team members and other key people in the wider business.

Key Issues Identified

  • Time strapped senior finance managers.
  • Credit Manager and Collections Team lacking motivation.
  • Collection Team overstaffed - a mix of long term FTE’s and temporaries not meeting targets.
  • Poor control of the major debtor accounts.
  • Little interaction between Credit and Sales.
  • Lack of a “collection culture” throughout the business.

Solutions

Over three months WTC introduced the following initiatives after consulting fully with the CFO, the Credit Manager, the Collections Team and senior Operations and Sales staff.

  • Credit Manager mentored on a regular basis by WTC.
  • Revised targets set and financial incentives introduced for the Collection Team.
  • Head count in the Collection Team reduced from five to four.
  • Reallocation of duties within the Collection Team with one Collection Officer responsible for the management of the Major Accounts.
  • Weekly meetings set up between Credit Manager and Sales Team.
  • Roles and responsibilities communicated to the business.

Outcomes

Within four months the following had been achieved.

  • Reduction of ten days in the DSO from 76 days to 66 days.
  • Reduction of 10% in the over 60 day debt from 30% to 20% of the ledger.
  • A motivated Credit Manager engaged in the process.
  • Motivated Collection Officers working towards and achieving targets.
  • Credit and Sales working together to minimise the credit risk and to maximise cash flow.

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