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Streamlining Order Processing
By Michael C. Dennis, MBA, CBF

It is important for the credit department to look for ways to streamline the order review and approval process. It is equally important for the credit department that review and approval of pending orders be given top priority. There are a variety of techniques to accelerate and streamline the approval process for orders placed on credit review including:

  • Arrange for someone to modify the software that your company uses so that orders are not placed on credit referral if there is only a small dollar amount past due. An example would be to modify the software so that orders do not go into credit review [sometimes called erroneously credit hold] until the past due balance exceeds 10% of the total A/R balance.

  • Consider whether or not orders for certain low risk accounts should be allowed to bypass the credit approval process altogether. Most companies have a limited number of strong, stable, large and creditworthy customers that should be allowed to bypass credit approval.

  • Another idea is to allow all orders for low risk accounts to bypass credit review and approval process unless the order pending would place the account over the established credit limit by a specific dollar amount or percent of the credit limit.

  • Consider modifying the software so that orders are not held when the past due balance involves disputed balances - such as outstanding deductions.

It may take some time and effort to modify your software to accommodate these change, but I am convinced that the time and effort required to do so will be more than offset by the benefits of being able to process orders more quickly.

One final thought: To prevent problems before they can happen, notify your salespeople of the credit limits established for each of their customers. Invite them to study the report and request increases before the customer exceeds the credit limit. This will give the credit department time to update the file - and hopefully avoid the problems associated with having to hold an order while the account is evaluated for a larger credit limit.

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