Certificate in CREDIT MANAGEMENT PART FOUR COPYRIGHT Credit skills & Management Pty Limited All rights reserved. Use of this material is based on the agreement of the following: No part of this material may be reproduced or transmitted in any form or by any method - manual or electronic – including photocopying, recording, saving or any information retrieval or reproduction system – whether for CSM learners or other – without the express permission in writing from one of the Directors of Credit Skills & Management Pty Limited. Copyright(c) 2011 CONGRATULATIONS! • WELCOME BACK! • Credit Two & Three were challenging.......BUT YOU MADE IT! • Credit Four will be interesting – but you can’t afford to miss any lectures! LECTURE DATES FEBRUARY MARCH APRIL MAY NATIONAL EXAMINATION 2nd June 2012 INCLUDES AN ICM ASSIGNMENT COMPULSORY CLASS ASSESSMENTS: PLAN YOUR STUDIES ACCORDINGLY! Credit Four CONTENT • Refer Intro Pack for full ICM syllabus • OVERVIEW OF SYLLABUS: – Human Resource management – Introduction to Statistics – Business Legal Environment – Overview of Economics EXAMINATION • CONSISTS OF: – 3 hour Examination PLUS – Home assignment – SET BY ICM – EXAM = 80% – Assignment = 20% BUT - MUST SCORE minimum of 50% in exam PLUS have an overall mark over 50% in order to PASS! RECOMMENDED additional references • • • • Blue Book of South Africa Internet Employment and the Law Business Management MODULE ONE • EMPLOYMENT and the LAW Learning Outcomes • Explain, discuss, draft and/or evaluate: – Contribution of human resource management to the business – Theories of employee motivation – Objectives and elements of KPA’s, job descriptions, performance measurements – Mentoring/counselling, training and discipline – Legal compliance in employment – Managing by objective • Cash flow projections and targets Who is considered to be an employee? In terms of law: Employees Rights • Permanent staff • Part Time staff …………………………………….. • Contract worker Long Terms Contract = EMPLOYEE Short term renewed frequently = EMPLOYEE Short term contract – renewed maybe once – NOT NECESSARILY AN EMPLOYEE NOT SURE if you are considered an employee under the Act? • EARNING MORE THAN R140736? - can then apply to the CCMA for them to determine whether or not you are considered an employee – and therefore whether employee rights apply to you. • IF you earn more than this – then Sections 9 – 18 of the Act do not apply to you What are these sections? • • • • • • • • • • Section 9 – relates to STANDARD HOURS OF WORK Section 10 - relates to OVERTIME PAY Section 11 – relates to COMPRESSED WOEKING WEEKS Section 12 – relates to AVERAGE HOURS OF WEEK Section 13 – relates to the DETERMINATION of HOURS OF WORK Section 14 – Relates to MEAL INTERVALS Section 15 – Relates to DAILY AND WEEKLY REST PERIODS Section 16 – relates to PAY FOR WORK ON SUNDAY Section 17 – relates to NIGHT WORK Section 18 – relates to PUBLIC HOLIDAYS Discussion • What do you think the common law duties of an EMPLOYER and an EMPLOYEE are? Employers must: • • • • Appoint an employee into service Pay the agreed wage Ensure safe working conditions Conform to the Labour Relations Act Employees • Have a duty to work • Work in the manner required by the employer (reasonable and lawful) • Respect the employers authority • Work with diligence and in good faith (looking after the interests of the employer) • Not compete with the employer or reveal trade secrets Does an employer…. • Have a general duty to provide work for an employee? BASIC CONDITIONS OF EMPLOYMENT ACT • PURPOSE / OBJECTIVE • CONTENT • EMPLOYMENT CONTRACTS BCEA OBJECTIVE OF THE ACT • THE BCEA Regulates – Acceptable minimum standards and rules of employment • Employer can offer better terms and conditions than the Act stipulates – but not worse ones – by agreement) OR • A collective agreement entered into with unions or bargaining councils can result in standards and rules being different to the BCEA • The Minister can change the BCEA from time to time Content of the Act • The Act dictates – amongst other things - that: – Every employee must have a written employment contract in place – Standard working conditions (hours) Employment Contract This is: – A legally enforceable contract between 2 parties – wherein one party places his services at the disposal of , and under the control of, another party – for an indefinite or determined period – in exchange for a fixed or ascertainable wage. Elements of an employment contract (ie to make it valid) • • • • • A time agreement must exist It must be permissible by law The parties must have legal capacity There must be intention by both parties The employer must have the power to