23 S.M.A.R.T Credit and Collection Goals


  • Get access to the goals adopted by the top industry leaders to upscale credit and collections operations.
  • Monitor your credit & collections performance with these 23 goals to check whether you are on the right track or not.
  • Build process improvement recommendations from the set of objectives that are most critical to accelerate your A/R team’s growth.

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Contents

Chapter 01

Defining Credit & Collections Goals

Chapter 02

How To Set S.M.A.R.T Goals?

Chapter 03

Summary

Chapter 04

About HighRadius
Chapter 01

Defining Credit & Collections Goals


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

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

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

Defining Credit & Collections Goals

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

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

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

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

08

Support the Sales and Cash Forecast by Managing Cash Inflows and Outflows by Coordinating and Bringing Transparency to Collections and Accounts Payable.

Defining Credit & Collections Goals

09

Work with Other Stakeholders to Establish Cross-Functional Targets for:

Defining Credit & Collections Goals

  • Collections performance
  • Dispute Management
  • Accuracy of the Cash Forecast
10

Establish Performance and Efficiency Targets for the Credit Collections Department and Staff:

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

  • 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:

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

15

Review the Current Cash Application Process and Leverage Automation to Reduce Expenses

Defining Credit & Collections Goals

16

Create a Schedule for Onsight Customer Visits to Key Accounts and Accounts of Concern

Defining Credit & Collections Goals

17

Review Credit Card Security Procedures and Fees. Take Actions to Reduce Risks and Costs, Including Taking Advantage of Recent Changes in Surcharge Rules.

Defining Credit & Collections Goals

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.

Defining Credit & Collections Goals

19

Review Calculated Expected Credit Loss (CECL) Requirements and Adjust Bad Debt Reserve Calculations

Defining Credit & Collections Goals

20

Regular Tracking A/R Performance

Defining Credit & Collections Goals

21

Implement Continuous Training and Education of Credit Management and Staff:

Defining Credit & Collections Goals

  • Related to the department’s role in the Order to Cash Cycle.
  • Treasury
  • International Business
22

Elevate the Skillset of Your Team

Defining Credit & Collections Goals

23

Create a High Performance Culture Throughout Your Team

Defining Credit & Collections Goals

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:

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.

Chapter 04

About HighRadius


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.

HighRadius solutions

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

Chapter 01

Defining Credit & Collections Goals


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

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

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

Defining Credit & Collections Goals

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

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

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

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

08

Support the Sales and Cash Forecast by Managing Cash Inflows and Outflows by Coordinating and Bringing Transparency to Collections and Accounts Payable.

Defining Credit & Collections Goals

09

Work with Other Stakeholders to Establish Cross-Functional Targets for:

Defining Credit & Collections Goals

  • Collections performance
  • Dispute Management
  • Accuracy of the Cash Forecast
10

Establish Performance and Efficiency Targets for the Credit Collections Department and Staff:

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

  • 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:

Defining Credit & Collections Goals

  • 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

Defining Credit & Collections Goals

15

Review the Current Cash Application Process and Leverage Automation to Reduce Expenses

Defining Credit & Collections Goals

16

Create a Schedule for Onsight Customer Visits to Key Accounts and Accounts of Concern

Defining Credit & Collections Goals

17

Review Credit Card Security Procedures and Fees. Take Actions to Reduce Risks and Costs, Including Taking Advantage of Recent Changes in Surcharge Rules.

Defining Credit & Collections Goals

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.

Defining Credit & Collections Goals

19

Review Calculated Expected Credit Loss (CECL) Requirements and Adjust Bad Debt Reserve Calculations

Defining Credit & Collections Goals

20

Regular Tracking A/R Performance

Defining Credit & Collections Goals

21

Implement Continuous Training and Education of Credit Management and Staff:

Defining Credit & Collections Goals

  • Related to the department’s role in the Order to Cash Cycle.
  • Treasury
  • International Business
22

Elevate the Skillset of Your Team

Defining Credit & Collections Goals

23

Create a High Performance Culture Throughout Your Team

Defining Credit & Collections Goals

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HighRadius Collections Software automates and optimizes the credit & collections management process to improve collector efficiency, minimize bad debt write-offs, improve customer relationships, and reduce DSO. It provides a complete set of tools to optimize and automate the credit collections management process and enable the better prioritization of credit collections activities All the information you need (invoices, dispute information, POD, claims, tracking info, etc.) on each case is automatically presented in a collections work-space and is ready for use. Apart from the wide variety of benefits that it has, it also comes with some amazing features like CADE (Collection Agency Data Exchange), collector’s dashboard which has prioritized collections worklist, automated dunning & correspondence, dispute management, centralized tracking of notes, call logs & payment commitments along with cash forecasting functionalities. The result is a more efficient collections team that contributes to enhanced cash flow and reduced DSO.