Credit management within the automotive sector: a basis for risk management and customer satisfaction.
Working capital is of critical importance for every organisation: if it is not at a sufficiently high enough level, you can get problems with cash flow. Three factors are important when it comes to working capital: stocks, creditors and accounts receivable. Of the above, the latter group is often underrated.
Jolanda Ooteman is responsible as Credit Manager for the Accounts Receivables Management department at Fource Automotive, an importer and distributor of parts for the automotive industry. She understands how important it is to manage debtors effectively to ensure the organisation can maintain a high level of working capital. Onguard talked to Ooteman about her experience with accounts receivable management within the automotive sector. She explained how she uses credit management software to ensure the processes within Fource Automotive run as smooth as possible.
“In addition to providing greater visibility and structure, the specialist credit management software works hand-in-hand with us to facilitate our procedures. The systems really thinks along with us.”
Jolanda Ooteman, Credit Manager
Accounts receivable management
Ooteman has worked as a credit manager in the automotive sector for many years. “It is a sector that is in flux and in which trends succeed one another at a rapid pace. You only have to think about all the technology to be found in a modern car and, of course, the self-driving cars that are becoming a reality on our roads. There is a major focus on how to respond to these trends among organisations within the sector. This makes sense since it is a completely new market with many unknowns. It is important that the credit management department develops alongside the business and constantly considers risks as well as customer relations. What I’m noticing in the sector is that the potential for credit management to have an impact is growing all the time. This is because credit management is a very important aspect within the organisation, in particular for working capital and customer satisfaction.”
Focus on accounts receivable
Ooteman: "We speak about customer satisfaction, but no one talks about debtor satisfaction. It should be remembered that a debtor is a customer who has one or more unpaid invoices to an organisation. As an organisation you want to see these invoices paid, but you also want the customer to be satisfied and to return to the company a second, third or fourth time.
There is a belief within many organisations that when customers end up on the books of the receivables department, they are more likely to take their business elsewhere. They do not see accounts receivable management as customer relationship management and so do not make a link to supporting the business – all the while the department can make a real difference for customers. For example, if I look at my own organisation, we do not label a customer who is late with a payment as a ‘nuisance customer’. On the contrary, our collection team takes steps to ensure that invoices are paid in a way that works for both parties. Having said that, the work of the teams is not just about chasing up outstanding invoices.
Undoubtedly that is an important aspect of our work, but credit management also works hand in hand with sales. This way we can exploit every opportunity effectively. We assess the potential customer upfront and identify any associated risks. It may be that we are happy to take on a specific potential customer with a high financial risk, because the Sales Team is sure that they can make the difference that is needed. In that case, it is important that the collection team does all it can to reduce the risks associated with this customer and ultimately is able to welcome them to Fource."
Specialist software provides transparency
The Credit Management Department is responsible for both risks and outstanding invoices. It is important that sufficient time is devoted to this. As credit manager you also want to be able to focus on contributing constructively to the business, keeping the working capital at a high level and ensuring that customers remain satisfied. Ooteman states: “In the past, our work was primarily about administrative transactions. However, developments in technology have enabled these and many other tasks to be automated. Within Fource Automotive we use credit management software from Onguard for a number of operating companies. This software has a host of options for integration with various ERP systems. This means that everything that is done in the software becomes visible in the other systems we work with, so you get a clear overview. The solution also creates structure in the follow-up process for different actions, and the software guides you through the process. What I mean here is the actions required for that day are shown directly, and it is up to the user to action them. The system provides the structure, but ultimately the collector makes the decision, for example whether or not a reminder should be sent. It should be said it is important the software is properly configured: it is a complex system with many features. To get the most out of the software, the department and managers need to effectively translate the credit management policy into workflows. Once you’ve got this foundation, the software really makes things easier."
Segmentation contributes to satisfaction
“In addition to providing greater visibility and structure, the specialist credit management software works hand in hand with us to facilitate our procedures”, continues Ooteman. The solution lets you group customers in segments. “Segmentation ensures that we send each customer the right communication at the right time. For example, it could be that a customer forgets to pay their invoice on a single occasion. This demands a different approach than for a customer how is consistently paying late. For example for the latter group, we might drop reminders, but instead immediately institute a fixed payment schedule. Customers like this, and we have noticed that it increases satisfaction levels, even though the invoice remains on the books for longer. That is precisely what we are aiming for in the department.”
- Specialised credit management software provides structure and clarity within the portfolio
- Communicate with existing ERP system
- Customer segmentation ensures each customer gets the right communication at the right time
- DSO has declined with the introduction of CreditManager
- The software has replaced old Excel lists
- Onguard and Fource Automotive meet regularly to discuss developments and continually update and enhance the software