control and the employee must place his/her services at the employers disposal (possible to perform) • There must be agreement between both parties • Both parties must enter into the agreement of their own free will CONTENT OF AN EMPLOYMENT CONTRACT – – – – – – – – – – – – – – – – Full name and address of the employer Name and address of the employee Title of the position Brief description of the work Place of work Date work to commence Normal hours of work Rate of pay for normal time Rate of pay for overtime Any other cash payments the employee will get Frequency of payment Deductions to be made from pay Leave entitled to Termination rules and periods Details of any councils that govern the employer List of any other company documentation relevant with details of where copies can be found ACTIVITY DRAFT A STANDARD EMPLOYMENT CONTRACT FOR: Susan Malophi who has recently been employed as a call centre debt collection agent for an international debt Collection Agency called BINDINI COLLECTIONS PTY Limited HAND IT IN TO YOUR LECTURER FOR MARKING Employment contracts • Must be in writing and signed • Any subsequent changes must be in writing • Employer must retain a copy of employment contracts for a period of 3 YEARS after termination of the employment agreement! STANDARD WORKING CONDITIONS • • • • • • Hours of work Overtime hours Leave pay Sick pay Maternity pay Family responsibility leave Standard hours or work • Not more than 45 hours per week • Not more than 9 hours per day in a standard 5 day (or less) working week • Not more than 8 hours per day in a week which is longer than 5 days By Agreement between the parties: These hours can be extended by 15 minutes per day (but not more than 60 minutes per week) – where the employer’s business deals with the public after normal working hours) OVERTIME Does NOT apply to: • Senior managerial staff • Sales staff who travel to customers and regulate their own hours • Employees who work less than 24 hours per month for the employer Over time hours • Over time must have been agreed between the parties • No more than 10 hours overtime a week (except where there is a collective agreement in place) • Where there is a collective agreement – no more than 15 hours overtime a week is allowed What is a collective agreement? • Agreement with a group of people – like a trade union Example: A Trade Union may agree with an employer that their members will work a maximum of 13 hours overtime per week Overtime agreement & rates • Overtime agreement must be entered into on commencement of employment – or within 3 months of starting • Rates are time and a half on Saturdays – double time on Sundays and public holidays Exempt for overtime • In terms of the Act – some employees may not be entitled to payment for overtime. Standard Leave pay • The BCEA states: – Full time employees are entitled to a MINIMUM 21 consecutive days paid leave (ie 15 working days) after every 12 months of continuous employment OR – By agreement – 1 day for every 17 days worked OR – By agreement 1 hour for every 17 hours worked Annual Leave continued • Annual leave must be granted not later than 6 months after end of leave cycle • Employer must not allow annual leave to be taken – during notice of termination of employment – During any other leave (such as sick leave) SICK LEAVE • Sick Leave cycle is 36 months • Employee entitled to paid sick leave every cycle - equal to number of days he would normally work in a 6 week period Example: 5 days a week worker: 30 WORKING days every cycle (36 months / 3 years) SICK LEAVE • Restriction of sick leave: – During the first 6 months of employment – only allowed 1 day for every 26 days worked Sick Leave rules • Sick for 2 or more consecutive days – employer entitled to ask for a medical certificate OR • Sick for 2 or more consecutive days on 2 or more occasions in a 8 week period – employer can request a medical certificate Family responsibility Leave • This refers to paid leave to deal with family issues related to: – Death – Birth – Illness Direct family members: Child / Spouse/ parent / sibling/ grand parent / adoptive child / grandchild MATERNITY LEAVE – entitled to: • PRIOR TO THE BIRTH – 4 weeks (1 month) unless otherwise agreed or doctor note • AFTER THE BIRTH – 3 months • TOTAL – 4 months Paid maternity leave • NO legal requirement for the employer to pay the employee whilst on maternity leave • Employee can claim benefits from UIF (Unemployment Insurance Fund) – if they contribute to the fund monthly. Miscarriage and Still births • If in 3rd trimester of pregnancy – or if still born: – Entitled to 6 weeks leave after the sad event LEAVE NOT UTILISED IN