WO2005124619A1

WO2005124619A1 - Credit management system

Info

Publication number: WO2005124619A1
Application number: PCT/NZ2004/000126
Authority: WO
Inventors: George Walter Owen
Original assignee: George Walter Owen
Priority date: 2004-06-18
Filing date: 2004-06-18
Publication date: 2005-12-29
Also published as: AU2004320845A1

Abstract

In its broadest aspect this invention provides a multi-user credit management system (1) integrating an accounts receivable management system (5) for managing the collection, tracking, reporting, and fund remittance functions of debt recovery activity with a credit checking system (4) wherein the credit and credit worthiness information is derived from a database (2) shared and updated automatically by operation of the accounts receivable management system (5), the system operating within the context of an on-line, real time, environment.

Description

CREDIT MANAGEMENT SYSTEM

TECHNICAL FIELD

This invention relates to the field of credit management, and more particularly to systems providing credit and credit worthiness information and to an accounts receivable management system for managing the collection, tracking, reporting, and fund remittance functions of debt recovery activity, all within the context of an on-line, real time, environment.

BACKGROUND ART

A "successful" business can be defined as one where sufficient profit is retained in the form of cash to pay the business' expenses when they fall due or, in the case of a small business or professional, the business owner's personal and business expenses when they fall due. There can often be a fine balance between the cost of providing a product or service to the client or customer and making a profit for the owner.

It is therefore readily apparent that one of the most critical steps in any business is to ensure that it gets paid for what it provides.

Business software developers have, over the years, designed and marketed a plethora of products designed to carry out, among other things, stock management, staff management, money management, plant management, payroll management, taxation management, and/or profit management. Despite that, there is no credit management program dedicated to minimising the risk of not getting paid while at the same time prioritising payments from debtors.

To minimize their credit risk, credit providers often use an external credit rating agency to determine whether to provide credit to a potential client or customer.

Credit rating agencies provide historical information about debtors who have defaulted in making payment, typically determined only after 4 or more months have passed from the time the goods or services were supplied. Credit worthiness information is not available about slow payers - only about defaulting payers. Credit providers are generally prohibited by privacy laws from sharing information about slow payers.

To collect debts that have become overdue credit providers typically out source such work to debt collection agencies. When accounts are placed with collection agencies the credit provider loses control over their accounts. Collection agencies typically charge a fee calculated as a percentage of what is collected. This percentage can be significant, and is often more than the profit on the original transaction. Further, because of the way the agency gets paid the debt collection agency typically has a "pay up now and don't come back" approach and mentality. This often results in the total breakdown of business relationships.

In view of the foregoing problems, there is a need to provide dynamic credit information regarding a customer so that a credit provider may make an informed decision on whether to engage in commerce with a potential customer. This credit information needs to convey a meaningful level of the creditworthiness of each prospective customer. Further, there is a need for a system that enables a credit provider to keep control of the debt collection process in house which assists in keeping outstanding accounts to a minimum but at the same time doesn't upset customers by being heavy handed. Such a system would minimise the cost of providing credit and would enable any penalty payment fees to be kept by the credit provider to cover interest and other expenses, and not be given away to a collection agency.

It is therefore an object of the present invention to provide credit providers with credit management tools which overcome at least some of the abovementioned problems, or which at least provide the public with a useful choice. SUMMARY OF THE INVENTION

In its broadest aspect the present invention provides a multi-user credit management system integrating an accounts receivable management system for managing the collection, tracking, reporting, and fund remittance functions of debt recovery activity with a credit checking system wherein the credit and credit worthiness information is derived and updated automatically by operation of the accounts receivable management system, the system operating within the context of an on-line, real time, environment.

Internet based functionality is achieved via credit providers subscribing to a secure web enabled database and application facility.

All subscribers become agents of the application service provider and sign a declaration not to disclose information to non-subscribers. Credit information is shared between agents, as doing so typically complies with privacy law requirements because all individuals and companies in the application database have been informed of all the information held about them in writing.

Credit information for all debtors recorded in the database is available to all subscribers. Information in the credit rating database is derived automatically from the debt collection function of the application used by the multiple subscribers.

