Good Credit Management is vital to the efficient processing of the modern integrated enterprise. It helps speed up company and supplier credit management, as all the necessary due diligence can be stored electronically and third party credit reports and references can be at hand to confirm checks. Credit terms for specific, identified customers will be easy to access and keep tabs on. They can be confirmed as digital templates in the format your company uses, and reviewed by the legal team if those terms are non-standard. Plus, you have a full workflow with audit trail to reference.

An electronic history of previous transactions with suppliers is going to make it far easier to search for serial fraudsters or bad payers. Even something as simple as a postcode for an accommodation address could help identify a serial fraudster, for example.

All supplier quotes could be digitally stored if you move to a Document Management (DM) enabled Credit Management environment, and therefore always accessible to credit management specialists, along with useful customer order (PO) and confirmation details to keep the relationship’s progress clear.

Cut down debtor days

That’s on the long-term supplier relationship side. On a day to day basis, using a fully paperless credit approach can help on items coming in and out of your warehouse every day. Goods supplied with full delivery documentation captured inbound to confirm acceptance against your order is important for fraud prevention and fully closing the delivery transaction loop. It also gives you the permanent option of being able to check on any delivery issues, as the outcome of every delivery will be properly recorded.

That’s for items coming in. For items going out, you’ll want the same processes and checks. Every sales invoice raised will be tied to your internal finance (ERP) system, with the quote and terms linked as stored documents. Completed electronically, you can log in a delivery receipt, with some customers moving to full supplier portal integration, with sign-on acting as proof of receipt by your customer or partner.

This is describing an efficient, friction-free process. What happens when things go wrong however? DM can help with problem areas of credit. For example, chasing debt can become a process fully regulated by your business rules, and all interactions can be recorded electronically. As discussed previously, your aim should be to keep the amount of time you are in debit to anyone to a minimum. So ensure internal communications about debts copy in both the service/goods user, purchasing person or team if used, quoting the original order, and the finance team at the customer (its accounts payable). Clear single line invoices are superior to complex multiline versions, which may be easier to produce but harder to automate at the customer end for swift payment and another impetus to reduce debtor days.

Also as we discussed last time, you never want to have to repeat sending invoices. This can cause bottlenecks at the customer which may feed into a drawn out duplicate checking process, or worse result in duplicate payments, which means unwelcome work and uncertainty as you work to keep your accounts as true as possible.

Better to be digital if you need to get credit management legal

How do you get to this level of efficiency if you are a FMCG sector player, for instance? EDI (electronic document interchange) is great for high volume transactions, typically for your biggest 20% of customers and cost is coming down for integration between DRM, ERP and EDI systems. If you choose this path, ensure proper storage of the data stream, and provide human-readable content for query purposes at key staging points.

Finally, if things ever go legal due to a credit dispute, having a complete digital transaction history makes it much easier to fight cases of non-payment.

That’s absolutely the last resort. Most customers will want to pay on time to not adversely affect their credit history, providing the goods and services are fit for purpose. Fraudulent and repeat bad payers can be quickly identified using electronic systems, as we’ve set out in these two blogs. The larger player can afford advance trend spotting tools that can flag uncharacteristic behaviour early, so remedial action can be taken, and the cost of such tools is always coming down.

Making credit management as digital as you can makes a lot of sense for the enterprise and represents a definite business growth area for the astute DM supplier.

Howard Frear

The author is Sales and Marketing Director at EASY SOFTWARE UK