Measuring the performance of the credit department:

Making all necessary improvements. Bad debt losses and financing costs should then be substantially reduced.

·         The ratio of bad debt write offs to sales

·         DSO( days sales outstanding) by product line, business unit, sales territory as well as collector

·         DSO can also be measured on a sales weighted basis which is not affected by significant monthly sales differences. This creates a stronger DSO measurement

·         The percentage of the aged trial balance over a specified period (e.g. 60 days)

·         The total monetary figure of outstanding client deductions that is unresolved. The credit department does not rectify the issue directly, they do need to follow up to ensure that it gets resolved

·         The total monetary figure of fully outstanding and disputed issues.  This is where the client refuses to pay until a credit is received. This greatly impacts the cash forecast projection for the period. The credit department needs to source all the details of the concern and follow through with the tracking, until rectified

·         Customers on a “hold” status. This will impact sales if accounts are not being contacted and funds are not collected in a timely manner. Determine if greater numbers of customers are going on hold every month due to poor collection performance