A credit manager wants to achieve maximum results – visible through measurements and metrics. Daily measurements showing the financial health of your receivables portfolio and how your team is performing against their targets are essential in order to stay on track.

However, most of them mean collecting information from various systems topped up by hours of Excel building. That´s why a good system or credit software might be of handy.

1. DSO - Days Sales Outstanding. It’s a measure of the average number of days your team takes to collect revenue after an invoice has been sent. A relatively high DSO typically indicates that an organisation has a customer portfolio with credit challenges or a collections team that is underperforming. A low DSO can come from a high performing team, but also be a signal that credit policies are too tight which could impact an organisation’s competitive position in the longer run. There are several ways of calculating DSO, but in general it tells you:
    • How quickly your customers are paying
    • How well your credit and collections team is performing
    • How long it takes on average to collect open invoices
    • An indication of your customer satisfaction - happy customers have fewer reasons not to pay!
    • The credit position of your customers
    • How well you are doing compared to your internal or industry peers - a benchmark

2. Ageing Invoice, how long the invoice ages (like wine ages, but in this case it turns in vinager) before the customer pays an invoice. The ageing should be as low as possible of course. The oldest invoices (and largest) are the biggest worry for a credit manager. Not only for it will become more and more difficult to recover but also for how much money (interest, margin,..have you already missed on these unpaid invoices).

3. Historical payment period The historical payment period shows an average over the whole of last year. So the more invoices the customer has paid, the more accurate this number becomes since it’s a weighted average.

4. Customer Score. Based on data which comes from payment behaviour, from external systems or even third party data sources. An example is a sudden change in a customer’s payment behaviour which could be an early warning signal of bigger problems. Taking proactive action can help prevent bigger issues in the future.

5. Interest and Cost - Both for internal reference (what is this open invoice actually costing me?) and external reference (dear customer, please be informed that this is what this open invoice is costing me) it’s a great calculation.