The 23 SMART credit and collection goals that your team must strive to achieve in 2023 include faster customer onboarding, periodic credit policy review, and process improvement and innovation.
What's Inside?
SMART goals are crucial to evaluate credit and collection analysts' productivity and performance
Reporting and analytics tools provide the necessary data insights to drive performance improvements and track goal achievement
Leveraging cutting edge technology including AI and ML helps transform the credit and collections process with automated workflows
The primary goal for the credit and collections department is to turn open invoices into cash, therefore increasing the cash flow while mitigating credit risk. Within onboarding a customer and collecting past-dues from them, credit and collections professionals go through the havoc of dealing with an exhaustive task list.
Reducing DSO and mitigating credit risk are long-term goals. Credit and collection teams should break their long-term goals into multiple short-term goals, these short-term goals could be tracked easily and would help them to see the bigger picture.
Here’s a list of 23 such objectives and smart goals for credit and collections, each one being the compartmental building block of the whole process:
01
Credit Onboarding Automation and Controls
Provide a customizable credit application portal for new customers that requires the documentation and a customer appropriate credit application be completed accurately prior to submission to the credit department.
Automate approval policies using credit scoring models
Automate the acquisition of trade and bank references.
Lock in a process for acquisition and retention of sales resale certificates and renewals. Consider a third party service.
Define a criteria and implement credit scoring and approval models.
Ensure the onboarding process ensures fraud prevention.
02
Conduct Credit Line Reviews Proactively
Understand the sales initiatives by channel, product line and region and ensure that credit lines are available to meet revenue goals.
03
Update Credit Policy
Review and adjust the current credit policy to include:
Information sources and benchmarking
Credit scoring
Escalations for exceptions workflow and approval
Alternative to open unsecured terms
Credit hold and release
Develop on-the-shelf solutions to mitigate risk when collateral or some form of guarantee is needed to get to yes.
04
Lead Initiatives to Automate the Collections Process
Implement collection strategies based on customer data and credit risk.
Identify root cause of collection delay issues.
Resolve aged receivables before they become an escheatment issue.
05
Implement an Effective Credit Hold Process: Use the Credit Hold Process as a Last Resort
Review and adjust the current credit policy to include:
Implement collection strategies based on customer data and credit risk
Identify root cause of collection delay issues.
Resolve aged receivables before they become an escheatment issue.
06
Focus on Process Improvement
Identify root cause issues driving errors in invoicing, shipments and cash application.
Lead cross-functional efforts to bring process improvement
07
Initiate a Supply Chain Risk Assessment Policy and Procedure
08
Support the Sales and Cash Forecast by Managing Cash Inflows and Outflows by Coordinating and Bringing Transparency to Collections and Accounts Payable.
09
Work with Other Stakeholders to Establish Cross-Functional Targets for:
Collections performance
Dispute Management
Accuracy of the Cash Forecast
10
Establish Performance and Efficiency Targets for the Credit Collections Department and Staff:
Credit review and decision turnaround
Collections performance
Timeliness and accuracy of Cash Application
Deduction Management
11
Review the Accuracy of the Company’s Customer Master
Remove dormant accounts
Eliminate “Bill To” redundancies
Separation of duties setting up Customer Master records to avoid potential fraud and embezzlement
12
Take a Proactive Role in Reviewing and Signing off on Vendor Agreements
Understand any administrative requirements that could lead to penalties being assessed by the customer.
Check that the terms are in line with your company’s terms.
Verify that the Law and Venue clause is acceptable
Verify that dispute resolution is in line with your company policy: (Jury or Judge Trial, Arbitration, Mediation)
13
Ensure Credit and Collections Staff are Well Trained in the Various Laws and Regulations Related to Their Function:
Robinson-Patman Act
Sherman Antitrust Act
Equal Credit Opportunity Act (ECOA)
Fair Credit Reporting Act (FCRA)
Fair Debt Collections Practices Act (FDCPA)
FCPA
Unclaimed Property (Escheatment)
State and Online Sales Tax
Incoterms 2020
Bulk Transfers
Customer Bankruptcy: Prior and Post
14
Develop and Implement Incentivizes and Morale Building Activities for Credit and Collections Staff on a Limited Budget
15
Review the Current Cash Application Process and Leverage Automation to Reduce Expenses
16
Create a Schedule for Onsight Customer Visits to Key Accounts and Accounts of Concern
17
Review Credit Card Security Procedures and Fees. Take Actions to Reduce Risks and Costs, Including Taking Advantage of Recent Changes in Surcharge Rules.
18
Develop a Policy to Mitigate the Impact of Customer Payment Terms Pushback, when a Major Customer Unilaterally Extends Payment Terms Beyond Their Original Agreed-To Terms.
