An important tool, the dashboard
The dashboard allows the management and monitoring of activities to provide relevant information in real time through synthetic indicators. These indicators allow to control the fixed objectives, toanticipate the foreseeable evolutions and toencourage the decision.
To be certain of the effectiveness of the dashboards, the credit manager mustcritically analyze the indicators used in order to show or demonstrate the evolution of performance, their origins and the profitability of their actions.
DSO, WCR, collection rate, performance indicators
In the management of credit policies, there are different indicators such as:
- Activity management based on ordered segments. Examples: Who are my 20/80? Who is leaving and who is entering my customer portfolio? And at what value ?...
- Prioritization of customer dunning operations according to risk or delay in payments
- The projection of the generated business and the expected cash flow
- Customer classification to approach the customer value and its associated risk around homogeneous groups (size, risk, turnover...)
In the performance of accounts receivable management, the indicators used are often :
- The DSO (Daily Sales Outstanding) or customer delay. This ratio allows the credit manager to monitor the evolution of his action in the short and medium term in terms of reducing collection times, in particular by regularly comparing this average time with the contractual times.
- The level of outstanding amounts.
- The rate indicates the proportion of outstanding trade receivables that are past due in relation to the total amount of trade receivables.
- WCR expressed in days of sales: this financial ratio allows the comparison of the evolution of the WCR according to the realized sales, in order to be able to anticipate any beginning of slippage.
- The collection rate and the creditor rate.
- The rate of disputes and processing time.
What do these indicators provide?
These different indicators, presented in the form of a dashboard, allow the credit manager to take several actions. In fact, in managing cash flow and cash recovery, the indicators provide in-depth knowledge of theevolution of customer risk, outstanding amounts, late payments, etc. late paymentsThe indicators provide in-depth knowledge of the evolution of customer risk, outstanding amounts, late payments, follow-up of reminders, but also of the causes of disputes.
In conclusion, these measures are key factors in the performance of the company and its management, provided of course that we do not forget that it is people who make decisions.
