Can you pull a rabbit out of a hat? That’s been the ongoing expectation on credit management departments as budgets shrink and economic jitters continue. Three leading businesses describe their journey to consistently improve their operations.

Credit management teams are under pressure. Head counts are reducing, offshoring is increasing and technology is improving. While this means the industry has had to keep a constant focus on change management, it’s also producing opportunities for businesses to improve efficiencies and cash flow.

Here, we find out what three top companies are doing to ensure their credit management teams continue to add value to operations.

Take the sales team on the journey

Fabian Sommariva, group credit manager with recruitment services business Allegis Group, formerly Talent2, has witnessed great change in his team since he joined the business eight years ago.

“When I started with Talent2 I had five people working in our Australia and New Zealand operations. As the business grew, both through acquisition and organically, that role turned into an Asia Pacific role,” he says.

Sommariva now manages a team of eight in Manila as part of a shared service centre, alongside his staff of six in Australia and one team member in China.

When it comes to introducing efficiencies the starting point was an assessment of the areas and processes that require improvement.

“Then you need to explore all options available to you. These include third party providers or moving the function to another area because it doesn’t form part of the core responsibility,” he explains.

The billings team, which reports to Sommariva in Australia, is an example. It was responsible for numerous finance-related tasks that were not core to billings. Those tasks have now been absorbed by the accounting and finance team.

One of the most important aspects of Sommariva’s role has been introducing automated workflows as part of the collection process. “This allows us to deal with scalability with the anticipated growth over the next five years.”

When it comes to managing offshore teams, Sommariva says it’s important to take the same approach as to managing internal teams. It’s also essential to understand the vagaries of the market where the team will be located.

“Find the right people, train them and give them an environment in which they have the ability to succeed. Structure their pay so they are rewarded when they exceed expectations and act quickly to identify great staff to ensure you continue to grow the business in a successful way,” Sommariva advises.

“Make sure they have a complete understanding of processes, that they’re clearly documented and easy to find. And hold them accountable. I talk to some of my peers and they manage their team on a hands-off basis, whereas my approach is they are part of my team. I manage them as if they were in Australia. To me, that’s been the fundamental difference between success and failure,” he adds.

Taking this approach has elevated Sommariva so he is not too bogged down in administrative work. “I’m not someone that sits in the back office. I’m seen as a business partner. We work with sales so they understand the end-to-end cash flow process, which helps decrease payment times.” This involves spending time training sales staff so they understand the client’s procure-to-pay process, and ensuring the correct questions are asked at the initial point of engagement.

Re-imagining the credit management function has required continual management support and Sommariva says it has been important for him to clearly articulate the return on investment of the initiatives he has introduced.

For instance, the business is in the process of considering implementing a new credit management software program, which will help take costs out of operations. To secure this investment Sommariva presented the business case for it and what the financial impact will be for the business.

“Create a story of the pros and cons. Cash plays an integral role in all businesses. So being able to explain how you can improve cash flow will help you to secure funds,” he says.

The investment in software the business has made means it’s less reliant on manual processes. “Now we’ve got dashboards and on-demand reporting at the click of a button. We also used to have to direct debit for hundreds of clients. That was a very lengthy process to manually allocate invoices. What used to take us between two and three hours now takes us forty-five seconds,” he says.

Of course, training and professional development has been critical given the changes the credit management team has experienced recently.

Says Sommariva: “When we built the team in Manila we spent substantial time training staff on systems and processes. We also spent a great deal of time training the team on the procure-to-pay process within organisations in Australia and throughout the region because they’re very similar in most companies.”

He says training never stops. “We have three hour meetings every fortnight that focus on specific topics, for example purchase orders. We look into reading them, understanding them and what they mean, and how they work both from a client’s perspective and how we use them.”

Ultimately, says Sommariva, improving systems has been a process of incremental gain. “When I started here we used to send out invoices by mail. Now we do that electronically and that has led to a major improvement in collection times and days sales outstanding.”

The upshot of the work that has gone into slowly transforming the credit management function is that the team is achieving record results, a great foundation on which to continue introducing efficiencies and improvements.

