Using Credit Department Metrics

for Operational Excellence



It’s been great to finally get back to meetings and get face to face with petroleum companies. During these discussions, I am hearing a lot about the rapid growth of many Study Group members, and how that growth puts immense pressure on a company’s infrastructure.

It’s highly advisable to be proactive about where these pressure points are showing up, and stay in a mode of repairing the root cause. Out of the thousands of processes taking place in your business today, how do you decide what to tackle first? I suggest starting with tracking credit department metrics to identify key operational problems. And I’m not just talking about pure financial metrics.

When things go wrong in operations after an order is placed, it frequently shows up as a late pay account on the accounts receivable aging, which creates a great opportunity to identify problems.

Let’s take a look at three easy ways to identify where problems are pooling:

#1. Examine the stories your A/R Aging is telling. When the 10-30 day bucket is at a high level it’s a good indicator of pricing, invoicing or delivery problems. This is the “easy fix” bucket, with customers at the highest level of quick collecting, and staff get so focused on achieving the collection they may miss the reason the account went past due to begin with.

The 30 – 60 day bucket is stickier. Again, what systems in your delivery process could be the problem? These are also potentially unresolved problems, customers having financial problems, or customers that just don’t have you on their payables list because they think it doesn’t really matter. They are going to be supplied anyway, and there is no late charge collected. This does not make for a big incentive to pay. This bucket needs to be clamped down on with a standard collection process that is swift and relentless in execution.

Customers in the over-60-day bucket should have a clear understanding of a gameplan for remedy. If there is no solid gameplan it would be time to bring in a 3rd party collector like an attorney or collection agency. Customers in this category have most likely moved past being able to justify with your system problems.

#2. Identify problematic internal systems causing efficiency breakdowns

What’s the percentage of Credit Rebills? Is truck technology, the back office system, or other technology working to actually cause some of these breakdowns? Check on the percentage of credit holds and releases. If there are very few credit holds, this feature probably isn’t used at all, and if there are too many your system is in overdrive. These two measurements can be a huge time commitment by credit staff, and frequently the fix just takes a systems adjustment.

#3. Analyze calls into the credit

Why is internal staff calling the credit department, and how can those needs be met without an interruptive call or email? Are there other resources available to sales to be kept in the loop on applications such as expanding the use of Salesforce or some other CRM system? Why are customers calling the credit department? What internal systems or processes are causing customers to pick up the phone, creating those interruptive, albeit highly important, phone calls?

Using non-financial credit department intel is an extremely effective tool to measure operational efficiency. Tracking and benchmarking these metrics by quarter is also a great way to spot troubling trends that need to be on a root cause fix project.

For more information,

contact Ann Pitts


or 817.304.1533