THE PERIOD • Annual Leave – can be carried to the next period • .................................................. • Sick Leave FALLS AWAY and a • Family responsibility leave NEW CYCLE BEGINS • Maternity leave DEDUCTIONS • The employee must agree in writing OR • The employer must have been served a court order OR • Deduction is as per a collective agreement or arbitration decision WHAT HAPPENS IF... • The Company OVERPAYS you .... And wants to deduct it off your salary? Termination • Termination of the employment contract must be: – in writing – In accordance with the termination conditions in the contract unless otherwise agreed by both parties Termination Rules as per BCEA Within the first 6 weeks of employment 1 week notice period After 6 weeks employment period – but less than 12 months 2 weeks notice period After 1 years employment period 4 weeks notice period Termination Certificate • The employee is entitled to receive this – stating: – – – – – – – – Employers full name and address Employees full name Description of any relevant council or sector Start date Termination date Salary at termination Job title Reason for termination (optional – employee can decide if they want this shown or not) Labour Relations Act (LRA) • This current labour law came about after consultation between: – Organised labour (trade unions) – Government – Employers PURPOSE of the Act • The ensure that social justice, peaceful employment, work place democracy are adhered to – resulting in economic growth Participants in labour relations EMPLOYEES (Represented by TRADE UNIONS) EMPLOYERS (Represented by MANAGEMENT) THE STATE (Government) EXCLUDED FROM THE ACT • Members of: – SA Defence Force – National Intelligence Agency – SA Secret Service The Act includes rules / processes on: • • • • • • • • • • • • • Grievance Procedures Disciplinary Procedures Freedom of Association Organisational Rights Bargaining Councils Statutory Councils CCMA Labour Courts Strikes and Lockouts Collective Agreements Agency Shop Agreements Closed Shop Agreements Workplace Forums We need to study each of these in depth together LETS REFER TO YOUR NOTES... Pages 19 – 46 plus assignment to be done on page 22 EMPLOYMENT EQUITY ACT • PURPOSE OF THE ACT : – Eliminate unfair discrimination (direct/indirect) against any employee AND – Apply affirmative action measures – to ensure the correct / fair balance of employment from within designated groups Designated Employers must: • Prepare and implement an Employment Equity plan – which shows how they intend to bring about change to the demographics of their work force – over the next few years (1 – 5 years)– in order to have the correct balance of designated employees DESIGNATED EMPLPYERS are: • Employers that: – Employee 50 or more people OR – Employee less than 50 people – but have a turnover that exceeds a certain amount as laid out in Section 4 of the Act • (varies industry to industry – refer to page 47 of your notes for levels) Designated Employees • • • • • • Black Indian Coloured Chinese Woman People with disabilities The Employment Equity Plan (EEP) • This plan must state: – Objective to be achieved each year – Affirmative action measures intended to be taken – Numerical goal in order to achieve the correct balance – Time table for the plan for each year – Period of the plan (not more than 5 years) – Procedures that are going to be used to monitor progress of the plan – Internal dispute resolution methods in terms of disputes within the planning committee – Name of person responsible for the plan Submission • The employers must submit a progress report to the Department of Labour – Annually on the 01st October for companies having more than 150 employees – Every 2 years on the 01st October for companies with employees of less than 150 SKILLS DEVELOPMENT LEVY ACT • OVERALL PURPOSE – To encourage business to become involved in the skills development and training of employees – and to contribute to the training and development of unemployed individuals through a skills levy / tax / rebate scheme • CONTENT – Companies must pay a monthly skills levy / tax to the Government based on 1% of their employees salary and wages total (not deductable from employees) – Companies that train staff can claim back part of this levy – Government gives training grants to various companies from the levies they have received Break down on the objectives of the Act • Develop the skills of SA workforce • Increase levels of investment in education and training by companies • Use the workplace as an active learning environment • To provide employment / work experience • To ensure the quality of training in the workplace • To