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"Maximizing your profitability
is only possible with an accurate
picture of your costs. With operational costs consuming a high percentage of your revenues, we understand
that maximizing yield and keeping strict control of costs and reducing waste in all areas of the business
is essential to your on-going profitability."
Source : SYSPRO
A Clear-cut Approach to Collections Is Essential for Profitability
Profitability is also known as :
Customer Profitability Analysis,
Gross Profit Ratio,
Market Share Profitability,
Net Profit Margin Ratio,
Operating Profit Margin,
Profit Margin Definition,
Bankruptcy is big business in the United States. For 2002, the last
year for which statistics are available, approximately 11,000 companies
fi led for Chapter 11 bankruptcy. That same year, suppliers had to write
off more than $18 billion in bad checks. And, there are few indications
that the bankruptcy picture has not improved to any great degree.
While many bankruptcies and much red ink can be blamed on a
stagnant economy, numerous can also be attributed to the inability of
companies to collect on past due invoices. The basic message here
is simple. The longer an account goes unpaid, the more diffi cult it
becomes to collect.
Surprisingly, many smaller businesses do not even have a collection
department. They rely on the accounts receivable clerk, who is already
busy getting invoices out and keeping up with customer payments, to
also act as the collector. Interestingly enough, many larger companies
also fail to establish credit guidelines and address the important area
of collections. They just send out invoices and expect customers to
pay them on time.
Research shows that the older a debt is, the less likely it is to be paid.
Experience shows that a "red flag" should be raised for accounts
uncollected for more than 60 days, and after 90 days very serious
measures should be taken.
The lesson here is simple. The race goes to the swift. Companies
that act quickly to secure over due accounts are the companies that
have the best chance of remaining in the black. It is important to get
paid when due, to avoid bad debts and utilize this income for better
"While many bankruptcies
and much red ink
can be blamed on a stagnant
can also be attributed to
the inability of companies
to collect on past due
Accounts receivable is the accountancy term for money typically
owed on work already completed or goods already shipped. Accounts
receivables show what customers owe the company and how much.
An accounts receivable ageing report lists all unpaid invoices and the
dates on which payment is due. Usually, these reports are divided
into several columns. The fi rst is for invoices that are still current
- i.e., payment is not yet due. Subsequent columns are for overdue
payments, characteristically divided into units of 10 days or 30 days
- or whatever makes sense for the business. However, most ageing
reports are lengthy, and the entire report must constantly be scanned
to determine which accounts are overdue.
Tri-Star Plastics Corp., a Shrewsbury, Mass.-based, privately owned
manufacturer and distributor of plastic products, is exemplary of the
methodology, or lack thereof, used to collect past due accounts. Prior
to the implementation of collection software, Tri-Star's accountant
would periodically run an ageing report, highlight past due accounts
and make phone calls in an effort to collect. In addition to being time
consuming, the "methodology" did not always produce results. Says
Richard Cedrone, Tri-Star president, "We'd get every excuse in the
book from 'I never received the invoice' to 'The check is in the mail."
"An accounts receivable
ageing report lists all unpaid
invoices and the dates
on which payment is due."
Ownership of Data
Who owns a company's data and information? The obvious answer
would be "the company." What seems to be obvious, however, is
not always accurate. When a key employee leaves, all the personal
notes that the individual has collected over the years could be lost.
Such data could encompass auxilary information realating to fi nancial
transactions associated with the collections process. How can such
information be "lost?" Customer payment information might be stored
on spreadsheets, contained on post-it notes in fi les and other methods
known only to the departing employee.
It's fairly typical that one person remains responsible for accounting
and collections and will have their own methodologies. When they go,
the company may lose valuable information, executives lose visibility
into which customers are laggards, and sales managers have no
insight into how credit worthy a customer placing an unusually large
order might be.
Automating collections in your ERP system through integrated
collections functionality is a solution that companies should consider
for all the above stated reasons. This is pertinent because all
associated information is centrally stored and is available, resulting in
a 360' view of total collections visibility.
