Case Study – Company Turnaround

Initial Remit 

  • To investigate every aspect of the business which impacts on the credit control function and its ability to collect outstanding debt within an acceptable timeframe.
  • To implement a strategy for recovering overdue debt.
  • To train the credit control staff

Initial Findings

  • Credit Control Team reported to Sales Director
  • Top 20 accounts amounted to 51% of total debt and were not assigned to any credit controller for monitoring/collection
  • 48% of ledger was overdue
  • DSO in excess of 200 days
  • Over 1,500 live accounts
  • Credit Control Team only given reports on over 60 days debt
  • Each credit controller works through ‘Held Orders’ list printed each morning which takes up 75% of their time
  • No collection strategy – credit controllers worked through above report in alphabetical order
  • Credit Control Team unaware of all functions available on the system to monitor debtors
  • 271 Final Demands sent out but only 24 accounts passed to DCA
  • 26 accounts on ‘payment plans’ totalling £60k but none supported with formal written agreement, and ALL had defaulted
  • Serious backlog of unanswered queries

Work carried out 

  • Recommendations put forward

Divided into:

  • immediate/high priority
  • maintaining progress
  • long-term plan

The client considered the report and was asked to carry out the work as the Interim Credit Manager

a) Stage 1 – Immediate priorities to reduce overdue debt

  • Aged debts used for collection by team to show all balances and be prioritised in descending overdue value order from 60 days onwards
  • Head Office Final Demand letter sent at end of March followed up
  • Top 20 accounts and Key Accounts addressed by credit control in conjunction with senior management and BDM’s. All to be made accountable
  • Credit manager visited all Top 20 accounts (mainly based in London and the southeast)
  • Debts over £1k chased by telephone and follow up letters, as required
  • Chasing (Dunning) letters generated and sent to customers with debts under £1k where there were overdue balances
  • Charged interest on overdue debts under The Late Payment of Commercial Debts legislation
  • Appointed Debt Collection Agency on “no win, no fee” basis for selected accounts
  • Payment Plans reviewed, formalised with an agreed future date for bringing account back into terms.
  • Accounts currently with DCA reviewed for progress (cash recovered) v costs incurred
  • Credit control reports, diary system, chasing letters, query log introduced
  • Ascertained DSO
  • Staff training, as necessary
  • Cash targets, DSO targets and telephone call targets set for credit control team

b) Stage 2 – Maintaining Progress

  • Regularly monitored and reviewed progress with team members
  • Implemented credit policy, guidelines, procedures
  • Reviewed payment terms and conditions of sale documentation
  • Ensured payment terms were flagged correctly in system
  • Used credit limits in system
  • Monthly meetings with BDM’s
  • Provided regular progress reports to Head Office

c) Stage 3 – Long-term plan

  • Centralised credit control department to Head Office
  • Interviewed and recruited new Credit Manager and Credit Control Team
  • Oversaw the embedding of new team
  • Trained new credit team


 We understand from the client that following the work undertaken the following benefits were enjoyed by the client:

  1. DSO had fallen from over 200 days to 80 in 6 months (and continued to fall)
  2. Better underwriting of credit risk resulting in decrease in overdues and bad debts
  3. The credit control team had made significant inroads into the backlog of accounts and processes are in place for handling late and non-paying customers
  4. Queries are logged and analysed by all relevant departments and these have reduced considerably
  5. The credit control team is more motivated
  6. There is now a good working relationship between the Credit Department, Sales and other areas of the organisation.