Credit

1. Scope

The scope of this process is to demonstrate the various options and processes involved in credit application and approval, balance management, and the collection process. This is done to ensure effective management and up-to-date balance movements. This scope encompasses the following:

• Credit

  • Application

  • Approval

  • Evolution

  • Balances

  • Collection

  • Analysis and improvement

1.1. Software Coverage

• Credit

  • Application

    • Basic Information

    • Co-applicants

    • Files

  • Approval Workflow

    • Steps

    • Service Queue

    • Responsible Parties

  • Evolution

    • Scoring

      • Traffic Light System

    • Rules

  • Balances

    • Inquiry

    • Reports

    • Mass Forgiveness

  • Collection

    • Inquiry

    • Calls/Management

    • Commitments and Follow-up

• Analysis

  • Widgets

  • Credit and Collection Reports

2. Definitions

What is credit?

Credit is a financial transaction, a form of lending physical or virtual money, both of which entail the commitment to repay the borrowed money gradually or in a single payment.

What is a credit application?

It involves requesting a sum of money as a loan from a company. The process may vary depending on the guidelines or requirements established by the company. This application undergoes various analyses, and based on this, the approval or denial of the credit limit and the approved amount are determined.

What is credit approval?

It is the approved amount of credit granted to an individual as a result of a previously submitted application to the company.

What is collection management?

It is the process undertaken to secure payment for a product, service, or debt. Payment can occur before, during, or after the receipt of the product or service, depending on the agreement between the parties involved.

3. Key Features

The system offers several functionalities that assist the credit and collections department throughout the credit approval and collection process:

• Credit Application/Registration: The platform allows for the configuration of the affiliation form with the necessary fields and information for the company. Additionally, the approval process for these registrations can be defined.

• Credit Limit Management: Rules can be configured within the system to automatically increase credit limits by evaluating conditions set by the company (average order, consecutiveness, segmentation).

• Collection Management: The system offers various ways to check pending balances and also allows for the recording of multiple collection management options, facilitating the recovery of outstanding debts.

• Credit Information Summary: Various credit and collection reports are available to aid in the efficient management of these processes.

4. Conditions

For the proper use of the software's functionalities, it's necessary to have defined technical and/or business elements beforehand, such as:

• Required Fields for Credit Application: Define what information is required and necessary when applying for a credit limit.

• Policies for Credit Limit Approval and Increases: Define the policies that need to be considered when granting or increasing credit limits.

• Collection Management Strategies: Define the strategy for collection management, including types of collections and methods of contact (phone calls, email).

5. Operation

5.1. Journey

Robert is a credit analyst, and Alejandro is a collections analyst at the company. Both of them, in their respective roles, are focused on minimizing financial risk and managing cash flow for the company. Therefore, it's essential for them to have a system that allows them to easily implement strategies and communication methods for collections, enabling them to stay up to date on all financial and economic aspects of the company.

In his role, Robert has specific functions and responsibilities assigned to him to ensure the proper monitoring of all financial aspects. These responsibilities are established in advance by the Director of Credit and Collections. Among Robert's functions are:

• Ensuring that policies are followed when approving and granting credit requests.

• Assisting in defining and implementing changes during the credit limit increase or decrease processes.

• Validating the aging of credits (days overdue).

• Analyzing the potential risks, the company might face with the credits it has granted.

On the other hand, Alejandro, in his role, is responsible for the following functions and responsibilities, which are also predefined by the Director of Credit and Collections:

• Ensuring constant collection methods for overdue accounts, starting from the first day of delinquency based on the company's policies.

• Notifying customers with overdue accounts about their outstanding balances and the number of days overdue, using various communication channels established by the company.

• Escalating overdue accounts to the collection agency for appropriate follow-up and management.

• Maintaining collection indicators in an optimal state, presenting information categorized by the age of accounts.

• Making adjustments with debit and credit notes as needed.

Both Robert and Alejandro play crucial roles in managing the company's financial health and ensuring that credit is extended and collected in a responsible manner.

6. Configurable Elements

The following are the elements to configure in the software:

6.1. Main Configurations

• Configuration of collection methods (phone call, email, text message)

• Configuration of collection categories

6.2. Related Module Configurations

• Mail Group Configuration (related to billing and collections)

• Mail Plan Configuration (related to billing and collections)

• Calendar Configuration (related to billing and collections)

• Configuration of required document types for attachment

• Assignment of widgets and reports to a desired role

• Configuration of clients in the restricted list due to delinquency

• Configuration of final reason for collection management (unresponsive, commitment, etc.)

• Configuration of payment methods

• Configuration of credit due dates or terms

• Rules for dynamic credit limit allocation based on behavior.

• Credit application review workflow

• Default credit limit assignment

• Credit limit allocation rules

6.3. Configuration of the Module

6.3.1. Collection Types

This configurator allows the company to establish the method of communication with the customer to inform them of the payment they need to make to settle their debts with the company.

Open

Open

"These collection types will later be reflected in the 'Collections' manager, in the 'Type' field of the 'Record Management' modal."

6.3.2. Collection Categories

The collection categories module facilitates the classification of collection activities based on the outcome achieved with each customer. When recording a collection activity, the user must specify the result and plan the next follow-up activity.

"These collection categories will later be reflected in the 'Collections' manager, in the 'Categories' field of the 'Record Management' modal."

7. Detailed Scope

7.1. Request

Through a credit limit increase request, the company gains control over each incoming request for analysis and evaluation.

This allows for appropriate validation to ensure compliance with the established policies based on the company's business model.

The credit limit increase request enables both the company and the customer to increase their average order value and the number of units selected per order.

