Raising the Bar in Accounts Receivable by Changing the Culture

Originally published in the Credit Research Foundation’s publication Perspective by CRF (Q4 2021)

I was fed up with putting out fires. Every day we went from reacting to one issue after another, picking up the pieces from one challenge to another.

Don’t get me wrong—we were a department accomplishing satisfactory results. We were achieving key results, such as DSO, which were on par with (if not better than) our competitors. However, we worked in a very reactive manner. I wanted to change how we operated as a department because I knew if I was frustrated and stressed, my team was too.

This realization led me to do a hard thing ... I had to stop.

For me (and almost everyone I know), being busy comes easily. To stop, review and plan takes time—time that many will say is better spent clearing the backlog of outstanding tasks. But that was my point. No matter how hard, or how long, or how many team members worked on it, the backlog was always growing.

I shared my frustrations with my mentor, who I knew could provide guidance and advice in a way that was challenging without being critical. I did not need someone who would agree with all of my ideas, nor did I need any more criticism (I am already my own worst critic—I am sure this resonates with many people).

We decided we would take 2 days away from the office and build a plan. As I mentioned above, stopping is uncomfortable. There is a sense of comfort and satisfaction from being busy. But my rationale was that if I could take some time away from the office, I could invest it in building a plan for me, the team, and the business we served. We are busy, but we always had to find time and resources to put the fires out. Instead, I wanted to invest time in discovering if we could prevent the fires and therefore create more time to perform the actions that drove improvement in results.

I want to share the outline we created and some of the rationale behind it.

One of the most important and critical things I learned was to stop managing people and start leading them. Here are some of the differences between management and leadership from my experience:

• Management involves planning and budgeting. Leadership involves setting direction.

• Management involves organizing and staffing. Leadership involves aligning people.

• Managers produce plans, both tactical and operational. Leadership provides strategy and vision.

• Management provides control and solves problems. Leadership provides inspiration.

As leaders of people—no matter our job title—our primary objective is to achieve results through the people we lead. Results are achieved from the processes and tasks that people perform, or in some instances, do not perform.

I was accountable for the key objectives and goals for the AR and credit teams, and our results impacted the balance sheet, profitability, and cash flow. These were critical to the well-being and success of the organization. I needed to change how my team operated, so we reviewed everything, including my management and leadership. This was not easy, but the desire to do something new was a big motivator for me.

The outcome was that we created our own credo—a statement of the beliefs and guiding principles that would guide our department. It consisted of three parts:

• Vision statement

• Mission statement

• Belief statements—five in total—each with guiding statements

We wanted to create a new way of working for everyone and build a workplace where people wanted to come every day. I believed this was the best way to drive results and raise the bar in performance.

Below is the credo and the rationale we created and shared with the team. We invited them to review it so we could gain their buy-in (which was a process in itself).

Vision Statement:

To be recognized as a leading credit management and AR department, by being better tomorrow than we are today through continually developing our people, processes, and services.

Rationale:

I wanted a vision statement that meant something and was relevant to every member of the team.

First was the aspiration to be recognized as a leading credit management department. We were going to measure this by achieving the Quality Accreditation from the Chartered Institute of Credit Management (CICM). I believe that people want, like, and enjoy being part of a successful team and understand how they contribute to that success. Success had to be higher than the next DSO target—that’s just business as usual.

Second was the how—and this was important. Being better tomorrow related to everyone and everything we did every day. Since being is an action word, it became our continuous improvement ethos.

I wanted something that was real, something everyone could measure themselves against. I did not want them to wait for the line manager to tell them, but instead take the responsibility to measure themselves. For example, if you were processing new credit account applications, could you increase the number per day? If you were a credit controller making 20 calls a day, could you make 21 calls the next day? Think about it: if 30 credit controllers make 1 additional call a day—that is the equivalent of 1 additional credit controller!

Knowing their improved performance was contributing to success and was being measured and recognized motivated everyone.

Mission Statement:

The prudent management of cash, credit, and risk, within the framework of customer care. We do this by:

1. Working together to get the job done and always achieving high quality work

2. Caring about one another

3. Taking responsibility for the business and our actions

Rationale:

We wanted our actions to speak louder than words and bring together what we did every day.

For example, we aimed to collect cash from customers in a way that would encourage them to become repeat customers. We wanted to remove the anti-sales tag that many credit departments have endured over the years. We also hoped to highlight the impact each team member has on the rest of the team as well as our customers, both internal and external.

The bottom line was that it was everyone’s mission to lead by example and refuse to accept poor quality work because it almost always impacts another team member or a customer.

Beliefs:

1. Customers: we believe our customers are vital to our business and lead to our corporate success.

2. People: we believe in and value our AR and credit management team members. They should be treated with fairness and integrity. We will support them in having a fulfilling career on this team at any level.