19
Review Calculated Expected Credit Loss (CECL) Requirements and Adjust Bad Debt Reserve Calculations
20
Regular Tracking A/R Performance
21
Implement Continuous Training and Education of Credit Management and Staff:
Related to the department’s role in the Order to Cash Cycle.
Treasury
International Business
22
Elevate the Skillset of Your Team
23
Create a High Performance Culture Throughout Your Team
Chapter
02
How To Set S.M.A.R.T Goals?
The S.M.A.R.T method is an excellent approach to setting achievable accounts receivable goals and objectives because it covers all bases and leaves no room for errors.
S.M.A.R.T stands for:
Let’s dive deeper to understand what every parameter in smart goals for accounts receivable stands for and how exactly they would help to attain your credit and collections goals:
1. SPECIFIC
MAKE THE GOAL QUANTIFIABLE
First thing is to specify the goal by making it tangible. Without specificity, the goal is a lot more like a dream than an actual goal. In addition to making it quantifiable, you want to answer the following questions:
What do I want to accomplish?
Why is this goal important?
Who is involved?
Where is it located?
Which resources/limitations are involved?
2. MEASURABLE
DETERMINE METRIC[S] TO TRACK PROGRESS
Your goal must be measurable so you can track progress, stay motivated, and recognize when you have achieved it. A measurable goal should address questions such as:
How much?
How many?
How will I know when it is accomplished?
3. ATTAINABLE
ENSURE IT IS WITHIN THE REALM OF POSSIBILITY
Setting a specific and measurable goal is all well and good, but if it's not realistic then its a waste of time, and will only lead to Disappointment.
Therefore, you must make sure that the goal is actually attainable given your unique circumstances.
An achievable goal will usually answer questions such as:
How can I accomplish this goal?
How realistic is the goal, based on other constraints, such as financial factors?
4. RELEVANT
DETERMINE HOW THE GOAL IS CONNECTED TO SOMETHING BIGGER
This step is about ensuring that your goal really matters to you, and that it aligns with other relevant goals.
You should answer the following questions to ensure your goal is relevant:
Does pursuing the goal seem worthwhile?
Is it the right time?
Am I the right person to reach this goal?
How is this goal connected to other goals?
5. TIME-BOUND
SET A DEADLINE
The final piece of the S.M.A.R.T jigsaw – making the goal time-bound.
The reason why your goal should be time-bound is relatively self explanatory, because every goal needs a target date; a deadline to work towards.
In order to make your goal time-bound you should answer the following questions:
When is the final deadline to achieve this goal?
What can I do six months from now?
What can I do six weeks from now?
What can I do today?
Chapter
03
Summary
Yes! Those are the list of things on the horizon that are going to completely change the outlook of performance goals for accounts receivable departments in the coming years.
Here is a quick overview on what you need to beat the odds, accelerate your growth, and drive your A/R to monumental success:
1. Minimize credit risk with a step-by-step approach to creating a credit policy framework that aligns with business growth objectives.
2. Drive compliance for everyday tactical work by understanding critical trade credit and collections laws.
3. Build process improvement recommendations by leveraging reporting and analytics for immediate course-correction and strategic insight.
4. Transform credit and collections processes by leveraging cutting-edge technologies and process automation.
Acquiring these skills and objectives can help leaders and professionals across the credit and A/R space achieve monumental success while delivering top of the class results.
On another note, do you want to know how beyond the curve advanced technologies with AI & RPA that provide automation for your credit management and collections management processes look like?
Read the section below.
HighRadius is a Fintech enterprise Software-as-a-Service (SaaS company that leverages Artificial Intelligence-based Autonomous Systems to help 600+ industry-leading companies automate their Accounts Receivable and Treasury processes.
The HighRadius® Integrated Receivables platform reduces cycle times in your order-to-cash process through automation of receivables and payments processes across credit, electronic billing and payment processing, cash application, deductions, and collections. The HighRadius® RadiusOne A/R Suite offers a pocket-friendly platform for hundreds of mid-sized businesses to enable faster A/R processing and enhance their working capital. HighRadius® Treasury Management Applications help teams achieve
touchless cash management and accurate cash forecasting.
Powered by the RivanaTM Artificial Intelligence Engine and FreedaTM Digital Assistant for order-to-cash teams, HighRadius enables teams to leverage machine learning to predict future outcomes and automate routine labor-intensive tasks.
Processing over $2.3 Trillion in receivables transactions annually, HighRadius solutions have a proven track record of optimizing cash flow, reducing days sales outstanding (DSO) and bad debt, and increasing operational efficiency so that companies may achieve strong ROI in just a few months. HighRadius is the industry’s most preferred solution for Accounts Receivable & Treasury and has been named a Leader by IDC MarketScape twice in a row.
To learn more, please visit www.highradius.com
Let’s dive deeper to understand what every parameter in smart goals for accounts receivable stands for and how exactly they would help to attain your credit and collections goals:
