Let customers pay faster and keep your credit risks manageable
- Shorten the payment term of (large) customers
- Improve the payment term (DSO) of the entire debtor portfolio
- Ensure structurally better cash flow
- Manage credit risks
- Show your customers a professional company in financial terms. Is taken seriously
Interim credit manager from The Netherlands
Most SMEs do not have a credit manager on the payroll, but they do need that expertise on a regular basis. Hiring an interim credit manager full time is still a bridge too far for many companies. That is why there is now a solution for founders, CEOs and CFOs of SMEs. Your personal interim credit manager who is available to you for a few hours a week or month.
Credit management large companies versus SME
Almost all large companies have extensive credit control departments, which focus on collecting invoices as well as keeping credit risks manageable. All new customers and orders go to finance, where an expert examines the question: how much risk do we run here and what payment conditions and/or securities are involved? These departments purchase credit information and collection services, investigate whether credit insurance or factoring can or should be deployed, They deal with customers who have a financial problem. And with customers who object to paying the bill. All obstacles that can delay the payment of an invoice are eliminated. For the entire order to cash cycle. Both ad hoc solving specific problems with customers, as well as continuous improvement in systems, processes and communication for the long term.
Credit manager for founders, CEOs and CFOs of SMEs
As a start-up or scale-up you probably do not have all the knowledge and skills that large companies do have available each day. You don’t need that knowledge all the time either. Hiring a credit manager on the payroll or on an interim basis full-time for a longer period of time is still a bridge too far. As your organization grows, there is a need for structure and especially cash. With that idea, André de Bruin of Straetus Amsterdam offers himself as an interim credit manager for SMEs. He mainly carries out work remotely and provides advice to the extent necessary to bring about structural improvement in the payment behavior of customers. And act in the event of incidents or customers who exceed the payment term.
What can the credit manager do for you?
- Agree a payment plan with a customer and monitor it
- Negotiating with a customer about the standard payment term of invoices
- Troubleshoot purchase orders
- Mediate in a dispute with a customer
- Assessing requests for debt restructuring and deferment of payment
- Assessing the creditworthiness of a new customer or advice on payment conditions/securities
- Determining the company's risk appetite and credit risk control measures
- Supervising a credit risk assessment
- Checking and adjusting texts of agreements and general terms and conditions
- Implementing additional payment functionalities for customers
- Implement / improve invoicing / bank reconciliation / debtor management functionality
- Describe and improve the credit management process
- Setting goals and reporting on progress
- Supervising improvement process: debtor management 2.0
- Training or coaching employees responsible for debtor management
- Training sales staff on how to deal with payment arrears and prospect selection
- Determining the texts of reminders and other customer communication
- Is factoring a solution for our company?
- Is credit insurance a solution for our company?
- Can debtor management still be performed from the current financial system or does it require a specialized tool?
Would you like to know more about the possibilities? Call our cedit manager for a free personal consultation.
The case: structurally improve payment terms, increase bank balance
Joost has started his software company 8 years ago. We now have a nice clientele with multinationals, for whom we work on a project basis. The debtor list is short. There are only about 10 customers on it. They are good for a few tons of debtor balance. Joost would much rather see that debtor balance in the bank account. Paying VAT and paying salaries remain exciting moments.
Endless waiting for payment of your invoices
Why do the big companies still pay at 90 or 120 days? As if there is no law! Sometimes you also have to wait months for a purchase order. The project is often already completed by then. An invoice can only be sent once the purchase order has been submitted. You can then wait another 3 or 4 month for payment. Just calling your customer’s accounts payable administration is not possible. Emails are answered by employees from Poland, Romania or India in staccato English. The answer is always: No. The mentality of a tax official. Joost is not happy about it. And he doesn’t have the time to keep chasing it either. He has no appetite for expensive factoring solutions. Its handling also takes a lot of time.
Contact with the credit manager
Through his accountant Joost comes into contact with our credit manager. A meeting with Joost at his companies office follows. We will first improve the payment behavior of existing customers. If this is not successful, it will be examined whether it is possible to use factoring in a smart way. A cost/benefit consideration. The amendment of the texts of agreements and general terms and conditions will also be on the agenda. There will also be an instruction for the people who negotiate a project with customers.