Responding to market dynamics

When David Hunt, national credit manager, credit services, Fujifilm Australia, started managing his team seven years ago there were eight people in it.

“We were in the heyday of film and sales were great. We were introducing a medical offering to the market, and in the meantime starting a graphics and printing division. We were building on the success of film and the imaging side of our business. Since then our product mix has come under significant pressure, particularly due to the fact people use their smartphones for taking photos rather than compact digital cameras. So that whole market pretty much ceased overnight,” says Hunt.

“The other challenge is that people aren’t printing photos anymore. They’re just sharing them on social media. That led to big redundancies including a reduction in my staff to three people. Even though sales are reduced, there’s still a significant requirement for a functioning credit department. We’re still making the phone calls – we might not be ringing for $10,000, we might only be ringing for $5,000. But we’re still making the phone calls,” he adds.

Hunt says he has been very focused on automating many tasks in his division. “We started by breaking down our everyday tasks with a view to seeing what could be automated. There were some obvious early wins. For example, at the beginning of every month a credit controller would spend the first few hours of their day placing customers that were outside of terms on stop supply. We automated this process, which required significant communication with the sales department because stop supply is not ideal from their point of view.”

The credit, sales and IT divisions worked together to build a product that suited everybody and at the same time automated the process. When the system automatically puts a customer on stop supply the sales rep is notified routinely by email. Clients also come off stop supply once the account has been paid in full. Says Hunt: “That simple step has saved each credit controller hours of work each month.”

Experts agree the stop supply mechanism must be sensitively managed. “A lot of commercial credit departments manage risk by not taking it. It’s easy to put a customer on stop. Usually the stop supply action drives payments from customers,” says Michael Blonk, principal consultant at Herringbone Consulting.

Blonk says what gets forgotten is the business lost to a competitor through this process. So a more nuanced approach such as the one Fujifilm has taken is required to avoid business being placed with a competitor.

Central to Fujifilm’s process has been an IT system called Office Torque, which is credit management software that enables significant automation and functionality around the credit control process. This includes notifications to customers during the accounts payable cycle as to the state of their account, with notifications escalating as the account ages. It has a workflow system credit controllers can use to manage their time, sorting accounts in a worst to best order, so they can work their way down the accounts each day.

“Our biggest gain is a customer’s ability to pay their account through a payment gateway link on their notifications, through the customer web portal. When they pay they can also tick off the invoices they’re paying and we receive an electronic remittance advice, which enables us to auto allocate those invoices from that customer’s account electronically. The payment comes in overnight and is also allocated to the account, saving significant time in allocations from the credit controllers,” says Hunt.

The innovations Hunt and his team have introduced have not only made processes more efficient, they have also led to better cash flow for the business at a point in its history when this is absolutely essential.

Connecting with sales

Shifting the positioning of the credit function so it now sits under the commercial rather than finance team has recently been a focus for Allister Morris, national credit manager, DP World Australia.

“The commercial team fosters and maintains our client relationships with major shipping lines around the world and they are in the best place to understand if a client’s position changes in the market,” Morris explains.

Repositioning the team has happened alongside a push to introducing efficiencies through technology. This has allowed the business to improve the way it checks references and verifies director information. It has also reduced payment times for some clients.

“We’re always educating internal stakeholders to sell the benefits of what we’re doing and the importance of risk assessments when taking on new business,” he says. Staying close to the rest of the commercial team also means that if there is a problem with a client’s invoice the appropriate sales rep is aware of this when meeting with the client.

Another recent initiative is an online credit application process, which reduced the turnaround time for approving new clients. “We also review our terms and conditions on a yearly basis and require clients to re-acknowledge those terms and conditions online,” he says.

Introducing these efficiencies has allowed Morris to play a more active role in the business and collaborate with the commercial and finance departments. “This gives us information on our clients’ future prosperity and minimises our risk,” he says.

Achieving the right balance between risk management and commercial imperatives will remain a focus for DP World.


*Alexandra Cain is a freelance finance journalist who has written for many leading Australian and international business publication.

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