Relationship management dispute resolution.(REQUIRED READING)(The Goldman Sachs Group Inc.)

The credit department is the focal point between clients and internal departments--properly managing these vital relationships is a challenge due to communication obstacles, conflicting goals and revenue exposure.

The Payoff Of Enhanced Systems

A study by Goldman Sachs found it costs 10 times as much to acquire a new customer as it takes to keep one. The reality is your credit department is quite often the most visible face of your company to your customers after the sale; they are an important component of your client relationship team. The credit department needs input from sales or other departments to do their jobs properly, but lack the information, accountability, and control that they need. This hampers their ability to balance the goals of managing deductions, settling disputes, and optimizing cash flow. Operational systems have historically been focused on supply chain efficiency, sales force automation and customer relationship management (CRM). A blend of these disciplines, focusing on CRM, will pay large dividends by keeping your credit department in control.

The basic concept of CRM puts all available information into the hands of those who need it. This information not only describes the current customer situation, but the history and commitments that have been made in the past. Having this not only saves time and research, but keeps everyone on the same page, and helps support good internal and external relations. It's important to remember that credit and sales are part of the same team. If credit and sales have an antagonistic relationship due to a data disconnect, customers will feel the impact, and overall profitability and revenue growth will most certainly be stymied.

Typical Deduction Management Challenges

The biggest deductions management challenge for most companies is establishing cross-departmental cooperation--which means the efficient sharing of customer information between credit, sales and operations. These internal relationships have traditionally been plagued by inefficient processes, unverifiable records, and on-the-fly promises made by sales staff that somehow never find their way onto the invoice, coming home to roost in accounts receivable (A/R) in the form of deductions and disputes. Too often, valuable customer information is hidden away in functional silos, instead of being shared between departments.

In the past, paper-based, manual processes have been a major source of frustration for A/R, as credit departments often Lacked easy access to data to support a challenge to a customer dispute. Despite their value to finance and operations, enterprise resource planning (ERP) systems have not been much help in this area, lacking the credit-specific workflow and communication tools necessary to "close the loop" between sales and A/R. Even if these systems succeed in automating the order-to-collection process, they typically do not provide any means to handle the deductions, charge-backs and write-offs that will inevitably occur. In many cases, Lack of time, personnel and financial resources--not to mention senior management buy-in--are still holding many companies back in the "Dark Ages" of deductions management.