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The 21 st Century Credit Manager

The 21 st Century Credit Manager. Czech Institute of Credit Management Mark Harrison BA ( Hons ) FICM (grad) Founder & CEO www.creditcee.eu. Value of Debtors. How much % of assets is debtors on Balance Sheet? Typically > 30%. Phases of Credit Management. Credit worthiness testing.

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The 21 st Century Credit Manager

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  1. The 21st Century Credit Manager Czech Institute of Credit Management Mark Harrison BA (Hons) FICM (grad) Founder & CEO www.creditcee.eu

  2. Value of Debtors • How much % of assets is debtors on Balance Sheet? • Typically > 30%

  3. Phases of Credit Management Credit worthiness testing Credit decision Collateral (guarantees/underwriting) Credit monitoring Collectionhandling Insolvency proceedings

  4. Measures etc • Working capital • CA - CL • Liquidity ratios • CA/ CL • CA- stock /CL CzICM 7-8 November 2012

  5. Days Sales Outstanding • Definition:The average debt period in days, called Days Sales Outstanding, referred to as an average number of days, from the invoice date until payment. • This ratio indicates, in what relation outstanding customer receivables to turnover for the last accounting periods are. • It represents the average length of debtors and is an indicator of the efficiency of the collections • Formulas • DSO = average amount of receivables of the last 3 months x 90 / turnover of the last 3 months • DSO = current o/s balance x 365 / turnover of the last 365 days • DSO = receivables at the end of period x number of days period / turnover within the period (without cash sales) CzICM 7-8 November 2012

  6. Provisions • What do you understand by Bad debt provision? • Calculations can be: • % of total debtors • % of over 60 days • Actual known cases • Combination of above • Reduces sales and profits PTPI /EBITDA CzICM 7-8 November 2012

  7. Cost of Credit • balance outstanding 5,000,000 • interest @ 11% 550,000 • daily cost of credit 1,507 • dso / cost of credit 45 67,808 • dso / cost of credit 42 63,288 • saving 4,521 CzICM 7-8 November 2012

  8. WHAT IS A CREDIT MANAGER? • A Debt Collector? CzICM 7-8 November 2012

  9. DEBT COLLECTOR CzICM 7-8 November 2012

  10. WHAT IS A CREDIT MANAGER? • A Salesperson? CzICM 7-8 November 2012

  11. SALESPERSON CzICM 7-8 November 2012

  12. WHAT IS A CREDIT MANAGER? • A Banker? CzICM 7-8 November 2012

  13. BANKER CzICM 7-8 November 2012

  14. WHAT IS A CREDIT MANAGER? • Perhaps even Customer Service? CzICM 7-8 November 2012

  15. CUSTOMER SERVICE CzICM 7-8 November 2012

  16. THE TEAM CzICM 7-8 November 2012

  17. THE ROLE OF THE CREDIT MANAGER • To promote the highest possible volume of profitable sales, over the shortest period of time, with the minimum of bad debt • That involves risk assessment, credit control, accounts collection, and above all, customer service CzICM 7-8 November 2012

  18. A COMPETITIVE WORLD • If we get it wrong, our competitor wins • A changing world: new business replaces old business at an ever increasing rate • Now over 4.8 million small businesses in UK • 18% fail within 12 months • 40% fail within 2 years • 50% fail within 3 years CzICM 7-8 November 2012

  19. Credit Manager/Customer Service • The “go between” • Main point of contact • Who’s interests are being served? • A Sales function or a Finance function? • A Customer Service function • Linked closely to query resolution • Assistance benefits both supplier and customer CzICM 7-8 November 2012

  20. A COMPETITIVE WORLD • There will always be someone else ready to pick up our customer when we fail him • Big is not always beautiful • Success is based upon customer focus • It should be just as easy to get it right as it is to get it wrong • Getting it wrong is dead easy!! CzICM 7-8 November 2012

  21. First rule of credit • Never assume!! • INSERT BENNY HILL CLIP HERE • How do you know your invoices are…………….. • printed • posted • received • opened • correct CzICM 7-8 November 2012

  22. HOW MUCH CAN GO WRONG? • Price • Discount • Shortage • Damage • Model • Size • Colour • Early delivery • Late delivery • Credit terms • Credit limit • Wrong delivery • Special deal arranged with Sales • Wrong rate of VAT • Errors in extension • Wrong address • Wrong description, or misleading description • Insufficient details • Customer order number • Unable to match to order • Unable to match to quotation • Wrong name Every invoice you send represents all that is good or bad about your company

  23. AND THERE’S MORE • The way we respond to customer complaints • The way we resolve customer complaints • The way we listen to customers • The way we talk to customers • The way we communicate with customers • INSERT COASTGUARD CLIP HERE • And take emails for example…………… CzICM 7-8 November 2012

  24. E-MAIL • If you don’t stop, think and check, you could say something you don’t mean…………………………………………………………………… • By the time he was admitted his rapid heart had stopped, and he was feeling better • The patient has a chest pain if she lies on her left side for over a year • The patient states that there is a burning pain in his penis which goes to his feet • The patient has no history of suicides • She slipped on the ice and apparently her legs went in separate directions in December • Between you and me, we ought to be able to get this lady pregnant • The patient left the hospital feeling much better except for her original complaint CzICM 7-8 November 2012

  25. MEETING CUSTOMER REQUIREMENTS • Keep customer focused • Internal reorganisation is “internal” • Cost savings must not damage customer interface CzICM 7-8 November 2012

  26. THE LANGUAGE OF CUSTOMER DISSATISFACTION • Silent • Vocal • Vitriolic CzICM 7-8 November 2012

  27. KEEP REFRESHING THE SKILLS BASE • Script without understanding - NO • Knowledge and experience - YES • Cost versus efficiency - NO • The wrong decision for the right reason ?! CzICM 7-8 November 2012

  28. NOT MY JOB • “Dedicated” customer service • Has this had the effect of saying to all other employees – customer service is not my job? • Someone else’s responsibility • NO NO NO!!! • Major reason why the Credit Manager is at the heart of customer service CzICM 7-8 November 2012

  29. THE COST OF NOT GETTING IT RIGHT? • Lost sales • Damaged goodwill • Tarnished reputation • Word of mouth • Falling profits • Redundancies • Insolvency CzICM 7-8 November 2012

  30. THE CREDIT MANAGER • The key to the success (or failure) of any business which survives and prospers through the granting of trade credit • The real B2B banker – forget RBS, Allied Irish or any other amateur operation • The focal point for allcustomer contact • The one person in the whole organisation who can unite all functions with one common aim – meeting customer needs • 2nd rule of credit???? • 3rd rule… CzICM 7-8 November 2012

  31. Rights • Right goods • Right place • Right time • Right price • Right colour • Right quantity • Right quality • ALL add up to the right to be paid • Why give any customer an excuse not to pay? • We have only ourselves to blame CzICM 7-8 November 2012

  32. Any questions? Never doubt that a small group of thoughtful, committed people can change the world. Indeed, it is the only thing that ever has Thank you CzICM 7-8 November 2012

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