Understanding Credit Management and Cash Flow
- The purpose and importance of effective credit management
- Why organisations extend credit
- The cost of credit
- Impact of overdue accounts and bad debts
- Relationship between credit management and cash flow
- Effect of overdue debt on profitability
- Main objectives of credit control
- Balancing sales growth with credit risk
Practical Exercise: Assessing the financial impact of delayed customer payments.
Credit Policies and Procedures
- Purpose of a credit policy
- Essential components of an effective credit policy
- Credit terms and conditions
- Credit approval responsibilities
- Establishing customer credit limits
- Implementing credit procedures consistently
- Credit-control health checklist
Knowing and Assessing Your Customer
- Identifying customers and their legal status
- Information required before granting credit
- Customer business and payment profiles
- Credit bureaux and commercial credit-information sources
- Trade references and payment histories
- Basic principles of credit evaluation
- Identifying customer risk characteristics
- Reviewing existing customers
Practical Exercise: Assessing sample customers and recommending appropriate credit terms.
Identifying and Prioritising Collection Risk
- Understanding accounts receivable ageing
- Current and overdue accounts
- Identifying seriously overdue debt
- Customer payment behaviour
- Recognising early warning signs
- Identifying higher-risk accounts
- Prioritising collection activity
- Differentiating temporary payment delays from deteriorating credit risk
Practical Exercise: Prioritising a sample debtor ageing report for collection action.
Effective Debt Collection Techniques
- Developing an effective collection approach
- Planning before contacting customers
- Understanding why customers do not pay
- Factors affecting payment behaviour
- Influencing customers to pay sooner
- Selecting the appropriate communication method
- Telephone, email and other appropriate digital collection channels
- Taking control of collection conversations tactfully
- Overcoming common reasons for non-payment
- Obtaining specific payment commitments
- Recording promises to pay
- Following up broken payment promises
- Closing collection conversations effectively
Role-Play: Conducting a collection conversation with a customer whose account is overdue.
Assertive Communication and Negotiation
- Passive, aggressive and assertive behaviour
- Benefits of assertive collection communication
- Understanding different customer communication styles
- Handling objections and payment excuses
- Dealing with difficult customers
- Negotiating with large or commercially important customers
- Negotiating payment arrangements
- Maintaining customer relationships while protecting cash flow
- Confirming agreed payment actions and deadlines
Practical Exercise: Negotiating a repayment arrangement with a customer experiencing payment difficulties.
Query and Dispute Management
- Impact of queries on payment delays
- Identifying common reasons for invoice disputes
- Purchase-order and documentation problems
- Billing errors and missing information
- Distinguishing genuine disputes from payment avoidance
- Improving front-end communication
- Developing an effective query-management process
- Working with sales, billing and operational teams
- Monitoring unresolved disputes
Group Exercise: Resolving a disputed overdue account.
Escalation and Recovery
- Establishing collection escalation procedures
- When normal collection activity should be escalated
- Handling seriously overdue accounts
- Maintaining appropriate collection records
- Working with reputable external collection agencies where appropriate
- Awareness of legal and regulatory considerations
- Knowing when specialist recovery or legal assistance may be required
Measuring Collection Performance
- Accounts receivable ageing
- Debtor days / Days Sales Outstanding
- Overdue debt percentages
- Collection targets
- Monitoring promises to pay
- Measuring collection outcomes
- Basic cash collection forecasting
- Identifying priority actions for improving performance
Final Practical Exercise: Developing a 30-day credit and collection improvement action plan.
Module 1: Credit Management, Cash Flow and Profitability
- Purpose and importance of effective credit management
- Why organisations extend credit
- The cost of credit
- Impact of bad debts
- Impact of overdue receivables on working capital
- Stimulating organisational cash flow
- Effect of overdue debt on profitability
- Main objectives of credit management
- Balancing sales growth, customer relationships and credit risk
- Credit management within the order-to-cash cycle
Practical Exercise: Calculating the impact of delayed customer payments on cash flow and working capital.
Module 2: Developing Effective Credit Policies and Procedures
- Purpose and objectives of a credit policy
- Essential components of an effective credit policy
- Customer onboarding requirements
- Credit terms and conditions
- Credit approval authorities
- Establishing credit limits
- Credit review requirements
- Roles and responsibilities
- Escalation procedures
- Ensuring consistent policy implementation
- Credit-control health checklist
- Reviewing and improving existing policies
Practical Exercise: Reviewing a sample credit policy and identifying weaknesses and improvement opportunities.
