Credit and Collections - Staying Ahead of the Curve
By Michael Shields, Business Line Executive, Receivables Solutions, FIS
Over the past 12 months, we have witnessed a dramatic increase in technology-based opportunities to improve credit and collection programmes. Access to new technology has traditionally only been available to large corporations with large revenue streams and complex structures that required a solution to consolidate all of their disparate systems into one interface. New delivery models including companies being able to self-host licensed software, leveraging hosted licensed software, or software-as-a-service (SaaS) broadens the availability of the technology to growing organisations.
During the same time, we have witnessed unprecedented volatility and unpredictability, with financial markets and the wider economy. Consequently, credit and collection managers need to be able to keep a close watch on credit risk, with the potential for higher defaults and less predictable payments.
FIS commissioned a study exploring some of the trends amongst corporations globally. This study consisted of 264 corporations across all major industry groups. The results of the study demonstrate current and emerging trends within the credit and collection function that hold true regardless of the industry serviced.
Centralising processes and data
Centralising credit and collections can mean a few things – centralising a team into a shared service centre environment and standardising processes as well as centralising data into a single solution to improve visibility into cash and risk. The two can happen together or separately. Centralisation is a challenging task for any organisation, but especially for larger corporations. Centralising processes allows corporations to create synergistic power. The reduction in resources that are required to complete tasks can save an organisation thousands, if not more, each year. Adherence to policy and procedures is easier to maintain in a shared service organisation. Maintaining one organisational head responsible for companywide results prevents business units from serving only their own best interests. However, the practical application of centralising operations that have been operating independently for any given amount of time is quite complex.
Processes must be documented, modified, and re-established. Physical centralisation throws in another wrinkle of potentially dealing with relocation and/or hiring of new resources at the centralised location. Two of the most difficult factors for corporations to overcome on their own when creating shared service centres are change management and technical system consolidation. To overcome these factors, corporations turn to change experts and a strategic solution partner. Change experts are great at designing a methodology to maximise employee buy-in. A strategic solution partner offers a single user interface that consolidates data from all of the numerous systems that a shared service centre must support. This interface becomes the user’s hallowed tool. This technology is the single most important success factor for credit and collections shared service centres.
The level of centralisation varies across organisations (figure 1). Some of the study participants centralised into a global centre (36%), some found it more appropriate to centralise into regional centres (24%). A smaller portion (15%) used a combination of approaches. The remaining portion (25%) either indicated they continued to be decentralised or simply responded with ‘other’ as a form of a combined approach.
Once a shared service environment is established, how do teams achieve the cost savings and results improvements that are necessary to claim success?
Fig 1 Level of centralisation
Leveraging automation technology to optimise shared service centres
Leveraging automation technology can help credit and collections teams that operate in a shared service centre to optimise their results and provide more value to their organisations. Credit and collections teams operating in a decentralised model can also utilise automation technology to help standardise their processes, consolidate data into a single system that is accessible by the whole team, and deliver greater value to their organisations. Surprisingly, many corporations have still not fully automated their credit and collections processes. According to study participants, only 5% have achieved full order-to-cash automation. The biggest group of participants (56%) considered that they had achieved only partial automation, demonstrating the scale of opportunity for improvement (Figure 2).
Fig 2 Degree of automation