provide opportunities for the jobless to find work • To provide and regulate employment services Do you think that this Act has achieved it’s objectives? • YES – in part – more people are getting trained • NO – in part – as it has not resulted in a vastly improved / increase in skills based, employable work force Assignment • Discuss page 49 – Exemptions to the Act? EXEMPTION • Who do you think is exempt from paying this Skills Development Levy? – Any company whose annual salaries and wages are less than R250 000 – Any company declared exempt by the Commissioner of SARS UNEMPLOYMENT INSURANCE ACT 63 of 2001 UIA • PURPOSE OF THE ACT – To provide a mechanism of short term financial relief for people who were are ready and able to work – but who are unable to get work / work for whatever reason – To provide a mechanism for short term financial relief for people who may be temporarily unable to work for a specific reason (example pregnancy) How it works... • Employees contribute 1% of their gross income (up to a maximum amount of R12478) per month • Employers meet this contribution (ie the employer also contributes 1% • This 2% is paid over to the Dept of Labour – via SARS – every month The employer: • Must advise the Dept of labour of the names, addresses ,ID and salary levels of all employees • Pay over the unemployment levy (the 2%) within 7 days of each month end How it works • Jane Smith earns R 10 000 per month UIF deduction will be R100 • Peter Malopi earns R15 000 per month UIF deduction will be R124.78 – Maximum salary for UIF deduction is R12478.00 TOTAL DEDUCTIONS = R 224.78 COMPANY MUST PAY OVER R224.78 X 2 = R 449.56 WHAT BENEFITS CAN BE CLAIMED? • • • • Unemployment benefits Illness benefits Maternity or adoption benefits Dependents benefits UNEMPLOYMENT Benefits • Unemployment period of 14 days or more • Unemployed because of: – Termination of contract – Dismissal – Insolvency of employer • Must be capable and available for work • Must register at the UIF offices How much can I claim? • Contributing 4 years or more? – Will be calculated based on a sliding scale of between 38% – 58% of your last monthly salary – (if salary under R12 478) OR between 38% 58% of R12 478 if your salary is greater than that amount • Contributing less than 4 years? – Calculation will be based on 1 day for every 6 days worked whilst contributing ILLNESS benefits • Can be claimed if the period of illness is: – 14 days or more AND - The employee cannot perform specifically because of this illness - AND - The employee meets any prescribed requirements in terms of the illness MATERNITY / ADOPTION benefits • Up to 17 weeks worth of benefits can be claimed for maternity • Up to 6 weeks if a miscarriage occurs • One parent can claim benefits if leave work to look after an adopted child under the age of 2 Dependent benefits • Payable to a surviving spouse, life partner or dependent child • Claim must be submitted within 6 months of a contributors death REMEMBER • Cannot claim if: – Receiving a pension from the state – Receiving payment from a compensation Fund for injuries that caused the unemployment – Receiving payment from any other fund under the LRA – The employee RESIGNED – The employee fails to conform to requirements – The employee is working again CLASS ACTIVITY • Calculate how much would be paid over to the UIF each month based on the following: – J Smith earns R17500 per month – S Clote earns R12000 per month – F Jones earns R5600 per month – A Liven earns R10000 per month (see example on page54) Working it out • DEDUCTIONS from each employee would be: – J Smith earns R17500 per month Deduction based on R12478 = R124.78 – S Clote earns R12000 per month Deduction = R120.00 – F Jones earns R5600 per month Deduction = R56.00 – A Liven earns R10000 per month Deduction = R100.00 TOTAL DEDUCTION = R400.78 Answer • Deductions would be R 400.78 • Company contribution would be R400.78 TOTAL Amount to pay over: R 801.56 HOMEWORK • Write a memo to your staff members – identifying the following in terms of the unemployment Insurance Act: – – – – – – – Key purpose Responsibilities of the Employer Rights of the Employees Who should contribute When can a claim be submitted Who should it be submitted to Who is exempt from this Act INTERNAL HUMAN RESOURCE ACTIVITIES REMEMBER CREDIT 3? • Management responsibilities: – Plan – Lead – Organise – Control Factors influencing HR Planning • • • • • • Type of work to be done Available financial resources Company policies Companies strategy Available level of skills Economic growth of the business PROCESS OF MANAGING • • • • • • • • Conduct a job analysis Transform this into a job