Module 3: Gathering the Right Information for Credit Decisions
- Knowing your customer
- Identifying customer legal status
- Essential information required before granting credit
- Financial and non-financial information
- Credit bureaux and commercial credit-information sources
- Trade references
- Customer payment histories
- Industry and sector considerations
- Ownership and organisational structures
- Interpreting collected information
- Reviewing existing customers rather than relying only on initial approval
Interactive Exercise: Determining the information required before approving a new credit customer.
Module 4: Understanding Financial Statements for Credit Decisions
- Understanding the statement of financial position
- Understanding the statement of profit or loss
- Understanding cash flow information
- Accounting terminology relevant to credit professionals
- Assessing financial performance and financial position
- Understanding working capital
- Liquidity and solvency considerations
- Profitability and operating performance
- Recognising financial strengths and weaknesses
- Applying financial information without becoming an accountant
Practical Exercise: Analysing a customer's financial information to assess financial health.
Module 5: Financial Ratio Analysis and Commercial Credit Risk
- Key liquidity ratios
- Working capital measures
- Profitability indicators
- Leverage and gearing
- Efficiency measures
- Cash conversion and operating-cycle considerations
- Interpreting financial trends
- Avoiding reliance on individual ratios
- Combining financial and commercial information
- Identifying higher commercial risks
Practical Exercise: Calculating and interpreting selected financial ratios for a customer credit decision.
Module 6: Credit Scoring, Risk Ratings and Credit Limits
- Principles of credit scoring
- Developing practical credit scorecards
- Financial scoring factors
- Non-financial scoring factors
- Customer risk ratings
- Differentiating low-, medium- and high-risk customers
- Establishing appropriate credit limits
- Matching credit terms to customer risk
- Reviewing and adjusting credit limits
- Documenting credit decisions
- Determining when additional credit safeguards may be required
Practical Exercise: Assessing a customer, assigning a risk rating and recommending an appropriate credit limit.
Module 7: Ongoing Credit-Risk Assessment and Early-Warning Indicators
- Why initial credit approval is not sufficient
- Monitoring changing customer risk
- Monitoring payment behaviour
- Industry and sector risk
- Economic and commercial risk factors
- Changes in customer financial position
- Early-warning indicators
- Deteriorating payment patterns
- Operational and management warning signs
- Customer-visit observations
- Reviewing higher-risk accounts more frequently
- Triggers for credit restriction or escalation
Case Study: Identifying warning signals in a deteriorating customer account and recommending appropriate action.
Module 8: Effective Debt Collection Strategies
- Developing a structured collection strategy
- Planning collection activity
- Knowing the customer before making contact
- Understanding why customers do not pay
- Factors influencing payment behaviour
- Segmenting customers according to risk, value and payment behaviour
- Prioritising collection activity
- Recognising different debtor behaviours
- Selecting appropriate collection approaches
- Establishing collection timelines
- Managing promises to pay
- Following up broken commitments
Practical Exercise: Developing different collection strategies for a range of customer scenarios.
Module 9: Assertive Communication and Multichannel Collections
- Passive, aggressive and assertive communication
- Benefits of assertive behaviour
- Maintaining professionalism under pressure
- Preparing for collection conversations
- Rules for successful collection calls
- Taking control of conversations tactfully
- Asking effective questions
- Identifying the real reason for non-payment
- Responding to excuses and delaying tactics
- Influencing customer behaviour
- Securing clear payment commitments
- Confirming payment dates and amounts
- Recording collection commitments
- Effective collection emails and written communication
- Using appropriate digital communication channels
- Following up consistently
Role-Play: Conducting and evaluating a complete collection conversation.
Module 10: Effective Negotiation and Customer Management
- Understanding different communication and negotiation styles
- Preparing for payment negotiations
- Dealing with large and commercially powerful customers
- Face-to-face and remote negotiation techniques
- Understanding negotiating positions
- Handling objections
- Identifying realistic payment options
- Negotiating repayment arrangements
- Avoiding unnecessary concessions
- Confirming agreements and responsibilities
- Maintaining commercially important customer relationships
Practical Exercise: Negotiating a structured payment agreement with a difficult customer.