A significant advantageous feature of the system is that it inherently provides an incentive to a debtor to prioritise any debts owed to a subscriber ahead of others debts that they may owe. The result occurs because everyone generally wants a good credit rating, and in the system of the present invention all debtors start with a clean slate. The system uses that as an incentive to pay. Correspondence, generated in-house, to a delinquent debtor, desirably specifically asks for payment to ensure their credit rating is not damaged by their tardiness. An individual debtor may well have a terrible credit rating with others but not with subscribers to the system of the present invention. As a result there is a strong incentive to prioritise payment of a debt owed to a subscriber ahead of debts owed to non-subscribers.

As soon as a letter is sent to a debtor from within the debt collection function of the application a credit rating is established. This information is immediately and automatically posted in the credit worthiness database viewable by all subscribers.

The system of the present invention places control with the credit provider. It enables them to affect any debtor's credit rating until such time as the debt is paid. When the debt is paid the debtor's credit rating becomes A1 again.

However, while when the debt has been paid the database will record this debtor as having an A1 credit rating, a record of the debtor's payment history is retained and is visible showing subscribers how many times that debtor has been credit watch, or had their credit stopped.

BRIEF DESCRIPTION OF THE DRAWINGS

A preferred embodiment of the invention will now be described, by way of example only, with reference to the accompanying drawings in which:

Figure 1 : illustrates a functional overview of a preferred embodiment of the credit management system of the present invention;

Figure 2: illustrates a functional decomposition chart of the system of figure 1 ;

Figure 3: illustrates a functional diagram of the debt collection process operated by the debt collection module of the system of figure 1 ; Figure 4: illustrates a flow diagram of the steps in the debt collection process operated by the debt collection module of the system of figure 1 ; and

Figure 5: illustrates by way of example a letter of the type generated during the debt collection process operated by the debt collection module of the system of figure 1.

DETAILED DESCRIPTION OF THE DRAWINGS A general functional overview of aspects of the invention is illustrated in figure 1.

The invention comprises a credit management system 1 having an online database 2 and application software through which one or more credit providers, or agents, can interact with the database 2. The application software has a login security module 3 through which each agent must successfully pass before they can interact in any way with the database 2. Key interactions possible are firstly to query the database 2 via a credit check module 4 to establish what information is contained within the database 2 as to the creditworthiness of a customer or potential customer, and secondly, to perform debt collection processing via a debt collection module 5 in respect of that agent's debts as recorded in the database 2.

For proper performance of the system 1 it must be operable in an online networked environment enabling multiple agents to access and store debt related data in the database 2. To an extent the more agents storing their debt data in the database 2 the more accurate or reliable the credit checking function will be for use in predicting the true creditworthiness of a customer or potential customer. Accordingly, to maximise the accessibility of the system 1 to agents it is internet based on a secure website, with the functions of the application software being fully web enabled. Figure 2 provides a functional deposition chart of the entire system 1 within the context of a website map. Initialising the process of joining the system 1 and being set up as an agent can be commenced online. However, a prospective agent cannot use the system 1 of the preferred embodiment until the system manager has received the documents necessary as required by applicable laws and has approved the agent. Once this has been done the new agent will have their online account activated and a user identification and password will be provided. This will then allow them to progress through the login module 3.

As part of the very first time of logging in to the system 1 it is desirable that the new agent be required to read, and more preferably download, documentation as to how the debt collection process works and the essential legal requirements necessary in their interactions with customers. These can then be checked to ensure that the agent's own terms of trade enable them to gain maximum advantage from the system 1. It is desirable that the agent provide some form of verification or undertaking that they have read the documentation. This would typically be by clicking on an icon or re-entering their login password or the like.

Once through the security module 3 the agent can either move to the credit checking module 4 or the debt collection module 5.

