Metrics For Job Security in Credit

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

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.

  1. Report monthly and minimize the number of metrics routinely reported.
  2. 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?


Like this article from Credit Today?

Boosting Credit Staff Effectiveness With Formal Performance Measurements

Editor’s note: The following article originally appeared in Credit Today, the leading publication for the credit professional, a CMA Partner. Click here for Special CMA Member $10 Trial!

“It’s essential for every member of our associate family first to understand the limitations of our resources and then to be able to show how and why their function is important to the organization and how we can contribute to its profitability and growth,” declares David J. Carere, CCE, CPA, CIA, director of credit risk management for Rich Products Corp. (Buffalo, N.Y.). “Formal performance measurements help us demonstrate this. For example, we can show the total number of dollars in the receivables portfolio and the benefits the organization gets from timely collection of those accounts.”

Benefits of formal performance measures for associates include:

  • Clearly established expectations.
  • Alignment in pursuing goals and directions that are important.
  • Creation of a stable environment and a sense of certainty for the associates. “They know what is important and why,” explains Carere.

In setting targets, Carere realized that he needed to take several factors into account:

  • Targets must be consistent with and support the overall departmental mission and objectives.
  • Targets must be limited to a small number of important ones. “If you create too many, you not only water down the importance of each, but it makes it very confusing and overwhelming for the associates to deal with so many,” he explains.
  • Targets must be achievable. “If targets are not achievable, it only sets associates up for failure,” notes Credit Manager Suzanne Gastle.
  • Targets must be set for both individuals and teams. “There are some measures that are good for individuals and some that are good for a team,” explains Carere. “When individuals are recognized and rewarded for excellent personal performance, and a sense of team is fostered, you get the best of both worlds.”

Associate Input

While Carere and the department managers could have created the performance measures in a vacuum, they elected to encourage and utilize associate input. “Associates need to know that the measures are fair and objective, and they need to understand why they are important,” notes Carere. “For example, they need to understand how much money the organization saves when they are able to reduce DSO by one day.”

Carere began discussing the performance measurement initiative at monthly departmental breakfast meetings. He also began soliciting associate feedback at these meetings. One result of this feedback was a decision not to set individual DSO goals as he had initially planned to do.

“They helped me see that there was a real lack of comparability with this approach, as well as some other potential problems,” he explains. Taking this feedback into account, Carere eventually changed the DSO component to a team goal. He also implemented a feature that measures DSO performance from year to year, taking extenuating circumstances into account.

Departmental Measures

In the Rich Products’ organizational structure, the credit and collection department handles credit extension and collection efforts, and the accounts receivable department applies payments, reconciles accounts on a daily basis, and initiates deduction resolution.

Measurements/targets for Credit and Collections are:

Team Goals:

  • Current year DSO compared to prior year DSO (adjusting computation for changes and new unusual factors, such as differences in the customer base).
  • Bad debt as a percentage of credit sales (comparing current year’s percentage to prior year).

Individual Goals:

  • Percentage of accounts assigned to a credit associate that have been properly followed up on.
  • Achievement of mutually established targets for slow-aging categories.

Measurements/targets for Accounts Receivable are:

Team Goal: Timely application of customer receipts by specific deadlines throughout the week.

Individual Goal: Accuracy of receipt applications, measured by monthly self-reporting errors.

Communication, Rewards and Recognition

Providing feedback to associates on a regular basis is important to the success of an initiative like this. “Associates see their progress on a monthly and quarterly basis,” explains Carere. He posts performance numbers each month, and when associates meet with their managers to review quarterly performance objectives they discuss performance measurements, too.

How are associates rewarded for improvements in performance? While many executives might arbitrarily create a blanket reward system, Carere realized that each person is unique and is motivated by different things. For this reason, he arranged for the department managers to meet with each associate and find out what they wanted (e.g., time off, gifts, cash, etc.).

Despite the challenges associated with this process, Carere continues to focus on what he considers to be the most important motivator of all–recognition. “It doesn’t put food on the table,” he admits, “but people really like to hear how much they are appreciated.”

People or Technology? Where will the improvements come from in the department? Carere believes that the associates have always been doing a good job. As such, he does not expect them to work a great deal harder.

Where he expects improvements to originate is with technology. “For example, we’re implementing a document management system in the cash receipts area to improve performance there,” he says.

