Before starting to build a reporting system, we must decide on a basis for measurement. In the world of credit and collection, the common basis for metrics and evaluating the world of debts is the organization’s annual sales turnover. Therefore, this is the baseline data that needs to be collected.
However, we must examine whether the sales cycle can be used as a uniform basis for all customers or whether it is necessary to segment it to achieve a significant and accurate targeting of the requested credit and collection data.
It might be beneficial to segment the sales turnover data in several ways in order to allow credit and collection controls to be carried out from different aspects. The examples that will be presented here are a few of many possible, and the principle is that they should fit the special needs of the organization that performs the control:
- Total turnover in money and number of invoices
- Sales turnover by customer types: large, strategic, institutional, small businesses, private
- Sales turnover by product lines
- Sales turnover by methods of payment: open credit, standing orders, credit cards, checks
- Sales turnover by branches
- Sales turnover according to geographical distribution and local customers versus customers abroad
- Sales turnover by sales channel
We would also like to track some additional metrics:
- Average invoice amount
- Sales to 10 (and up to 100) major customers
All the above divisions will help us isolate and better understand the credit and collection metrics. We can continue to segment and focus the indices according to the basic data of the sales turnover, whichever provides the maximum relevant detail for the analysis.