Cash Flow – Better management and control of debtors 

Cash Flow is the ‘life blood’ of a business
In these challenging economic times, dealerships appear to be suffering more than most businesses, working capital is under pressure and customers are taking longer to pay their bills. 

For every dealer, it is vital to optimise cash flow, to keep capital costs low and minimise bad debt. Research conducted by ADP with its customers in February 2009 confirmed the position. Comments included: 

“Cash Flow and Liquidity will be the main concern and priority over the coming 12 months
“The availability of credit is crucial to the motor industry and its customers”
“Cash is king - those with deep pockets will survive, those without will not”

Cash collection is key to the survival of a business
It has been estimated that as many as one in four insolvency cases can be attributed to late payment issues. In view of this, obtaining the most value from the computer system is an essential factor in maximising cash flow and system-based, automated facilities need to be fully utilised. ADP advises a four-step process.

STEP 1 Credit chase letters and follow up calls - linked to payment terms and based on aged debt 
– 1st day of calendar month/30 days from invoice date chase letter and follow up call
– 10 working days after 1st chase letter and follow up call
– 7 working days after 2nd chase letter and follow up call

Autoline is able to record the credit chase letter contact and schedule the follow-up event within a specified timeframe and the appropriate letter is automatically selected according to the number of payment overdue days. Autoline provides the ability to add statements within the credit chase letter.

STEP 2 Use of CRM contacts - Schedule automatic follow-up phone call dates and times 
For example, the Autoline CRM module allows contacts and follow up events to be automatically generated in the credit controllers diary and daily calls can be viewed from the ‘Today’s Performance’ facility. This enables the credit chase events to be tracked and future contacts can be programmed
 
STEP 3 Use e-mail to distribute statements 
Emailing and faxing credit letters and statements directly from the computer system helps to increase the speed of cash collection and saves on print and postage costs. A successful strategy for accounts receivable is to email a letter and statement with an immediate follow up call to gain instant acknowledgement of the outstanding debt in order to agree payment.

STEP 4 Set new debtor targets 
ADP research found that dealerships operating an automated credit chase process had a better debt collection ratio than the <45 day target referred to in the ‘KPI Book’. Dealerships without a credit chase process have higher debt collection ratios and did not maintain customer email addresses. Dealerships distributing statements by email had a better debt collection ratio. When the ‘debtor days’ is known, improvement targets can be set. 
 
Debtor Days = Average trade debtors x 365 days
                     Annual Credit Sales

In summary - visibility and control 
Building relationships with customers’ accounts departments is a key factor in debt management. Autoline supports this with the integration between the CRM and Accounts modules to automatically generate contacts and follow up events in the credit controller’s diary. Therefore Autoline can help to: 

• Cut the cost of cash collection
• Reduce the cost of short-term borrowing
• Improve cash flow  by reducing debtor days