description Set goals Motivate employees Measure performance Train Coach /Counsel Discipline / Motivate TYPE OF WORK TO BE DONE • JOB ANALYSIS – Conducted by internal personnel OR – Through an external consultant – Need to • COLLECT INFORMATION • ANALYSE AND GROUP THE INFORMATION • DESIGN A JOB ANALYSIS REPORT FROM WHICH A JOB DESCRIPTION CAN BE DONE JOB DESCRIPTION • WHAT PURPOSE does a job description fulfil? – Can be used for recruiting of new people – Sets guidelines for a new employee – Can be used to train, coach or counsel an employee – Can be used to assist in the evaluation of an employees performance – Can be used to determine salary levels Content of job description • Title of the job (ie credit controller) • Reporting structure (centralised / decentralised & chain of command) – revise credit 2 for organisational structures • Overall objective of the job EXAMPLES – (primary objective of a credit control position (divisional) = maximise profitable sales whilst minimising bad debts and slow payments) – (primary objective of a call centre debt collector = collect as much money as soon as possible and rehabilitate the debtor) – (primary objective of a third party debt collection agent is to collect as much as soon as possible – in the most cost effective manner possible) Content of job description continued • Main duties – Examples: (provide details under each heading) • • • • • New Account Assessments Reconciling of payments to remittance advices Allocation and capturing of debtor payments Account reconcilliation Current and arrear debt collection • Job specifications – Skills – Knowledge – Ability Job specifications • SKILLS required – Competency based activities • Analyse credit information to form a decision • Capture within a set time period • Conduct a telephone collection call Job specifications • KNOWLEDGE required – Subject matter knowledge on: • Securing an account • Rules of the National Credit Act / Consumer Protection Act (which ever is relevant to the industry) • Credit principles QUALIFICATIONS required Job specifications • ABILITY – Task related: • Ability to work on a specific computer program – Excel – SAP • Ability to calculate: – DSO calculations – Trade discount percentages IMPORTANT NOTE A job description is drawn up based on the JOB to be done .... And NOT on the ability / skills etc of the person already in the position Job specifications • SKILLS required – Competency based activities • Analyse credit information to form a decision • Capture within a set time period • Conduct a telephone collection call Job specifications • KNOWLEDGE required – Subject matter knowledge on: • Securing an account • Rules of the National Credit Act / Consumer Protection Act (which ever is relevant to the industry) • Credit principles QUALIFICATIONS required Job specifications • ABILITY – Task related: • Ability to work on a specific computer program – Excel – SAP • Ability to calculate: – DSO calculations – Trade discount percentages STAFF Motivation • What motivates YOU to work well? Definition of “motivation” • An persons internal desire to satisfy an unsatisfied need – Therefore – each persons internal desire may differ from the next person’s – making it very difficult for managers to motivate each person on their team Motivational Theories • There are a number of theories that have been documented about the motivation of staff members: – Authors of FORMAL Motivation Theories include: • • • • Maslow Hertzberg McClelland Alderfer HIERACHY of NEEDS All based on: • A basis that human needs need to be met – in order for employees to be motivated......... And they all debate the order of importance of these needs – and they group them differently to each other • Human Needs include: – – – – – Fair return for efforts (money) Safe and comfortable work environment Social acceptance Recognition of efforts Recognition of skills and ability levels What else would you identify as a human need in the work environment? Each of the theories believes: Employees have needs These needs have to be met in order to have motivated staff members These theories differ in: • how these needs are grouped / identified • the order of that these needs have to be met Your lecturer will • Go through the theories briefly. • You aree required to investigate them further – make your own notes – and then do the assignment on page 60 MASLOWS THEORY Self actualisation needs Esteem needs Social needs Security(safety) needs Physiological needs Starts here Alderfs ERG THEORY Growth needs Relatedness needs Existence needs Starts here Hertzberg THEORY BOTH MUST EXIST Motivational (growth factors) Maintenance (not motivational – but essential) McClelland’s THEORY Need for affiliation Need for power Need for achievement HOME ASSIGNMENT • Examine the 4 different theories provided in your text book • Compare each theory and provide a report that: – Explains each one in your own words – Identify the theory that YOU personally believe would best suit YOUR motivational needs in the workplace – and justify your answer IN SUMMARY • Motivation is greatly based on many of the aspects of these theories PLUS support from management in the following instances: – Clearly defined structures / expectations – Environment – Reward and recognition – Communication / feedback – Counselling / Coaching and training Previously you studied: • Job descriptions / KPA’s and goals (DSO) PERFORMANCE Appraisals • These can ONLY be done if clear goals / expectations / targets were originally set – and communicated to the employee • Must be done regularly (same month/s each year) • Be done when it is due (no delays) • Employees must be treated with respect Performance Appraisals • • • • • Purpose Advantages Disadvantages Common types of appraisals Preparation for implementing appraisals Purpose • Estimate the of work • Open up skills between manager and employee employee to perform or exceed required standards • IDENTIFY for employee growth and development / improved results • Determine • Determine levels Advantages to using Appraisals • • • • • • • • • Can increase loyalty in staff member Eliminates discrimination Assists in making promotional decisions Assists in salary levels Encourages communication Identifies correction needs (coaching / counselling / training/ discipline) Opportunity to communicate company vision and strategies Opportunity to communicate employee’s role in the strategy Protects company from needless litigation Disadvantages • None... If done correctly and fairly! • BUT – if NOT done correctly and fairly: – Could result in expensive legal consequences for the Company – De-motivation of employee Common Types of Appraisals • • • • • • • Self appraisals “Check the box” appraisals Competency based appraisals Comprehensive performance review Peer to Peer /360 degree appraisals Continuous feedback Using Management by Objectives Common Types of Appraisals • Self appraisals – Company provides a pre drafted form that the employee fills in - based on the employee’s own performance – The manager is given the same form to fill in – based on his opinion of the employees performance – The employee and manager then meet to compare and discuss – and come to an agreement on the quality and level of – The employees activities Common Types of Appraisals • Check the box appraisals – The company produces a pre printed document that has a list of activities to be measured – and the manager then “rates” the employee’s performance using a sliding scale of numbers EXAMPLE 1 = Below acceptable standards 2 = Acceptable standard achieved 3 = Above expected standard ) Danger of Check the Box • The manager may not be fair • The manager may impose his own prejudices • Could de motivate employee Common types of appraisals • Competency Based Appraisal – Best used in jobs that have outcomes that are easily identified and measured Examples from the credit departments: captures new application details accurately Captures payments correctly and on time Follows credit policy authority levels Files documents accurately Common types of appraisals • Comprehensive Performance review – Define expectations – Define additional areas to be evaluated Your opinions • Class Discussion • DIVIDE INTO GROUPS – Discuss your opinions with your group on the Advantages and Disadvantages of this type of appraisal – Present your thoughts to the class for discussion and the class must come up then with am overview of the advantages and disadvantages Did you include the following: • Advantages: – Clearly states what the employee is going to measured against (no surprises) – Varied duties – better chance of higher score than if just being measure on one thing • Disadvantages – Score achieved depends on the managers “opinion” in some instances – Any problems with co-workers – whether employees fault or not – will result in a lower score Types of appraisals • Peer to Peer – The employees colleagues in the same department actually do the appraisal on the employee based on their opinion on the employee’s: • • • • • teamwork Work quality Communication skills Work ethics Strengths and area of development Types of appraisals • 360 degree appraisal – Very similar to “peer to peer” appraisal – except that other departments are also involved Examples: - sales department - claims department - payment