"It's fairly typical that one
person remains responsible
for accounting and collections
and will have their
The SYSPRO Collections Module
The SYSPRO Collections Module automates all aspects of debt
collection. It serves as a proactive tool for collectors, providing access
to summary screens for all assigned accounts, enabling them to
review the daily workload and assign priorities. Drill-down and sort
views provide additional details of each contact with the customer,
providing executives and credit managers with the information
required to conduct business and establish long-range plans.
The SYSPRO Collections Module fi lls a critical void that most ERP
and CRM solutions have failed to address - that of automating
the process of collecting past due invoices. In fact, it was written
at the request of SYSPRO customers, for which the need became
particularly acute during the recent economic downturn when
businesses were slow to pay. This trend has continued despite a pick
up in economic conditions. Customers, it would appear, are reluctant
to give up lengthy pay cycles.
The Collections Module identifi es overdue invoices, assigns (or
reassigns) the invoices to designated collectors, monitors debt
collection efforts and retains account collection history, tracking
the number of times the account goes into the collection phase and
number of days to pay. The software offers several levels of security
to maintain the confi dentiality of customer records. For instance, the
system can restrict a collector's access to only assigned accounts.
The Collections Module has a screen for capturing Dun & Bradstreet
(D&B) credit information and automatically creates monthly ageing
reports for submission to D&B on each specifi c account for which
D&B checks were obtained. In addition to saving time, this capability
appends the customer profi le with information vital to sales feasibility.
The SYSPRO Collections Module is highly customizable, enabling
a company to determine those levels at which automated collection
efforts are to commence, such as minimum overdue balances,
minimum number of days overdue and others. A key system feature
is the ability to assign overdue invoices to collectors based on the
customer, customer class, geographic area or branch.
"The SYSPRO Collections
Module fi lls a critical void
that most ERP and CRM
solutions have failed to
address - that of automating
the process of collecting
past due invoices."
Several codes can be assigned to give managers quick insight into
collection efforts. These codes provide ready indication of collection
diffi culty and the fi nal status of the collection effort.
A variety of reports can also be generated to provide management
insight into the status of collections. Among the available reports are
those that indicate invoices in the collection system, invoices below
minimum requirements and/or customers' credit histories.
The Accounts Receivable module is a prerequisite for the new
Tri-Star Plastics President Richard Cedrone discusses the outstanding
results his fi rm has experienced since implementing the SYSPRO
Collection Module: "We've decreased days outstanding of our
accounts receivables by more than ten since the introduction of
SYSPRO Collection Solution into our environment. We were at 61
days and now we're down to 49 days and aiming to be much lower!
The system is extremely utilitarian ...you can call up all the pertinent
information when you have an account on the phone...it's right there
on the screen...If the account says, 'We never received the invoice,'
you can see when the invoice was sent. You can make all notes to the
account while on line, so all employees have the same visibility. You
can even email statements while on the phone."
The SYSPRO Collection Solution integrates to all the appropriate
SYSPRO modules, avoiding the need to duplicate data entry and
ensuring that executives and other managers are always viewing the
most current data.
For more information on the SYSPRO Collection Module,
"A variety of reports can
also be generated to
insight into the status of
Glossary of Terms
A record of monies owed by each customer for services performed or
A report of customers and monies owed organized into categories,
including current and past due accounts according to defi ned time
The timely securing of monies due for goods and services provided.
CRM (Customer Relationship Management) is a software system that
provides insight into customers, suppliers and partner relationships.
CRM enables patterns of change to be easily discerned from
marketing, sales and service arenas and leveraged to build future
ERP (Enterprise Resource Planning) is a business management
system that integrates all aspects of the business, including
accounting, manufacturing and distribution.
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Table of Contents
- Accounts Receivables
- Ownership of Data
- The Solution
- Glossary of Terms