What new capabilities should companies look for in credit and collection managers? Creativity, technology know-how, problem-solving ability and relationship-building skills are at the top of the list. As receivables management evolves, companies will limit traditional credit analysis to their largest customers. Credit scoring software that uses algorithms to make decisions will dramatically change the credit approval and review processes.
Traditional ways of handling credit and collection are inadequate in an increasingly wired environment. Everyone charged with managing trade receivables portfolios must acquire new skills to adapt to technology changes and the increasing focus on customer care.
The question, then, is: What skills are necessary to support superior receivables performance in an increasingly electronic world?
It takes a geek
Technology is both the cause of and the solution for the challenges facing receivables management personnel. Tech savvy is very important and it goes without saying that you know how to turn on a computer and can surf the Internet. It means you know where to find data and have the ability to manipulate it in order to turn it into corporate intelligence.
Writing database queries and using report-writer software will soon be essential skills. Receivables managers will need to understand the structure of the A/R database and be able to filter relevant information from myriad of sources, then add that information to the database. The abilities to create macros and to move data between applications will also be important so that A/R personnel can streamline tasks and improve workflow. Such seemingly small tasks can have a tremendous impact on productivity.
Companies need receivables personnel with even more advanced technical skills to develop connectors that enable data to flow efficiently between the different software systems that support the credit-and-collections function. Most receivables applications are weak in terms of credit and collection functionality, so companies that automate credit and collections must either build their own systems in-house or install bolt-on software. Either type of project requires staff who have a solid understanding of A/R software and the A/R database; expertise with electronic data interchange (EDI), electronic funds transfer (EFT), e-commerce and other automation tools; and knowledge of integration issues. Without expertise in all these areas, an implementation team is likely to encounter configuration problems that affect the receivables function's workflow, productivity, accuracy and customer satisfaction.
Evolving credit processes
As technologies within the credit-and-collections department change, the granting of credit will shift in a few fundamental ways. One alteration is in the way companies evaluate credit applications. As receivables management evolves, companies will limit traditional credit analysis to their largest customers. Many businesses have already reached this point, not because of technology but because they do not have time to do more than a cursory review of most new accounts and they seldom review existing accounts unless a problem crops up.
New software will help companies reduce their use of manual credit analysis without eliminating thorough checks of customer creditworthiness. Credit scoring software that uses algorithms to make decisions will dramatically change the credit approval and review processes. Such applications will be able to provide a better understanding of the risks in a receivables portfolio, but they will also increase A/R employees' need for strong statistical abilities.
A second major change in the credit approval process has been sparked by the growth of e-commerce. When companies introduce the Web as a sales channel, they open the door to new risks. Another area where we are going to have to develop skills is Internet and e-commerce fraud. At least a portion of your staff will have to be fraud experts, as opposed to just a typical credit analyst. Thieves are proving that automated systems can be easier to fool than people. Companies that choose to accept payments online or use Web-based payment clearing houses will need to proceed with caution, and that requires competence in fraud prevention.
Relationship management skills
With companies' newfound emphasis on automating the credit decision process, management responsibilities within the function are changing. They will do more analysis and evaluation, spend more time on system improvement tasks, and be actively involved in managing relationships with outsourcing firms and other service providers.
A good deal of the consumer credit manager's time is spent managing the relationship with their credit bureaus, who are their major sources of information, and with their collection agency, which handles their over-30-day accounts. It does not mean they have less responsibility. It simply means that there is an adjustment in how they get the job done.
Relationship management comes into play in other areas of receivables management, as well. Some customers require extra, personalised attention — especially a company's largest customers. In addition, to keep things moving along, credit and collection personnel must maintain working relationships with all the internal and external constituencies that the order-to-cash process touches.
Relationship management skills will be needed in working with not just internet service providers or outsourcing firms, but also with intermediaries in your distribution channel: sales agents, brokers, or services you might use for spot selling or reverse auctions.
Diversity in competencies
All this adds up to a broad range of skills; rare will be the manager who is strong in every area. For this reason, many small and midsize firms will employ generalists, then supplement those workers' weaknesses by hiring outside vendors.
The variety of skills required by the new A/R makes it difficult to describe the ideal credit-and-collections employee or manager. The so-called 'soft skills' can be just as important as specialized expertise. More than ever before, job requirements vary from company to company.
Training, therefore, is unavoidable. Employers must provide educational opportunities to their receivables work force in order to help employees develop specialties and to broaden the scope of knowledge and skills that workers can bring to bear on any issue. Above all, anybody who chooses to work in receivables management must be willing to learn.
Issues that influence credit department staffing levels
Factors that reduce required staffing levels:
Factors that increase required staffing levels:
Further reading