Implementing A Credit Management Solution For Order To Cash
And Credit Management
Finding reliable and efficient credit management solution for order to cash systems can be an arduous task. C-suite executives in the finance environment need to take certain measures that ensure the credit management process is not subject to long delays, weak compliance control, or errors.
The following steps lay out the major considerations when implementing credit management solution within an order to cash Softwaresystem, with focus on the needs an executive in the finance department would have.
Step 1: Evaluating Credit Risk
To ensure proper credit management, executives must start with evaluating the credit risk of their customers. Evaluating credit risk involves considering factors such as the financial stability of the customers, the likelihood of late payments and history of defaulting on payments. It is important to create guidelines which accurately assess the creditworthiness of each customer and establish how much risk is acceptable. It is likely that more thorough approach to evaluating credit risk will involve third-party credit risk assessment.
Step 2: Define Credit Terms
Once credit worthiness has been established and risk assessed, executives must define the credit terms associated to each customer. Credit terms define when an invoice must be paid in full and the methods available for payment. Terms should take into consideration the overall credit risk of the customer, but it is important for customers to not feel pressured. Declining credit terms as leverage for payment is risky move.
Step 3: Establish Payment Processes
Once credit terms have been established and agreed to, executives must ensure that the payment process is secure and efficient. For this purpose, it is important to use electronic methods of payment which streamline the payment process and avoid errors. When considering the payment process, it is also important to consider incentivization for early payment and penalties for late payment.
Step 4: Monitor Credit Exposure
In order to ensure the credit management process does not create an undue amount of risk, executives must monitor the overall level of credit exposure. This involves monitoring invoices that have yet to be paid and making sure that the overall credit exposure is within the acceptable risk guidelines. Executives must continuously monitor the level of exposure and adjust credit terms if necessary.
Step 5: Confirm Payment
Finally, once payments have been received, it is important to confirm payment. This can be done via secure automated system. Invoices should be marked with ?paid? when payment is received and communicated with customers and other relevant departments in prompt and secure manner.
Conclusion
Implementing credit management solution for order to cash systems can be complex and potentially risky. It is important for C-suite executives to consider the overall credit risk of customers and take the steps necessary to ensure the process is secure, efficient and compliant. By following the instructions outlined above, executives should be able to maximize their success when implementing credit management solution for order to cash Softwaresystems.
