Business-to-Business (B2B) collections are vital to any company as this effectiveness of this function helps to optimise an organisation’s working capital position, lower DSO, write-offs and revenue leakage. This can be achieved through:
- Improved collections effectiveness through focused and skilled individuals
- Optimised cash collection policy and processes an
- Enhanced dispute resolution processes and supporting technologies
- Supporting collections analytics and credit and payment performanceto target customers who most need your attention
Dashboards and key performance indicators (KPIs) are necessary tools for a successful B2B collections operation. They help to provide the business with a clear direction and identify trends for the future.
It’s important to note that the B2B environment and the B2C environment have very different characteristics, as well as KPIs. The B2B environment is much more delicate, as customer satisfaction and relationship building is critical. It requires different abilities – communication, negotiation and customer service are all necessary skills. It is less rules-driven, and more customer-centric. A B2B collections department, which is rarely fed by inbound calls, is less likely to have B2C centric KPIs such as Attempts per Hour, or Promises per Hour.
Key Performance Indicators
KPIs are essential for developing and monitoring collection strategies. But how do you decide upon the right KPIs to track and which ones will assist you in improving business processes?
Below are some B2B Key Performance Indicators that may be generated on a daily, weekly and monthly basis:
- DSO (Days Sales Outstanding)
- Number of invoices collected
- Value of invoices collected
- Collections efficiency (total collected comparing opening A/R vs closing A/R)
- Collections efficiency percentage (total percentage collected comparing opening A/R vs closing A/R)
- Reduction of overdue A/R amounts measured monthly/quarterly
- Percentage of not yet due invoices out of total A/R
- Reduction of aged items, older than 60, older than 90, and older than 180
You can monitor progress against KPIs using simple applications like Microsoft Excel. However, it is advantageous to have an integrated system that can draw from multiple databases to create an online and secured dashboard. Remember, only when you compare KPIs (daily, weekly, monthly and yearly) can you analyse the trends that help gauge your company’s progress.
Real-time access to the A/R portfolio improves transparency and provides accounting professionals with immediate and more encompassing decision-making information. As well, frequent and detailed reporting and analysis ensure that KPIs and other performance metrics are consistently met and optimised.
How do your collection processes, reports and KPIs measure up? We’d be happy to offer a free assessment of your current practices. Comments? Questions? I’d be happy to answer.