While in the credit checking module 4 certain details of all debtors in the database 2, both past and present, of all agents are able to be searched by any member agent. A search is initiated using the search function 10 by the agent entering the name of the debtor (or potential debtor). Depending on the debtor's name it may be necessary to provide additional details to narrow the search down. Optionally the full details for the potential debtor can be entered, and if they are not already in the database 2 a record for them can be created. If the debtor is located in the database 2 the View History function 11 allows all of the debtor's history to be examined. In the system 1 of the preferred embodiment of the invention there are four different credit status', "A1" meaning that the debtor has no outstanding debts owned to an agent user, "1" meaning that a first, "friendly", reminder has been sent, "2" meaning that a second, "warning" letter has been sent, and "Stop Credit" meaning that the debtor has a seriously delinquent debt owed to an agent user of the system 1 and that no credit should be given to that debtor by any agent user.

Even when a debtor has paid all their debts their history will be viewable to see how promptly they have paid those debts in the past. All debtors not on the database 2 start with a clean slate, i.e. as an A1 credit rating. Similarly, all debtors who are on the database 2 but have no unpaid debts with an agent user of the system 1 have an A1 credit rating. This has the effect of prioritising debt for collection in favour of agent users of the system 1 , as debtors will want to keep getting credit from the other system 1 agents.

Optional features of the system 1 include Current Debtor Report 12, which lists all of the inquiring agent's debtors with each of their debts. This feature provides and easy way to print out all of the current debts owed to the agent and their status.

A further optional feature includes List Current Debtors 13, i.e. debtors of the agent who have outstanding debts, giving the option of viewing each of their debt history, or entering a debt for them. This feature has the advantage of saving time searching by name for each debtor.

In the preferred embodiment of the invention there is a degree of overlap of functionality between the credit checking module 4 and the debt collection module 5. Either module can be used to enter a new debt that has not been paid. Regardless of which module 4/5 is used as the entry point the process of entering a new debt is substantially the same. After the debtor is identified, or in the case of a debtor new to the system 1 after their details have been entered, the agent enters the month of the debt and its amount. The month of the debt only is necessary in the preferred embodiment of the invention, as the debt collection module 5 operates on the 20^th of the month after the debt is due rather than a certain amount of weeks from the debt. A significant advantage flows from that, particularly for small business and sole traders, as it means that debt collection can be done in batches, rather than every day. This also means that the agent has the option of not entering every invoice they issue into the system, but has the option of only entering those debts which are just past due.

In the debt collection module 5 the agent can initiate the debt collection process for a new debt, or can continue to process debts already on the system.

Figure 3 illustrates the functioning of the debt collection module 5 in the form of a chart, showing how the debt collection process flows from Invoice to Legal Action and revolves around the View History 11 functionality, which is a feature shared with the credit check module 4.

Only the agent who entered the debt can change its status or send letters relating to it. However, other agents can view the debt but can not modify it.

Figure 4 illustrates the steps in the debt collection process as a flow diagram.

Referring to figures 2 to 4, after a new debt is entered, which is usually the 20^th of the month following the due date of the debt, the debt collection module 5 prompts the agent to send a "friendly" reminder letter 20. A sample of such a letter is illustrated in figure 5, and is entirely generated by the debt collection module 5 of the system 1. The letter 20 is designed to show that a third party, namely the organisation operating the system 1 to which the agent owed the debt is affiliated by virtue of use of the system 1 , is involved with the credit management process, and is also designed not to unduly intimidate the debtor.

If the debtor is already in the database 2 with a credit status which is not A1 (because that debtor has a debt outstanding to another agent user of the system 1) then the debt collection module 5 automatically jumps forward to the appropriate automated action relevant to the current status of that debtor, and the agent is thus prompted to send a letter such as a credit watch or credit stop letter instead of the "Friendly" reminder. This provides a significant and important advantage over the prior art. In that regard, this function of the system 1 prevents a debtor from moving from one credit provider to the next creating a string of debts owed as a cascading time line. In the present invention all agent users of the system 1 have to be paid before the debtor's credit status is restored to A1 and thus there is an incentive for the debtor to clear the debts owed to all of the member agents.

As illustrated in figures 3 and 4, the collection process continues such that after the "friendly" reminder letter is sent the next letter will be due to be sent at a preset thereafter, typically 10 days later. When the agent logs into the system 1 10 days further on they are prompted to send a system generated letter advising the debtor of their current credit rating, the debt owed and who to, and that prompt payment direct to the agent is required if a downgrade of the credit rating is to be avoided.

