Good Morning!
We recently centralized our AR & AP team into a Shared Service Center. As a credit manager, we are always watching (or praying) for money to come in and then ensuring it’s applied correctly.
With our new centralized AR team still learning all the quirks of each of our OPCO’s, we see a lot of mistakes. Some are obvious, some not.
So, my question is, what does your AR team consider to be a good/ fair benchmark to grade their team on how well (or not so well) they are doing?
Is there a good way to track? We send a number of emails when we see things not posted as specified and will utilize the subject line to indicate if “correction needed”, or “discount needed”, etc., but besides actually counting emails/ subject titles, what do your AR team use to monitor, track errors and what is the benchmark/goal of their AR folks?
All suggestions welcome and appreciated!
To us as a company a good and fair benchmark is for any unresolved short pay or unapplied cash (which is usually the form it takes) to be resolved as much as possible each month before the 31st. If it's operator error, they all need to be fixed as soon as discovered (like you're doing below) and prior to EOM. These particular operator errors need to be few and far. Any that are not resolved can remain only for the following reasons:
Sorry, no ideas about how to track without reports that give you a count and point to the individuals who make the most errors. A poor application of a customer's check can really hurt your company. Many years ago prior to centralization under the Credit/collections umbrella (not to pay myself on the back) We upgraded the AR's individual qualifications and have had some really qualified people applying checks through the years. Makes a big difference.
I’m not in your shoes, but here’s how I’d start. If there are multiple locations posting cash, I’d start tracking them on a SHARED spreadsheet, by location, error type, account#, amount & cash applicator. Once data started to accumulate I would begin looking for patterns and sources of problems. Many of our dealers provide no remittance details, some make partial or flat payment amounts or pick & choose random invoices to pay. Time-wise we can’t stop & call every dealer to ask what they’re doing. I’ve spent time training staff on how to watch different customer payment patterns and learning their patterns. To figure out the combination of invoices/credits that equal an amount when many invoices are involved excel-solver add-in might be a useful tool. As a last resort asking the collector for that account- how They want payments applied or whether to put it on account as a lump sum to be determined later (rarely). Our collectors often know which invoices/amounts aren’t being paid because they’ve had a discussion with the customer and have made notes. Those collector notes can be useful for cash application questions.
Cross-training may be a good option (if possible) for those cash application staff who don’t understand the difficulties collectors experience and vice-versa. One collector didn’t understand & couldn’t explain transactions and would blame the cash application person. I fixed that problem by making the collector post some of our batches daily so she could see how/why things happened.
I would suggest that you do not send emails on every topic, they will just get lost. Either in person, meeting, or through a google spreadsheet that lists every customer and the exceptions to how that account should be applied in one centralized location (a training tool/document).
Tracking their errors on a spreadsheet is good going forward to ensure they adhere to expectations, however, In order to get to that point, giving the cash app team a list of customers with exceptions that need to be applied a certain way for example or guidelines is part of the training. If you don’t lay the expectations and training out with as many of the rules and exceptions that come with cash application, then counting how many mistakes they make won’t accomplish what the ultimate goal is. There is more than one way to apply a check, balance, and get out of the application. What’s important to you is not necessarily what is important to them.
Perhaps your team can create a shared document that lists “reminders” and guidelines by account, the account number and their name and contact info in case someone isn’t clear about that specific customer’s remit and wants further clarification from the credit team. “A Cheat Sheet” is always helpful.
Thank you for all the great suggestions!
You guys/ gals are so helpful and your feedback is very much appreciated.
This was a HUGE problem for us. Short pays, overpays, entire checks posted as unapplied credits, etc. Specifically, regarding the tracking aspect, I created a system wherein my cash application personnel are responsible to note discrepancies. Once tested to gauge customer reactions, I added the duty to the cash app rep job description. I also created a cheat sheet of common issues.
Nice one