Credit Managers are multi-talented gymnasts

2019 Day of the Credit Manager Takeaways

CFO Services' Dieter Verbeek and Jo Uyttersprot attended this year's edition of IvKM's Dag van de Kredietmanager. As an expert manager in Credit management, Jo did a talk on fraud and how to prevent it. Dieter reflected on the insights that were shared by the speakers.

Here are five lessons learned.


Article by Dieter Verbeek, business manager, CFO Services


#1 Credit Managers are multi-talented gymnasts: it’s about the straddle and the flic flacs

This year's Day of the Credit Manager once again proved that it requires flexibility and versatility to become a Credit manager. Experts from different fields took the floor and discussed a wide variety of topics: Order-To-Cash, automation, fraud, treasury, mediation, psychology of management accounting,...

Building bridges between sales and Credit management, maneuver between legal knowledge and risk appetite and chasing existing customers while on-boarding new customers: these are all key tasks for the Credit management function. A well balanced Credit management team is of the utmost importance. Today’s Credit manager is a gymnast, doing front-flips, flic flacs, dive rolls and straddles on a daily basis. In our economically unstable world where all stakeholders are pushing to increase EBIT, it has become a real hassle to set credit limits.

#2. Automation in credit management is on the rise: it’s about the tech, step-by-step

This is not exclusively a Credit management subject. Automating an (Order-to-Cash) process poses multiple challenges:

  • First of all, management must be convinced that an automation of the process is necessary. At multiple occasions, TriFinance raised the question about the credit department’s strategic level. That should be high enough to receive sufficient budget to implement this change.
  • Once the process is automated, the business and the people working with the technology have to be convinced of its added value.This is a daily task and starts before implementation: involve your employees from the very beginning, use their experience, train them adequately, test the tool sufficiently and use it.
  • Last but not least, people and technology must constantly adapt to the changing environment. A takeover, updating to a new version of an ERP system or even changing ERPs, installing a shared service center... organizations need to keep ahead of the curve or get overrun, Mufasa-style, by the herd.

Don’t announce the big bang tomorrow, the keyword is step-by-step. In all 3 phases: convincing, working, adapting.


#3. The Waterzooi legislation: it’s about medi(t)ation

Meditation” and “mediation” differ by only one letter. Maybe that small difference played a distinctive role for Justice Minister Koen Geens, when he pushed the Waterzooi legislation through the legislative process before the 2019 elections. The ‘Waterzooi legislation’ got its name from the famous Flemish stew dish because it is a consolidation act that contains all sorts of new legislation, just like the dish contains many sorts of fish.

Koen Geens wanted to relieve the Belgian court system from cases that can be settled between parties. Too many conflicts are still settled in court, which leads to an extended duration of judicial proceedings, dissatisfied parties, financial catastrophe, etc.

The belief is that mediation is time and cost efficient and will create a win-win for all parties. A good mediator needs (life) experience, searches for motives, seeks common ground and keeps his/her head always cool.

Meditation leads to mediation. You think first, you focus on exhale and then you try to settle, instead of going to court.




#4. Fraud: it’s about the Nigerian prince and the Trojan horse

There are two types of fraud, CFO Services’ Jo Uyttersprot said: internal and external fraud. Although the likes of Ponzi, Maddof and Belfort are still around, external fraud today is mostly cybercrime. Everyone knows the mails from that long lost family member who happens to be a Nigerian prince. And while it might be one of the longest running internet scams, it still ‘raised’ 700.000$ in the USA alone. 

Today, cybercriminals use more sophisticated methods. In 2018 a major ransomware attack shook the world: emails were sent with a link that contained a virus that was then uploaded into the system. Whole organizations were held hostage. Files, devices and even whole companies were held hostage using encryption until the victim pays a ransom in exchange for a decryption key. Only recently, a large-scale ransomware attack on ASCO Industries in Zaventem left its 1000 employees technically unemployed since June 11, a situation that demonstrates how this kind of crime can have grave consequences.

Internal fraud on the other hand is fraud that’s committed, willingly, by someone working for the organization. In 2016, Studio 100 discovered its Finance Director had embezzled 4 million euros. Better known are the cases of Enron and WorldCom. All of these cases have one common denominator: it starts small and reaches alarming proportions really fast. The hard part of internal fraud is more often emotional than it is monetary. It’s a breach of confidence.

Important to prevent fraud, whether it’s internal or external, is building control mechanisms. This control mechanism might be a 4-eyes principle, a segregation of duties or even a firewall. Combined with common sense, this can be a successful recipe for a hazard-free environment. Two sayings are in order here: prevention is better than cure and the opportunity makes the thief.

#5. Employee engagement: it’s about self-determination

Last but not least, the most entertaining session of the day was conducted by prof. dr. Werner Bruggeman. Being a living example of intrinsic motivation himself, Werner Bruggeman differentiated the old Principal Agent theory from the new self-determination theory. People do things because they want to do them.

Writing this piece inside an airconditioned building with the view on a terrace when it’s 35 degrees outside, might question this statement. The underlying reasoning is solid, however: an important part of how effective and efficient you work, is incentivised by autonomous motivation. This motivation is fed by three kinds of feeling: 1) a feeling of autonomy; 2) a feeling of relatedness and 3) a feeling that you possess the right skills and compentences. These feelings stimulate people to co-create. The reverse is also true: by co-creating, people feel intrinsically motivated.

I believe strongly in the self-determination theory. The fraud presentation taught us that it’s wise to install different control mechanisms. The automation part of this Day of the Credit Manager showed is it is best done step-by-step.

Who said it’s about the straddle and the flic flacs?


 

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Dieter Verbeek Business Manager Credit Management CFO Services
+32 489856822