A recent survey from Credit Today reveals that a portion of companies are pretty good at keeping up with their AR Credit Collections Manual updates, but a majority of businesses neglect to keep up with this important activity.
The survery reported that about 41% update their manuals at least once a year, but that leaves more than 50% who do it less frequently which leaves them with a manual that is basically useless, and that is a big problem.In the same survey from Credit today, 19% said they update their manual every two years, 13% said every 3 years, 15% reported they only change their when they need to, and 12% said “other” which really makes you wonder then the last time they updated theirs was…
The study also found that smaller enterprises are the worst offenders of all and are guilty of neglecting their AR manuals more so than larger corporations. This is not surprising considering these companies are often without the resources necessary to devote the time to updating their AR credit collections manual, but those are the companies who should also be using their AR as strategically as possible- updating policies needs to be a part of that strategy!
Why bother with these updates? A credit policy and procedure manual will help your company in many ways, including:
- It will ensure continuity in the department in the event that key personnel leave the credit department.
- It will help ensure all customers will be treated fairly.
- It will ensure consistent credit decisions are being made.
- It can be used as a training tool for new sales associates and new additions to the credit and collections team.
- The manual can be used to ensure consistency of procedure and execution between the credit department and management.
Here are a few tips and considerations for you as you review and update your AR credit collections manual:
- Do not let yourself become overwhelmed- work on one section at a time
- Begin with a broad policy and narrow is down over time. You can add details, new sections, and make changes over time.
- Many of the people surveyed by credit today have an update schedule while others in the suvery reported to update their manual as needed. Either way works as long as you stick to your schedule and/or make the necessary changes immediately after they happen so your AR cedit collections manual stays up to date.
- Do not write a policy so restrictive that employees are afraid to make decisions for fear of going against policy.
- Standard best practices state you should update atleast once every other year.
- Store your policy manual in a place where everyone can see it. Those way sales associates can quickly and easily access the document to review the content. This will also make it easy for your credit and collections team to make updates and make sure there is one master copy that is always up to date and available to the entire team.
We also have a youtube video available which can help you improve your AR credit collections as it outlines 6 steps to developing a world class credit and collection policy and action plan.