Multiple configurations can be considered according to the company's needs:

• References / Co-applicants

• Attached Documents

S4DS offers various ways to submit a credit limit increase request, including:

• Basic Information
  For consultants, the ability to increase and grow their business is essential. Having the option to place higher-value orders translates to increased profits from their sales.
  Therefore, S4DS allows for the submission of credit limit increase requests, which can then be sent to the company for proper management.

• References / Co-applicants
  For many companies, having references and/or co-applicants for credit limit increases is crucial. This additional information aids the company in gathering more data when managing collections and, ultimately, in collecting outstanding debts.
  Typically, the credit approval process requires consultants to provide information about personal and/or commercial references or co-applicants if the business model requires it.
  The platform allows for the registration of multiple references. The company can configure the required number of references to initiate a credit request.
  For demonstration purposes, two references are configured as mandatory.

• Files
  The documents required for a credit limit increase request are defined by the business model, and the user must upload the mandatory documents.
  Once the reference and document requirements are met, the consultant can request a credit limit review, which initiates an approval workflow.

7.2. Approval

Within the system, the value of the granted credit can be assigned in the following ways:

• Default Value

• Value Assigned According to Credit Policies

• Value Based on Discretion

This approval is carried out through a workflow that defines:

• The steps for approval

• Service queues and responsible parties

7.3. Evolution

The system can dynamically modify the credit limit based on the payment behavior exhibited by each consultant.

For this purpose, a configurable rule engine is available that evaluates the account status over a certain number of business cycles or campaigns and categorizes consultants into one of five ranges or groups.

Categorization: This is the range or group to which each consultant is assigned once the system evaluates their payment behavior according to the rules configured by the company (credit behavior segmentation).

Rules: These are the conditions that the company defines to categorize the consultant based on payment behavior and subsequently adjust the credit limit.

Example:

• The ranges can be used flexibly to assign the credit limit, such as providing a credit limit double the average order value per campaign.

• It could also be defined that orders are not blocked for certain payment ranges and are held for others.

7.4. Balances

The balance represents the sum of invoices, plus debit and credit notes, payments, and future notes, in monetary units. It signifies the money that the consultant owes to the company or whether they have a credit balance due to a return.

Additionally, the system supports "future notes" or "documents with future projected dates" These serve the same purpose as regular credit or debit notes. However, the key difference is that these notes have dates that extend beyond the current date, meaning this balance is not effective for the person until that future date is reached.

This means that the current balance is different from the actual balance that the person has, as the current balance does not apply future balances or debts in their entirety. This allows the company to implement business strategies that utilize this functionality.

The consultant's balance information is considered when processing an order, validating whether it can be invoiced, or if it should be held until a payment is made or the balance exceeds the order value.

Through rule configuration in the system, it's possible to control order release based on the balance and the consultant's overdue time. This can be configured according to the company's needs.

Queries and reports: Consultant balances can be viewed and managed in:

• A centralized consultant query, which allows exporting all related transactions for that individual.

• At the start of an order.

• When making a payment for an order.

• Report Dashboard

  • Accounts Receivable - Total

  • Consolidated Balance

  • Detailed Accounts Receivable Reports (only for those with a balance > 0 or debt with the company)

7.5. Collection

Collection management is an activity carried out by the responsible department, which handles the collection and recovery of outstanding balances from customers. 

S4DS's collection management module enables the company to maintain a record of the collection process for customers who have payment arrears on their invoices.

7.5.1. Inquiry

It is important to effectively manage the validation and collection of pending payments. For this reason, this module allows for the visualization of invoice information, the total payment, what has been paid, and the outstanding payment. This ensures synchronization with the sales force regarding what is owed.

Furthermore, this information can also be accessed through reports, which provide a comprehensive view:

• Accounts Receivable - Risk

• Accounts Receivable - Collection

• Total Accounts Receivable

• Detailed Accounts Receivable

7.5.2. Calls/Management

When the collections or accounts receivable department contacts the sales force to carry out the collection process, it's essential to maintain a record of the actions taken during this procedure.

This functionality allows for the registration of collection activities carried out with the sales force who have overdue accounts. It records information such as:

• Method used for communication (phone call, meeting, visit)

• Category (not contacted, denies the debt, etc.)

• Commitment date

• Observations

7.5.3. Commitments and Follow-up

When the collections or accounts receivable department communicates with a customer and this process results in a commitment with defined dates, it's important to follow up to ensure the commitment is met.

Therefore, S4DS has a collection management feature where you can record commitments made with the customer. These commitments are then integrated into a workflow to facilitate tracking and follow-up on these commitments.

7.6. Analysis

Analysis is crucial for maintaining control over all business variables, and S4 provides access to all the information either through the user interface or by generating reports.

For data analysis, there are various types of queries and reports available, including:

7.6.1. Dynamic Dashboards

Widgets allow quick and visual access to information or indicators. They contain information from different components, providing a concise way to access them.

This allows the person in charge of the credit department to have an overview of the key performance indicators and make decisions to improve business strategies and collection methods.

For example, a "Campaign Widget" can provide a snapshot of campaign-related data.

"Collection Widget."

7.6.2. Reports

Collecting and analyzing information is essential for a commercial entity, whether it's to identify critical areas or market opportunities and to monitor various sales-related aspects.

Reports enable the sales force to manage a vast amount of data on a specific topic by generating files. This allows access to detailed information for proper monitoring.

• Credit

  • Stencil Report

  • Customer Report

• Accounts Receivable

  • Consolidated Balance

  • Consolidated Risk Accounts Receivable

  • Total Accounts Receivable

  • Detailed Collection Summary

  • Account Movements

  • Detailed Accounts Receivable

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