Preparing the AR-dept for future growth

Doing a Credit Management Maturity Scan

Starting out small in the 1960s, the family-owned business has been growing continuously to become a market leader in its segment. Currently, the company is looking beyond the borders of the Benelux for the export of its own brands. Thanks to the commitment of more than 300 employees and ongoing investments in technology and automation, the company is growing year after year.

With all departments, processes, and procedures following the company’s growth path, the AR department and the credit & collection processes were no exceptions. As the company’s management wanted to prepare its administration for future growth in a sustainable way, TriFinance was asked to do a Credit Management Maturity Scan of the AR department.

The importance of change management

Change management was key in this project. The inclusive approach to guide/coach the team through the changes appeared to be the best road forward. 'We guided and coached the team through AS-IS process & procedures, with a critical approach and best practices in mind,’ project manager Benjamin Celis says. ‘Based on mutual insights the TO-BE process was then developed, together with the team.

'I acted as a sounding board for the AR team by asking the right questions, listening, and focusing on the team’s issues,’ project manager Benjamin Celis says. 'By gaining mutual insights, we designed the sustainable processes and procedures together as one team. In this approach, it was key to keep everybody on track, in order to make the implementation a success. Empathic listening was key in this project, you can only be understood if you understand first.’

Scoring process maturity

By organizing workshops with the AR team, in which the existing AR and credit & collection processes and procedures were screened, our consultant identified bottlenecks, pitfalls, and opportunities. 

Throughout this process, the TriFinance-developed Credit Maturity Model (TCMM) was used as a guideline. 

The scores on domains such as ‘strategy’, ‘governance and people’, ‘process and automation’, and ‘data & metrics’ were then clarified and rated, with ratings ranging from ‘aware’ and ‘initiated’ over ‘accelerated’ to ‘integrated’. To show the company’s management how to go forward, a detailed roadmap was presented.

Preparing the AR-dept for future growth

This resulted in a management project to implement the proposed roadmap. Because of the ‘inclusive’ approach, the team understood why the need for improvement was necessary and they could see the projected benefits/time savings, which is essential for a successful implementation.

The main challenges were:

• the need for structure in the AR department, resulting in new workflows, tasks, roles, ownership & responsibilities;
• the need to optimize the order release process, as it was inefficient and taking up far too much time;
• the number of credit limit breaches, as the credit limits were not well defined & updated;
• the inefficient daily exercise of processing bank statements.

Defining new workflows and responsibilities

In the first phase, new workflows, ownerships and responsibilities were defined together with the team:

The team used to work haphazardly, with little or no structure in their execution of tasks. In a roll-over system, banks were booked, orders released and customers followed up. As there was no clear responsibility or ownership of tasks, this approach lead to poor results, for example (but not exhaustive):

• credit limits not correctly defined or updated
• credit limit breaches
• a growing number of orders on hold

In the new setup, every team member had their own customer portfolio assigned, organized from A to Z in the credit management process.

Besides the portfolio, every member got the ownership and responsibility of a specific area of expertise, such as

• credit insurance
• reliability of data
• internal credit limit setting
• reporting.

Team members subsequently knew much better what their roles were and what was expected from them on a task lever. Their individual results could be monitored in a specific daily Qlik–reporting.

‘We also optimized the order release process and the process to review credit limits,’ Benjamin Celis says. ‘Both processes were very cumbersome and time-consuming. To optimize them, the number of orders on hold had to be reduced and the process of releasing orders had to go faster.’

• The business rules in AX Dynamics, behind the order release process, were analyzed and finetuned
• The process of reviewing credit limits was updated with clear workflows for credit limits of the credit insurer and workflows for internal credit limits (these two were mixed up in the team and there were some flaws in the process)
• Dedicated training for creditworthiness analysis and defining credit limits were rolled out in the AR team
• Tools were developed in Qlik to help the team define the internal credit limit (based on payback period in case of non-payment)
• A specific reporting was developed to follow-up the credit limit breaches

At the same time, the business rules behind the daily exercise of booking the bank statements were fine tuned, resulting in a considerable timesaving of approx. 1 – 2 hours on a daily basis.

For more info you can always contact Benjamin Celis. (benjamin.celis@trifinance.be  or 03/201 25 60).