An important tool, the dashboard
The scoreboard allows in the steering and monitoring of activities, to trace relevant information in real time through synthetic indicators. These indicators allow to monitor the objectives set, to anticipate foreseeable developments and to encourage decision-making.
In order to be sure of the effectiveness of the dashboards, the credit manager should conduct a critical analysis of the indicators used in order to show or demonstrate the changes in performance, their origins and the profitability of their actions.
DSO, WCR, cash flow rates, performance support indicators
In the management of credit policies, there are various indicators such as:
- The management of the activity from ordered segments. Examples: Who are my 20/80s? Who comes out and who enters my customer portfolio? And at what value?…
- Prioritisation of customer recovery operations based on risk or delay in regulations
- Projection of the generated business and expected cash entries
- The customer classification to approach the customer value and its associated risk around homogeneous groups (size, risk, turnover…)
In the performance of the client position management, the selected indicators are often:
- The DSO (Daily Sales Outstanding) or the customer delay. This ratio allows the credit manager to monitor the evolution of its action on the short and medium terms in terms of reducing the cashing times, in particular by regularly comparing this average delay with the contractual deadlines.
- The level of stock.
- The rate indicating the share of outstanding client receivables that is late in payment in relation to the total sum of client receivables.
- The WCR expressed in days of turnover: this financial ratio allows us to compare the evolution of the WCR according to the turnover achieved, so that we can anticipate any start of slippages.
- The cash flow rate and the equity rate.
- The rate of litigation and processing time.
What do these indicators provide?
These different indicators, presented in the form of a dashboard, allow the credit manager several actions. Indeed, in the management of its cash flow and cash recovery, the indicators provide an in-depth knowledge of the evolution of the customer risk, of the stocks, of the delays in payment, of the follow-up of the recoveries, but also of the causes of the disputes.
In conclusion, these measures are key factors in the performance of the company and its management, on the condition of course not forgetting that it is men who decide.