On the surface, it may seem that expecting technology to make the improvements runs counter to a performance measurement system. After all, if it is technology that is making the improvements, why reward the associates? In addition, what motivation do the associates have to improve if the opportunity to improve is in the hands of technology?

Carere explains that, while technology is the basis for the improvement, associate involvement with the technology is critical to success. “We arrange for them to participate in the selection of the technology,” he says. “In addition, the performance measurement system provides the motivation for them to embrace the technology and utilize it to its fullest.”

While it’s too early to see any specific improvements as a result of the system, Gastle expects some benefits soon: “I think the measurement system will eliminate a lot of the subjectivity we’ve had to deal with in the past.”

This article originally appeared in Credit Today, the leading publication for the credit professional.
Click here for Special CMA Member $10 Trial!

U.S. International Trade Administration to Offer Educational Resources to CMA Members

Credit Management Association® announced that it has entered into a strategic partnership with the International Trade Administration (ITA) of the U.S. Department of Commerce (DOC). The Memorandum of Agreement (MOA), titled the “U.S. Trade and Investment Expansion Partnership,” will help credit and risk management professionals gain access to educational resources needed to expand their businesses nationally and globally.

The agreement, which represents a relationship between CMA and the U.S. Department of Commerce, will promote international trade to CMA’s members by increasing awareness of the economic benefits of exporting, and educating them on trade activities as a job creation and growth strategy. As part of the agreement, CMA will work with the DOC to increase trade and business investment awareness among the U.S. business community, emphasizing the small- and medium-sized businesses that make up CMA.

Through this program, CMA and the DOC will jointly develop a series of educational webinars on topics such as the importance of trade and business investment and associated benefits to the economy, export and business investment opportunities, and ITA’s role in opening foreign markets to U.S. exporters. Additionally, this partnership creates the platform to engage in a dialog between CMA and the DOC. The program expands upon the resources of another CMA-sponsored service, the Global Trade Credit Consortium, which offers assistance for companies that sell internationally by providing access to letters of credit, international collections, banking resources, credit insurance, international credit reports and education and training.

“In this global economy, CMA is constantly evaluating which programs and services it offers that will help our members the most,” said CMA President Mike Mitchell. “Participation in this project furthers CMA’s programs such as the Global Trade Credit Consortium which encourages the economic growth of its members and other small and medium-sized businesses, and gives them access to some high-powered government resources on these topics. CMA is helping its members to better understand how to navigate and effectively compete in a global marketplace.”

“The function of the ITA is that it strengthens the competitiveness of U.S. industry, promotes trade and investment, and ensures fair trade through the rigorous enforcement of U.S. trade laws and agreements. ITA works to improve the global business environment and helps U.S. organizations compete at home and abroad,” said Eddy Sumar, CMA Director of Educational Services. “The goals of this U.S. Trade and Investment expansion partnership are to increase the economic benefits of trade; educate the public on trade activities as a job creation and growth strategy; to create general awareness of ITA and other government resources, and encourage U.S. businesses interested in exporting and foreign businesses interested in investing in the United States to seek the assistance of ITA. I can’t wait to announce some of the great training programs that we have planned.”

“In the coming months, CMA members will be reading more about these developments via CMA’s social media sites, blog, newsletter and other communications. I am very excited about the growth possibilities of this program,” Sumar added.

These educational sessions will complement the nearly 100 annual seminars, webinars, courses, conferences and training sessions that CMA offers. For details on other offerings, visit

Credit Manager Lessons Learned from Watching the World Cup, by Michael C. Dennis

Like many people, I’ve been watching the World Cup soccer matches (time permitting). For whatever reason, I’ve been trying to draw insights from the competitions that are applicable to the workplace. Here are a few I’ve come up with:

  1. It pays to be a winner
  2. Teamwork is critical to your success…
  3. …So is having a good game plan
  4. Don’t become overly reliant on your star performers
  5. Even the most unlikely members of the team can become superstars
  6. Inappropriate behavior can result in red cards [or pink slips]
  7. We have to think more globally
  8. The best teams have the best coaches
  9. Winning is always a team effort
  10. Sometimes, it pays to be aggressive

In sport or at work, there are many things you can accomplish if you remember this: everyone on the team has the same GOOOOOOOOOOOOOOOAL.

