Accounts Credit Management

 

High Level Activities / Processing

  1. Set and Mange Client Credit Policy
  2. Set, monitor and adjust client credit and payment terms
  3. Communicating to internal sales, production and despatch managers concern over client credit position to mitigate / get approval for any additional work
  4. Manage Debtor Accounts
  5. Establish Supplier payment terms
  6. Prioritise early invoicing to drive down Days Sales Outstanding metric for both clients and portfolio as a whole
  7. Perform regular (weekly) comprehensive credit control
  8. Provide additional client specific information to expedite client payments.
  9. Respond to client invoice queries to expedite client payments.

 

Inputs

From

Details

Credit Reference Agencies

Credit information on companies

Bank

Payment Information

Accounting Package

Client Balance information
Payment History

Production System

Order / Invoice-able charges information

Clients

Communication regarding payments
Requests for additional information

Sales Department

Request for credit authorisation / terms for (new) client(s)

Senior Management

Approvals for credit term breaches

Approvals for credit terms / credit term adjustment(s)

 

Outputs

To

Details

Client

Credit Terms

Notification of credit breach

Response to queries

Additional information to expedite payments

Sales Department

Production Managers

Senior Managers

Notification of concern over client payment behaviour

Notification of credit breaches

 

Accounts Package

Client Credit Term creation / adjustment

Bank Balance information

Production System

Client Balance Data

Client Credit Status

 

 

Current Processing Flow

Set and Mange Client Credit Policy

  1. Accounts department sets TOT's credit policy with respect to clients:-

    1. Credit Limit

    2. Payment Terms

    3. Authorisation / Approval process for alterations to the above

  2. Client credit terms are decided based on

    1. Credit searches

    2. Client Payment History information

    3. Information/ limit recommendation from reference agencies (TOT uses Experian)

    4. Any other pertinent information sources

    5. If terms requested by the client are outside reference agency recommendations, Accounts staff refer the request to senior management

  3. For new clients which have credit terms established, Accounts staff subscribe to the Agency Alerts notification
    (Recommend this is done for all clients with credit terms)

  4. Credit terms are communicated to the client

  5. Credit terms are recorded in the accounting package and fed back to the production system (credit limit; payment due)


Set, monitor and adjust client credit and payment terms

  1. Following on from the above, Accounts department receive Credit Alert information for subscribed-to-clients from the reference agency via email

  2. Where an alert / concerning information is received for a client, the Accounts department can act on the information in consultation with Senior Management

  3. If appropriate, the Accounts department can adjust credit limit / payment terms in the accounting package which should update the internal Production system

  4. If the client credit / payment position / concern is significant enough, the Accounts department can place the client on hold:-

    1. This means no additional work is to be undertaken for the client

    2. Any work in progress should not be despatched to the client without Accounts / Senior Management authorisation

    3. Accounts department update a client level flag in the production system to indicate on hold status. This causes the client record to be formatted in red to indicate the position

Communicating to internal sales, production and despatch managers concern over client credit position to mitigate / get approval for any additional work

  1. Following on from the above, as well as updating the production system, the Accounts department notify the following department managers of the client credit status

    1. Sales Department

    2. Production Administration

    3. Production Management

    4. Despatch Management

    5. Senior Managers

  2. The communication instructs that no billable work should be undertaken or despatched if completed without Accounts / Senior Management approval until the credit position is resolved.
    Additionally, no additional work should be agreed to or orders accepted until the situation is resolved

Manage Debtor Accounts

  1. Aged Debtor report is generated from the accounting package (Tues or Weds)

  2. This report breaks down for each customer their credit limit, total balance which is then broken out into current and aged (30/60/90/90+) buckets

  3. Accounts staff review this report to identify customers who have debt outside terms

  4. Accounts staff use this to highlight / escalate any clients of concern -

  5. This process forms part of Perform regular (weekly) comprehensive credit control.

 

Establish Supplier payment terms

  1. On the purchase side of the balance sheet, the Accounts Department establish payment (credit ) terms with key suppliers

  2. It is advantageous for TOT to negotiate longer duration terms with suppliers so any cash flow / funding gaps between sales receipts and purchase payments are mitigated

  3. Supplier payment terms are ultimately decided by the supplier, but TOT Accounts will seek to leverage their order turnover to achieve favourable terms

 

Prioritise early invoicing to drive down Days Sales Outstanding metric for both clients and portfolio as a whole

 

  1. A key aspect of credit control is to invoice clients as early as possible to minimise the time period between service provision and payment

  2. This is especially important for higher value orders where the funding gap between paying suppliers and receiving sales payment can materially affect cashflow

  3. Therefore, the accounts department invoice daily as soon as the order is in an invoiceable state

    1. Current process is that Invoice information (is essence an invoice) is fed overnight from FileMaker to Sage when the record is marked as completed in FileMaker

    2. Accounts staff interrogate the accounts package to filter for newly received invoices and issue these as a priority task

    3. There is an exception that is noteworthy. Some clients will not recognise an invoice from TOT unless it contains the customer internal PO reference. The challenge on this from a timing perspective is that the same customers will not inform TOT of the actual PO reference for their order until they receive a copy of the invoice so that they can validate the order and charges. To expedite this process as much as possible, for these clients, Accounts staff interrogate the FM system and extract and send to the respective client invoices that are to all intents and purposes ready to invoice but require client level PO references. - and this is time / date stamped. Once the client responds with the reference information, this is manually added to the FM invoice data and the record marked as ready to invoice so feeds overnight. Once the "official" invoice is received in Sage, it is emailed to the client, but the issue date is tagged as the date it was initially sent from FM.

  4. The accounts package records by customer the average days elapsed between invoice issue and payment (Days Sales Outstanding - DOS). This information could be extracted /analysed to identify

    1. Customers with a D.O.S. that is not acceptable and prioritising them for review / communication.

    2. What the average D.O.S is for TOT's active client base and how this compares to comparable businesses

    3. Setting D.O.S mertrics and monitoring progress

 

Perform regular (weekly) comprehensive credit control

  1. As part of the Aged Debtor review,all aged balances that meet either of the following criteria are highlighted :-

    1. Balance >= Credit Limit.

    2. Aged balances which exceed payment terms.

  2. For each client identified above, action is taken:-

    1. Clients are contacted to make payments / ascertain reason(s) why payment is delayed

      1. If necessary additional information is provided to clients

      2. If client queries are raised regarding charges / orders - these are fielded to the relevant departments

    2. The report is annotated to record what action was taken

    3. If there is any concern with client responses   - the issues is escalated to senior management

  3. The report once annotated is provided to accounts manager  and senior management on request.

 

Provide additional client specific information to expedite client payments & Respond to client invoice queries to expedite client payments.

  1. Accounts staff are regularly contacted by clients requesting additional information to assist in making payments

    1. Re-submission of invoices / statements

    2. Clarification of charges

    3. Account balances / payment terms

  2. To expedite client payments and negate outstanding information requests preventing invoice settlement, accounts staff service these requests.

  3. Where possible, clients can be referred to cport for invoice copies , current balance levels. However, invoice paid data is no longer held in FMP so cannot be exposed to cport

 

Considerations for the Future

These items are draft / placeholder currently to ensure they are captured for assessment into project scope

 

Real time credit approval / status

 

At present balance information is back filled from accounts package to the FM production system

Similarly,credit on hold status is retrospectively applied to the FM production system once identified in the Accounts Package

Both the above are not real time

A future state should incorporate real time credit approval:-

Order Acceptance

Real Time Accounts Credit Information