3. Process: we believe that by the continued improvement of our processes and the innovative management of change, we can improve our department’s contribution to the business.

4. Stakeholders: we believe by fulfilling our stakeholders’ needs, we will meet and enhance their expectations and receive continuing support.

5. Environment: we believe that we have a responsibility to the environment in which we live and work.

Each of the beliefs had 3 or 4 supporting statements. For example, under People we included the following:

• We are committed to train, develop, and enhance the skills of our credit control team members

• We respect the skills and experience of team members and will encourage their strengths

• We want our team members to feel that working on this team is rewarding and enjoyable

• We share our vision and achievements, so people have pride in their efforts and contributions

Rationale:

The beliefs acted as the barometer of the culture we wanted in the department and what everyone could and should expect from other team members.

One area we really focused on was the environment piece. Where people work matters so much, yet it is often overlooked. We realize that teams working in a good environment will be more successful. A positive environment can also reduce the number of people leaving the department. I wanted to build a team with the ‘ability to leave but the desire to stay’ because we all know that replacing an employee is expensive and time consuming, so reducing attrition is important.

The credo and the beliefs were the driving force to creating a culture that my team wanted to be—was proud to be—part of.

Culture is the backbone of any great organization, as has been demonstrated by many businesses and sports teams. A quote from Ken Blanchard, where he described culture as ‘what happens when the leader is not there,’ has resonated with me for many years.

I set myself a target: when I was out of the office, the performance of the team and the way they performed their tasks would be the same as if I were sitting at my desk. I had seen in other teams, and other managers had reported the same about my team, that there was a distinct difference in attitudes when the manager was not present.

I did not share it at the time (for obvious reasons) as a measure, but I knew we had achieved success when visitors would comment on the buzz and energy in my team’s section.

Another significant factor to our cultural success was that it was not only me ensuring that standards were being maintained. If an incident occurred that was below our standards or did not match our credo, there was a good chance someone on the team would raise this directly with the person concerned.

Measures of Success:

There are several other measures of success that we achieved.

Recognized as a Leading Credit Management Department

• We were awarded the CICMQ Quality and Centre of Excellence accreditations

• Between 2010 and 2016, more than 200 credit teams visited us for insight into how we developed teams, our process improvements, the solutions we deployed, and how we achieved success

• At the CICM educational conference, the then-CEO described our vision as the benchmark of professionalism for AR and credit professionals

Key Results and Objectives

For over 6 years, we achieved year-on-year improvements with a sustainable reduction in DSO of more than 25 days. This positively impacted cash collections, working capital, reduction in provisions, bad debt value of loss- es, and reduced the operational costs of the department while increasing capacity to absorb more work from the growth of the business.

The team bought into the credo, and it became our culture. The rest were outcomes of the team living out the credo.

Learning Experience

This was something new for me. Below are some of my learnings, both highs and lows:

• Be open. Share with your team as much and as often as possible. Communication is a two-way street. Just because you have presented your PowerPoint, it does not mean it has all been received. Go over it in 1-1s, in small groups, and with the team so it becomes a reality.

• Be brave. Doing something different is not easy. Staying with the status quo may feel easier, and I can under- stand that, but I did not want to do that. Do not be afraid to change. Treat everything as a learning experience.

• Be persistent. Change is not easy. Stick with it but do not be afraid to change direction and learn from the wrong turns. Do not give up and revert to what you already know. Stick to the plan and the vision.

• Be consistent. Your team will be watching. They want to know if you believe in what you are saying. They hear your words, but they feel your attitude. If you do not believe in the vision, how can you expect them to believe in it?

• Be kind to yourself. I made mistakes during this process. You are not perfect, and neither are your team members. Success comes from learning from your mistakes. Your team is not expecting you to be perfect, but you will get more respect if you can be open and honest with them and say you made a mistake. Then you can tell them what you are going to do differently and why

• Be aware of your time. Using time wisely is easier said than done, but I encourage you to take some time to stop. Plan and work out the vision. Work out the strategy.

These learnings will help you create something that you and your team can be proud of.

I have had many people over the years tell me why I could not achieve what I was I planning to do. I am so pleased I did not listen. My advice is to find people who can support and mentor you and help you achieve what you want.

There was not one single element that delivered the success we achieved—it was a combination of them all. It started with the desire to change and raise the bar in performance, and it led to so much more.

The most important aspect was the vision to be better tomorrow than today, which drove our desire to improve people and processes. It was tangible and something that helped everyone.

I would encourage accounts receivable and credit management professionals to ‘raise the bar’ for themselves and their teams. There will be challenges to overcome, but they are not a barrier to achieving success—instead, view them as a steppingstone to reach new levels of performance.

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