The debtor's status within the database 2 stays at A1 status until the next system generated letter is sent placing the debtor on notice that they are on "credit watch".

The system 1 alerts to agents that a debtor on credit watch may be still given credit by an agent at their discretion, but that the debtor may be a potential credit risk as this debt is now two months overdue. As noted above, if a debtor's status is already credit watch when a new debt is entered then the first letter sent out for the new debt will be "credit watch" as well, which means the second debt will have to be paid before the debtor's credit rating is restored to A1.

Once a debtor is on credit watch, and subject to the terms of trade as between the debtor and the agent to whom the debt is owed, collection fees can be added at this stage. The debt collection module 5 sets a default fee level of 20% of the debt amount. Higher or lower collection fees can be charged as long as they are "reasonable" in terms of how much effort is required to collect the debt. Alternatively the debt collection module 5 allows the collection charges to be raised at the "credit stop" stage if the debt continues not to be paid. These collection fees belong to the agent i.e. the person or company sending out the letters.

After a further predetermined period of time despite receiving the system generated "credit watch" letter the debtor still has not paid the debt collection module 5 prompts the agent to send out a "credit stop" letter. If the debtor's status is already "credit stop" when a new debt is entered then this will be the first letter sent for the new debt. This highly accelerates the debt collection process, which means agent's debts are much more likely to be paid rather than waiting for months before action is taken.

The final step within the debt collection module 5 is the setting of a date for the debt to be referred for legal action. Again this is a predetermined period after the "credit stop" letter, but the period of time can be adjusted to fit in with the agent's credit management policy.

At any stage of the debt collection process the debt can be flagged as being paid. This function 14 forms part of the view history 11 feature. Once the debt is paid the debt collection module 5 resets the debtor's status in the database 2 back to A1 unless they have other outstanding debts.

Wherein the foregoing reference has been made to integers or components having known equivalents, then such equivalents are herein incorporated as if individually set forth.

Additional advantages of the present invention will become apparent for those skilled in the art after considering the principles in particular form as discussed and illustrated. Thus, it will be understood that the invention is not limited to the particular embodiments described or illustrated, but is intended to cover all alterations or modifications which are within the scope of the appended claims.

Claims

A multi-user credit management system integrating an accounts receivable management system for managing the collection, tracking, reporting, and fund remittance functions of debt recovery activity with a credit checking system wherein the credit and credit worthiness information is derived from a database shared and updated automatically by operation of the accounts receivable management system, the system operating within the context of an on-line, real time, environment.

A system according to claim 1 wherein the on-line functionality is achieved via users subscribing to a secure web-enabled database and application facility managed by an application service provider.

3. A system according to claim 2 wherein all subscribing users become agents of the application service provider.

4 A system according to claim 3 wherein credit information for all debtors recorded in the database is available to be viewed by all agents while on- line.

5. A system according to any one of the preceding claims wherein information in the database is derived automatically from operation by the users of the debt collection function of the system.

6. A system according to claim 5 wherein as soon as a letter is sent to a debtor from within the debt collection function of the application a credit rating for the said debtor is established.

7. A system according to claim 6 wherein the new credit rating is immediately viewable by all users.

8. A system according to claim 1 wherein the system has an online database and application software through which one or more users can interact with the database.

9. A system according to claim 8 wherein the application software has a login security module through which each user must successfully pass before they can interact in any way with the database.

10. A system according to claim 9 wherein key interactions possible as between a user and the database are firstly to query the database via a credit check module to establish what information is contained within the database as to the creditworthiness of a customer or potential customer, and secondly, to perform debt collection processing via a debt collection module in respect of that user's debts as may be recorded in the database.

11. A system according to either claim 1 or claim 8 operable in an online networked environment enabling multiple users to access and store debt related data in the database.

12. A system according to claim 9 or 10 wherein any new user is required to confirm that they have read documentation as to how the debt collection function of the system works and the essential legal requirements necessary in their interactions with their debtors as they may enter into the database.

13. A system according to claim 10 wherein while using the credit checking module details of all debtors in the database, both past and present, of all users, are able to be searched by any user.

4. A credit management system according to claim 1 as herein described or exemplified with reference to the accompanying drawings.