Module 11: Query, Dispute and Billing Management
- Impact of customer queries on payment delays
- Identifying common causes of disputes
- Purchase-order problems
- Billing and invoice errors
- Missing supporting documentation
- Delivery and service disputes
- Improving front-end communication
- Distinguishing genuine disputes from payment avoidance
- Developing a robust query-management process
- Assigning responsibility and turnaround times
- Monitoring unresolved disputes
- Preventing recurring billing problems
- Improving customer master-data accuracy
- Improving supporting documentation
- Using technology appropriately within billing and collection processes
Group Exercise: Analysing a disputed account and designing an effective resolution process.
Module 12: Sales and Credit Working as a Team
- Building productive relationships between sales and credit
- Balancing revenue growth and credit risk
- Educating customers about credit terms
- Keeping sales teams informed about customer payment behaviour
- Role of sales in preventing overdue accounts
- Managing strategically important customers
- Resolving internal disagreements over credit decisions
- Coordinating action on high-risk customers
- Improving information flow between sales, billing, finance and credit teams
Case Study: Resolving a sales-versus-credit decision involving an important but high-risk customer.
Module 13: Accounts Receivable Performance and Collection Analytics
- Understanding accounts receivable ageing
- Debtor days
- Days Sales Outstanding (DSO)
- Accounts receivable turnover
- Collection Effectiveness Index (CEI)
- Overdue debt percentages
- Bad-debt trends
- Promise-to-pay performance
- Monitoring broken payment commitments
- Setting collection targets
- Measuring collector and portfolio performance
- Cash collection forecasting
- Linking receivables performance to working capital and profitability
Practical Exercise: Analysing a sample accounts receivable dashboard and recommending collection priorities.
Module 14: Accounts Receivable Portfolio Management
- Understanding the size and composition of the receivables portfolio
- Segmenting accounts by value
- Segmenting accounts by ageing
- Segmenting accounts by credit risk
- Segmenting customers by payment behaviour
- Customer concentration risk
- Identifying strategically important accounts
- Prioritising limited collection resources
- Developing differentiated collection strategies
- Monitoring portfolio deterioration
Practical Exercise: Segmenting an accounts receivable portfolio and developing an appropriate collection approach for each segment.
Module 15: Understanding Why Businesses Fail
- Common causes of business failure
- Cash flow difficulties
- Excessive borrowing
- Poor profitability
- Loss of major customers
- Operational problems
- Management and governance weaknesses
- Warning signs in everyday customer dealings
- Warning signs in financial information
- Warning signs during customer visits
- Distinguishing temporary financial difficulties from serious deterioration
- Taking preventative credit action
Interactive Exercise: Analysing a deteriorating customer and identifying the warning signals that should have triggered earlier intervention.
Module 16: Escalation and Advanced Debt Recovery
- Developing a structured escalation process
- Moving from routine collection to formal recovery
- Final-demand and escalation communication
- Internal authority for escalation
- Determining when normal collection activity has failed
- Evaluating the commercial value of further recovery action
- Maintaining appropriate records and supporting documentation
- Working with reputable external collection agencies
- Managing outsourced collection activity
- Monitoring external recovery results
Module 17: Legal and Ethical Considerations in Debt Recovery
- Understanding the legal environment surrounding debt recovery
- Consumer and commercial debt considerations
- Fair, professional and ethical collection practices
- Importance of accurate documentation
- Understanding formal recovery processes
- Obtaining and enforcing judgments where applicable
- Financially distressed and insolvent customers
- Knowing when specialist legal advice is required
- Evaluating the cost and commercial value of formal recovery action
- Important: Legal requirements and debt-recovery procedures must always be applied according to the jurisdiction in which the debt is being collected.
Module 18: Negotiated Settlements and Recovery Solutions
- Evaluating the debtor's ability to pay
- Negotiating repayment arrangements
- Instalment plans
- Restructuring payment commitments
- Negotiating out-of-court settlements where appropriate
- Evaluating settlement proposals
- Documenting agreements
- Monitoring compliance
- Responding to default on negotiated arrangements
Practical Exercise: Evaluating alternative recovery options and negotiating an appropriate settlement.
Module 19: Building a High-Performance Credit and Collection Function
- Integrating credit assessment, monitoring and collection
- Establishing clear responsibilities
- Applying consistent policies
- Strengthening escalation procedures
- Improving information flow
- Using collection and receivables data for decision-making
- Establishing meaningful performance targets
- Reviewing portfolio risk regularly
- Identifying process weaknesses
- Continuous improvement in credit management and collections
Final Workshop: Develop a practical Credit Management and Debt Collection Improvement Plan for implementation within your organisation.