How do you choose to manage your team? As always, I welcome your feedback.

Michael is the author of the Encyclopedia of Credit (, a free, fast, internet resource for credit and collection professionals.  He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events.  He can be contacted at 949-584-9685.

My Favorite (Hidden) Advantage to Joining an Industry Credit Group, by Michael C. Dennis

There are many benefits associated with joining an industry credit group. In my opinion, one of the best reasons to do so is to make certain that your company’s tolerance for credit risk is similar to other companies selling to common customers.

I am all in favor of leading rather than following, and I fully support the idea that credit decisions need to be made independently and in a manner that does not violate antitrust rules. However, I assume and expect that I will benefit from knowing how other creditor companies have assessed the risk associated with extending credit to a common customer.

I think the opportunity to understand how other creditors evaluate/ assess credit risk is probably the most under-appreciated benefit of credit group membership.

Credit Management Association offers more than 40 industry credit reporting groups. In my career, I’ve been in several groups.  As a result of what I have learned from others, I’ve saved my employer tens of thousands of dollars over the years. How have credit groups helped your company? I welcome your feedback.

Michael is the author of the Encyclopedia of Credit (, a free, fast, internet resource for credit and collection professionals.  He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events.  He can be contacted at 949-584-9685.

Don’t Delay Dealing Decisively, by Michael C. Dennis

I was just re-reading my recent blog post about career limiting mistakes, and thought I’d add this insight that applies to anyone who is a manager.

Don’t delay difficult discussions with your subordinates relating to performance or behavior problems. Doing so tends to de-motivate and demoralize other members of your team who are usually watching carefully, and will be quick to note when such a problem is not managed effectively. Managers can lose the respect and confidence of other direct reports if they delay dealing decisively with problematic employees.

In this case, I’ve used alliteration to make a point: if one bad apple can ruin the whole bunch, don’t let that bad apple be you.

What trait do you believe makes the most ineffective manager? I welcome your feedback.

Michael is the author of the Encyclopedia of Credit (, a free, fast, internet resource for credit and collection professionals.  He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events.  He can be contacted at 949-584-9685.

Dealing With Difficult People

In almost everyone’s life, there is one person that irks them or gets under
their skin; that knows how to push their buttons. Often, this painful person can
be avoided or at least contact minimized for the sake of one’s sanity.

But the workplace provides a kind of conundrum. Difficult people can be on
all rungs of the ladder, from a supervisor, to a co-worker, to a member of a
different department, and the path of least resistance may not be an option at
all. But, as demonstrated at a recent CMA teleconference, blame is not to be
shouldered solely by a difficult person to get along or work with, and in fact
these turbulent relationships can be beneficial.

“At what cost do we put up with these behaviors?” asked Susan Fee, counselor,
Susan Fee & Associates. “These people can help us by exposing us to our own
weaknesses. They force us to define our boundaries.”

Fee also said that interactions with “difficult people” could help
individuals recognize patterns. If they’ve felt these emotions before, then it
may not be the “difficult person” who is the problem since they are not the
common denominator through one’s life. She described a cycle that begins with
confronting a situation, a person’s automatic thoughts of that situation, which
lead to feelings/emotions, and ultimately to what sort of behavior is dictated.
So oftentimes, it is an individual’s outlook on life that has the most profound
impact on their attitudes toward a situation or person. “We clearly know that
people who are optimistic versus pessimistic deal with difficult people better,”
explained Fee. “Optimistic people tend to view difficult people or situations as
transient; they recognize what can’t be controlled. Pessimistic people feel that
a difficult person undermines their whole lives. They believe they are
completely uncontrollable.”

She described a typical occurrence where people complain that “So-and-so
ruined my day.” It’s an all too common lament where blame is placed on other
people for their impact on an individual’s life instead of that individual
taking accountability for their own happiness and taking the reins on what
affects them. Fee said that people need to “lose the victim mentality and focus
on what is controllable.”

She stated simply, “It starts with you. Your automatic thoughts will lead to
how you deal with a situation. These feelings don’t come from outside of you.
They come from your thoughts.”

“By blaming them, you are saying, ‘I can’t be happy until you change,'” Fee
added. “When people speak as victims, they perceive that they have no choice.
You can always change your thoughts. People can’t push our buttons unless we
reveal to them our panel.”