This article originally appeared in Credit Today, the leading publication for the credit professional.
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In his book “Accounts Receivable Management Best Practices,” author John Salek, VP, Order to Cash for outsourcing giant Genpact, offers two important principles for what metrics you track and report to management.
- Report monthly and minimize the number of metrics routinely reported.
- Report on the basic dimensions of the receivable asset:
– Risk. Age profile, risk profile by credit score, and bad debt expense.
– Turnover. DSO actual versus best possible and cash collected.
– Quality. Billing quality index, level of clutter.
– Cost. Cost of accounts receivable management group as percent of revenue.
– Service. Cycle time of disputes and credit application turnaround.
These are at once both complete and concise as a way to measure how both your receivables and your department are doing.
The first one of the five “basic dimensions of the receivable asset” above is something we see most credit managers report and often in great depth. The last four, not as much, but they are every bit as critical as the first one.
As we ponder these, we think the last two, in particular, are not just important for you and top management to track and work on. We are also certain they’re great metrics to track to ensure job security!
How do you stack up in all five of these?