Credit management is another area that can’t pretend the digital age isn’t happening. Decisions are increasingly being supported by (financial) data. In fact, if you ask me, we are on the eve of a major revolution. Graydon wanted to find out how today’s credit manager views these developments. So we came up with some provocative statements and presented them to more than 210 financials in Belgium, the Netherlands and the United Kingdom. They generated some surprising results. Want to read about them?
Let’s begin with the most striking reaction. Almost 60% of the people surveyed absolutely disagreed that by 2025 telephone debt collection will be a thing of the past and that by then all communication will take place online. I must confess that I blinked when I saw that figure. Don’t forget: from a technological point of view, 2025 is an eternity away from where we are today. With the best will in the world I cannot imagine that whereas we already digitise many of our customer contacts it would not apply to credit management. In any event, digitisation is also something that customers want. It is not purely an efficiency exercise. Customers are able to see and appreciate the convenience of digitisation. For the majority of credit managers, it still seems like science fiction.
That can also be seen from the answer to the following statement. By 2020, my credit management process will be run virtually entirely automatically. The number of human decisions will be reduced to a minimum. Over half of the managers surveyed believe that the process of automation will be as straightforward as that. Belgian respondents were even more reticent, with 61% replying in the negative. This high figure can also be explained by the relative under-representation of smaller companies in the Belgian part of the survey. These smaller players naturally have less of a need for automation than their bigger cousins. The cause of this negative attitude towards automation is the guesswork involved. I suspect that people are not able to see the benefits and opportunities sufficiently well for themselves. I think we can do more things – and do them better – precisely because of automation.
Here’s an example: at the moment, many companies are still working with standard payment periods. Take them or leave them. But with all respect, this attitude belongs in the past. Customers today want, no – demand, more flexibility. By managing your data properly, you are able to give your customers the freedom to pay when they want. Within certain limitations, of course, defined by the creditworthiness of the customer. I am convinced that this flexibility is a commercially wise move. It generates extra business. You can also save time by being smart in the way you automate. You can leave the follow-up of your invoices to your system. It will handle your customers automatically and lead to prompt payment. You can use the time you free up for other tasks, such as assessing strategic customer risks and opportunities. This is something that you do based on information, which you naturally share with other departments. More about this in a moment.
Another striking finding to come out of the survey is that one in three credit managers assumes that in the future credit management will take on a more autonomous position in the organisation. The way they see it, credit management will stop being part of Finance. Also, over 80% of the managers surveyed believe that credit management will share information about the financial risks with prospects and customers with the rest of the organisation. Not that I disagree: on the contrary. I have always argued in favour of a more independent role for credit management within the company. The strange thing is that these answers differ starkly from the current reality on the workfloor. In many companies, finance and sales are only vaguely known to each other, only talking to one another when it is really necessary. And there is still something not quite right here. Eight out of ten credit managers want to share their data, but the statements above seem to indicate that they do not see their salvation in automation. I think that sharing data without using the same data to run your processes is extremely inefficient.
According to one-quarter of the respondents, DSO is and remains the most important KPI for the credit manager. This observation may be obvious, but to the question of how credit managers intend to improve their DSO, barely 18% answered that they want to speed up their invoicing and collection process. The majority of credit managers see more future in better arrangements with and by sales. Payment arrangements need to be included in both the sales T&Cs, as well as in the sales conversation itself. Sounds good, but once again, automation and collaboration will have to play an important part.
To sum up, I can safely say that the credit manager will become a strategist with a sharp focus to the outside. The credit manager of the future will look far more ‘to the outside’ than is currently the case. Big data gives them greater insight into the market, customers and the competition. It will be the credit manager’s job to analyse and share these insights. They will become a strategic business partner who is both known and recognised as such within the company. Credit management will deliver greater added value to the organisation: precisely by selecting the customer who will contribute towards healthy growth in the company. As if that were not a beautiful and promising prospect.