The first results
After a month we can already see that a number of customers have shortened their payment term as standard. Old ‘rubbish’ has been cleared, paid or written off. That is already a huge improvement for me, says Joost. I now also know at what point in the sales process I have to act to avoid having to deal with terribly long payment terms again. It is extremely convenient that I can call a personal credit manager for consultation or ask to arrange something for us with a customer. So it is not only good for the bank balance, but also gives much less stress. Just know that someone is watching who has seen everything before, who is not afraid of anything and who gets customers moving in a friendly but determined way.
Why check the creditworthiness of new or existing customers?
Know who you are doing business with. Check in advance. Situations can change. Stay alert and (re)check regularly.
Adjust your payment and delivery conditions to the financial situation or creditworthiness of your customer. This is how you protect your company.
What is credit management?
Credit management is a broad term used for work related to managing credit, supplier credit. A collective term for things such as debtor management, collection , credit risk management and financing of working capital. Like factoring. A credit manager tries to make the processes as smooth and short as possible on the sales side, so that the money flow is as fast and complete as possible. Also known as the ‘order to cash cycle’. Large companies employ a credit manager. In most companies, certain tasks are assigned to the debtor monitor and the controller. In small companies, there is usually no specific knowledge available.
Assessing creditworthiness
At the start of a business relationship you need to pay attention to the creditworthiness of customers and the delivery/payment conditions that customers are assigned. How do you limit your loss if a customer unexpectedly goes bankrupt or is otherwise unable to pay the bill? How much loss do I want to run. How many companies trust a credit report we don’t know exactly. In large companies, assessing them is the job of credit analysts. ‘No customer of mine has ever gone bankrupt, so no unnecessary hassle please.’ That’s how many people think. Until they lose their annual profit to a customer who goes bankrupt, liquidates his entity, disappears or starts making things so difficult that you eventually write off the debt. Demonstrating that there is a solid process of credit monitoring in the company is a big advantage or even requirement for financiers, shareholders and the accountant.
Complaint management
Making the invoicing process run smoothly. Now that every large company uses another system in which the supplier can enter their invoices themselves, new challenges arise. Customers who are dissatisfied stop paying. Complaint management is therefore also part of credit management. What is going wrong in the company and how can we improve it.
Debtor management
Every company that sends invoices has to deal with debtor management. The debtor management task is sometimes done by the owner himself, sometimes by the accountant or secretary. As the company grows, more and more credit controllers are added. Each company determines for itself how intensively and in what way they move their customers to pay invoices. Sometimes a credit collector sighs: we are the company’s wastebasket. Customers who are dissatisfied with something or have a financial problem, people internally and externally who do not comply with agreements, all possible input errors and changes that have not been implemented. If something goes wrong or falters, debtor management will solve it.
Days Sales Outstanding
The goal of credit management is to keep the average age, the DSO (days sales outstanding) as low as possible. Debtor monitors prefer to work with advanced credit management software, which provides insight into exactly how many e-mails, telephone calls, payment promises, complaints and outstanding invoices and customer responses there are. And of course what the course of the DSO is. You can perform credit management at different levels. From calling with the question when payment will be made, to negotiating with a customer with a laundry list of complaints and an extensive damage claim. Who decides when to stop delivering to a non-paying customer?
Ultimate credit management
How do you accomplish the optimum in credit management? If you pay your suppliers late and have your customers pay upfront. If you are able to do that often depends on your company size and if you have a lot of competitors or not.
SMEs have a less dominant position than large companies. For you 10 others and for borrowing money you pay a hefty price. The large corporations could borrow very cheep from the banks (if they needed it), which they could use to pay their suppliers more quickly. But instead, they are contributing to a lucrative market for all kinds of factoring. Called supply chain finance or chain finance. The result is that many growing SMEs pay themselves blue in financing costs or are constantly in need of money. With some guts and tact, there is still a world to be won for the SME that does business with multinationals. We are happy to help.
