A guide to better gap analysis: Measure the performance of your credit management
How to measure the performance of your credit management? In this article, CFO Services software partner Onguard explains how gap analysis and benchmarking can help organizations measure and strengthen the performance of their credit team. Data compiled in benchmarking can give a strong idea of how certain differences between you and your rivals affect your relative performance.
What is gap analysis?
Gap analysis is a means of comparing your current performance with where you want to be. That means identifying the gaps between the best possible allocation of resources and the way they are currently being employed. It can involve different methods of determining, recording and then understanding the difference between what the organization needs and its current capabilities – then developing means of closing the gap. The process can be conducted to gain insight into different aspects of the same organization, whether that be its structure, strategic direction, processes or even its use of IT and other forms of technology. But every approach sticks to a few basic principles that enable organizations to work how to get to the next level.
How can you benefit?
Although it is easy to get lost in reams of complex data, gap analysis can be useful to show you how successful your credit management team could be under different circumstances. By analysing the right data effectively and acting on the findings, you can add real value and develop best-in-class credit management functions. By dividing your customers into different profile groups and assigning them to the best suitable credit collectors in your team you might ameliorate your results, for example.
The comparison process can be applied to a wide variety of situations, all of which can unearth areas where the organization is not yet reaching its full potential. That means it has short and long-term benefits. In the here and now, emerging problems can be nipped in the bud. In the long-term structural and process improvements could free up valuable time and resources to devote to more important tasks, giving businesses fresh impetus to grow.
Where to start?
To get maximum value from your gap analysis, you need to define where you want your credit management function to be. Be creative and develop a sense of what would constitute success for you. It is crucial to distil these ideas into a set of clear, defined goals that can be quantified and therefore measured.
From that point you should have a good idea of the kind of data that you need and where it can be obtained. Information from within the organization and its customers can easily be captured using integrated credit management software, which ensures that comprehensive data is captured at every stage of the customer lifecycle. That means data gathered by functions across the organization is always readily accessible for analysis.
Combined analysis: gap analysis and benchmarking
In the majority of cases, gap analysis works best when combined with an effective benchmarking strategy. The biggest benefit of this is that benchmarking actually provides a huge amount of data that can be used to conduct a gap analysis, especially if you are gathering information on competitors.
Data compiled in benchmarking can give a strong idea of how certain differences between you and your rivals affect your relative performance, pointing out how much further ahead you could be. It will also demonstrate how difficult it might be to make progress in some areas, which should help organizations to set realistic yet ambitious goals.
The value of your data
You have gathered the required information. Now you need the right tools to really understand where your credit management team’s performance is at its strongest and weakest. Analytics tools can be valuable in this respect, but it is important to take a broader view of the information at hand. Remember, a competitor may use processes that yield higher returns, but if they come at the cost of customer satisfaction then it may not be an example worth following.
Your next step to tangible results
As with any monitoring process, gap analysis will only reveal its true value when you act on what you have discovered. Whether you choose to take inspiration from good practice employed by competitors or develop entirely new strategies, the important thing is to integrate the processes into your everyday business operations and keep tracking your success on an ongoing basis. It remains crucial to know where your credit management team is going and how well it is progressing down that path. In the end, that will allow you to stay on track and get maximum value from gap analysis.
Want to improve your credit management? Read on to find out more about gap analysis and check ‘Benchmarking: where do you start?’ for actionable pointers on benchmarking and more inspiration to improve your credit management.
This article was previously published on the Onguard website.
Onguard is a CFO Services partner that offers integrated Order-to-Cash Solution that enables the credit management department to work more efficiently in a better controlled process.