By Sebastien Clouet, Marketing Director, Tinubu Square
Businesses, in order to survive, and more importantly to thrive, in recent years, have often turned to finance departments to find new, efficient processes to steer them through financial difficulties. Subsequently, credit managers are playing a more central role, one which proactively contributes to the expansion of the company. They have moved from the back office into a more prominent position, getting involved in strategic decision making and providing guidance to the sales team and senior managers to help direct business development. To prosper, senior departmental managers are looking to the credit management function to make informed choices about levels of risk, how much credit to allow existing and new customers and to use flexible credit terms as a means of expanding the business for the future.
The change in roles was evident in the findings of the Chartered Institute of Credit Management Credit Managers’ Index for Q1 2015. Not only does it illustrate business confidence and an all-time index high, it also reports a change in role and responsibility for 78% of respondents. 41% said they not only had additional responsibilities, but were increasingly being called upon to make strategically important decisions. It is reassuring to see that the contribution of credit managers is making a wider impact. However the same report also found that tasks such as managing credit across multiple countries are only being successfully automated by just over half (57%) of respondents, which means that 43% do not have the adequate software to support them. And just under a third still perform cross-country credit management as a manual task.
Lack of access to technology solutions in a profession typically characterised by systems based on less than efficient multiple mixed ledgers, can only hold credit managers back. Some more enterprising finance departments, are deriving value from a combination of all the data that they have on their customers and the analysis that can be drawn from it in terms of actionable insight and time savings.
Credit managers initiating big data projects are best served by focusing on easy wins, such as the data that can analyse trade payment behaviour, for example. With an overview of the characteristics of customer payments, credit managers can then form a case-by-case view on credit limits and access. They are in control and can bring silo teams and departments together, to collaborate and combine efforts for optimum return.
It’s not just credit managers, but all levels of staff from sales directors through to CFOs who can use the analysis derived from big data to make good financial decisions and encourage board-level endorsement to extend big data projects more broadly. But, because credit managers benefit from shared data, there is a logic to them implementing and driving the use of these technology-based projects.
Big data has much to offer in support of everyday credit management functions. It can help to analyse debts and prioritise persistently late payers so solutions can be found for dealing with them and reducing DSO; by monitoring debt collection records, risk can be minimised; the integration and streamlining of credit management processes saves time and costs; it can help to highlight the cost of late payments and the impact on cash flow; plus decisions can be made about ‘acceptable risk’ customers as defined by enterprise policy, whilst establishing insight into payment behaviour.
Big data and systems deliver real-time analysis which allows credit managers to make decisions based on hundreds of variables that are always current and by being in a stronger financial position, companies can obtain short-term bank credit.
Big data intelligence and the solutions that work hand in hand with data arms companies so they can assess customer risks and focus sales efforts on the strongest, high value opportunities that deliver fast, full revenue recognition.
For credit managers fulfilling more strategic roles, big data removes the guesswork and helps to automate tasks through technology. For the 43% of credit managers who said they did not have the software to support them, big data could make the difference between accurately identifying financial opportunities or succumbing unnecessarily to dangerous financial risks.
Founded in 2000, Tinubu Square is the leading expert in trade credit risk management. Tinubu enables organisations across the world to significantly reduce their exposure to risk, and their financial, operational and technical costs with best-in-class technology solutions and services.
Tinubu Square provides IT solutions and services to different businesses including multinational corporations, credit insurers and receivables financing organisations.