|Business Credit Articles|
20 Measuring Credit Department Performance Standards
by Michael C. Dennis M.B.A., C.B.F.
Here are twenty examples of objectives standards that the credit manager can use to evaluate the performance of the members of the credit department staff. Normally, performance reviews include evaluations of both objective and subjective data, but since these standards are easy to calculate determining which of your subordinates is doing a better job is easier the more objective standards you use to measure and compare their performance.
1. The number of active accounts handled by each collector.
2. The total dollar amount past due by collector.
3. The percent change in the past due amount from one month to the next [ Example from 13% past due and 87% current – to – 15% past due and 85% current ] .
4. The number of collection or deduction related calls made and received each day.
5. The number of valid complaints received from customers about each collector per month.
6. The number of valid complaints from salespeople about each collector per month.
7. The DSO calculated for each collector's assigned customer base.
8. The DDSO [Days Delinquent Sales Outstanding] per collector per month.
9. The average number of days from delinquency to the first collection calls being made.
10. The average number of days from first to the second collection call.
11. Bad debt losses as a percent of sales in the collector's account portfolio.
12. The total number of outstanding customer deductions in the collector's account base.
13. The number of deductions closed each month.
14. The average number of days from the date a deduction is taken by a customer to the date the deduction is resolved by either [a] arranging for a credit to be issued, or [b] by contacting the customer to arrange for deductions taken in error to be repaid, or [c] arranging for a miscellaneous or a bad debt write off.
15. The average number of days from receipt of a credit application to communication of the credit decision.
16. The average number of minutes an order in the credit approval queue remains on hold before it is reviewed and released – or reviewed and held.
17. The average number of days required to clear or close a customer deduction.
18. The number of applications processed per month per new accounts clerk.
19. The number of financial statements analyzed per month per analyst.
20. The number of errors made in customer financial statement analysis as a percent of the total number of statements analyzed.