allocation data capturers Discuss • What is the main problem that you can identify in using either or these 2 appraisal methods? Type of Performance appraisal • Continuous feedback – Very informal – Coaching and counselling sessions held to discuss short term performance levels Type of Performance appraisal • Appraising (Managing) by Objective – Set a goal to be achieved by the employee • Make sure the goal is SMART – Specific – Measureable – Achievable – Realistic – Time frame – After the set period – identify to the employee what has been achieved – Compare this to the goal set – Analyse any differences between results and expectations – Discuss causes for this difference – Report on it – Correct the problem through counselling / coaching / discipline or training / education Combinations • A company can decide which type they wish to make use of – or they may combine a number of them • IMPORTANT – – that generally all employees are measured using the SAME type of appraisal – That preparations are complete before appraisal system implemented Preparation must take the form of: • Ensuring that there is a job description in place and that the employee has a copy • Ensuring that any goals or objective that are set are achievable • Ensuring that there is open communication between the manager and the employee • Ensuring that the Company’s expectations are CLEARLY identified for the employee • Ensuring that the purpose and expectations of reviews are clearly communiciated to the employee • Ensuring conformance to all labour laws / legislation • Ensuring that the Company has a clear strategy and mission – and that this is communicated to the employee REMEMBER............ What is measured in the credit environment? • Some differences between measurements in: – Divisional credit structure • Usually commercial / trade credit – Functional credit structure • Retail credit / consumer credit • Commercial call centre collection environment Functional structure measurements Measurement New Accounts Dept Customer Service (Inbound) Debt Collection PRODUCTIVITY LEVELS Number of applications captured Number of calls answered in a set amount of time Number of calls made within a set period of time WORK QUALITY LEVELS Accuracy of information captured Number of queries resolved and time taken to resolve Taped call audits to determine service levels when collecting WORK EFFECTIVENESS LEVELS Number of Promise to pay (PTP) received Number of PTP met Rand value collected Divisional structure measurements PRIMARY measurements • Rand value collected • Days Sales Outstanding • Percentage of debtors overdue – Total – Per age • Number of overdue accounts Secondary performance measurements • Accuracy of capturing payments • Correctness of allocation of payments (open item specific) • Time taken to resolve queries • Filing and safe keeping of proof of delivery documents • Maintenance of master files • Management of credit limits • Relationship with sales staff DAYS SALES OUTSTANDING • Are you confident in calculating this from information provided? Setting monthly targets • If using DSO to measure performance – targets could be set with a view to reduce the n=following months DSO by a set number of days: ( no more than 2 – 3 days reduction per month is generally considered the norm) BUT:Credit controllers need to have a RAND value target derived from these reduction day requirements In other words: • Need to have a target of reducing DSO by 2 days AND need to say how much RAND VALUE must be collected in order to reach this 2 day reduction target! – We will now study the process of setting this RAND value target: Rand Value target calculation • PROCESS: – Calculate DSO at month end – Decide how many days to be reduced in following month – Work out which months these days will refer to (remember to include current months days) – Work out how much money can still be left OUTSTANDING on the debtors book at the coming month end to make up the DSO anticipated above – Deduct this amount from the debtors balance of last month end – BALANCE IS COLLECTABLE See examples in your manual pages 73/74 CLASS ACTIVITY See page 75. Training & developing your staff ON THE JOB (Internal) OR OFF THE JOB (External) TYPES OF TRAINING PROGRAMS FUTURE OPPORTUNITY TRAINING TOP UP TRAINING TASK RELATED TRAINING OPERATIONAL TRAINING OPERATIONAL TRAINING • Should be for ALL Employees – Covers company policies • Employment policy • Disciplinary and code of ethics policy • Credit policy TASK RELATED TRAINING • Specific to the employee’s job function (activity / skills) – Reconciliation of customer accounts training – Capturing and allocation of deposits training – Telephone skills training TOP UP TRAINING • Relates to the job function – but more to the KNOWLEDGE about the function being performed – Credit management 1 – 4 – Legal process training Future Training • Training that prepares the employee for future positions – Supervisory skills training – Management training Other tools used to manage staff • COUNSELLING – Assisting staff member through discussion – to identify and solve a problem themselves • COACHING – Identifying area of non performance and giving solution to the problem • MENTORING – Acting as an advisor to employees engaged in further or top up training (mentors are experienced people who have already followed the process and have succeeded therin) Training related assistance Coaching Counselling Development related assistance Mentoring SUMMARY of HR Management in the Credit Department • • • • • • • • Identify tasks to be done Plan the resources required Compile job descriptions and objectives Provide the necessary training Provide performance feedback Reward / train / coach / counsel / discipline Encourage further self development Conform to all Labour Legislation! SELF STUDY • Use the questions on pages 79-81 to assist you to revise this section and to prepare for the examination • Ask your lecturer if you are unsure of any answers MODULE 2 Introduction to Statistics Learning Outcome of this Module • Understand and extract meaningful credit statistics • Analyse these statistics • Provide relevant charts and graphs to management 14 12 10 90+ 8 60 6 30 4 2 0 CC1 CC2 CC3 CC4 INTRODUCTION TO CREDIT STATISTICS • • • • Definition Sources of data Data Collection methods Credit data – Analysing – Trend Analysis – Presentation of the data INFORMATION GATHERED MUST BE: • • • • • Timely (up to date) Accurate Relevant Adequate Available when it is needed (easily available) Information (Data) • Information / Data can be gathered – but without analysis – it is generally meaningless • Information / data must be: – Gathered from relevant sources – Relate to the objective / outcome that is being considered – Summarised – Analysed – Presented in a meaningful manner EXAMPLE • Imagine management is asking about the number of credit notes passed in your company each month and wants to put in a plan to reduce these • You provide them with the Information / data gathered that states: – 580 credit notes are passed monthly Although this tells management how many are passed – it doesn’t help them solve the problem on how to REDUCE them. Further ANALYSIS of the REASONS behind these must be obtained. You should gather the information now that will assist you to analyse these. SELF STUDY: • • • • External Data Sources Primary data sources Secondary data sources Data collection methods CREDIT DATA • EXAMPLES – Rand value of credit notes passed – Number of credit notes passed – Rand value of bad debts – Number of accounts that have gone bad – Rand value collected – Rand value of overdue accounts – Number of overdue account – Days sales outstanding EXAMPLES • Page 91-93 • COMPARE THE OUTCOMES TO ESTABLISH A TREND OVER THE PAST PERIODS! • Will then be able to see if the results have improved or declined over the past periods TABLES, CHARTS AND GRAPHS TABLES • Refer example on page 95-96 – Used to present a combination of information/ data – Often a CHART is used to plot the data before putting into a graph format CHARTS – refer page 97 & 98 • Most common chart used is a PIE CHART Collected Jan Feb Mar April Pie Charts • Good to use for showing: – Reasons for credit notes being passed – Ageing of the total age analysis – Comparison between applications approved and applications rejected – Rand collected per month RAND Collected Jan Feb Mar April GRAPHS • Commonly used graphs include: – Line graphs – Bar graphs • Simple bar graph • Multiple bar graph • Stacking bar graph Line Graphs Accounts Approved per month 90 80 70 60 50 Series 1 40 30 20 10 0 Jan Feb March Apri;l Line Graphs DSO Achieved 90 80 70 60 50 DSO 40 30 20 10 0 Jan Feb March April Line Graphs DSO Achieved 160 140 120 100 80 DSO Target 60 DSO Actual 40 20 0 Jan Feb March April Line Graphs Rand value collected 300000 250000 200000 TARGET 150000 COLLECTED 100000 50000 0 Jan Feb March April BAR GRAPHS • SIMPLE • MULTIPLE • STACKING SIMPLE BAR GRAPH APPLICATIONS APPROVED 90% 80% 70% 60% 50% APPROVED 40% 30% 20% 10% 0% JAN FEB MARCH APRIL MULTIPLE BAR GRAPH 120000 100000 80000 PROCESSED 60000 APPROVED 40000 20000 0 JAN FEB MARCH APRIL Multiple Bar Chart • Easiest to first put the relevant data into a table • Discuss when percentages should be used: REFER PAGE 101 STACKING BAR CHART • Information is STACKED on top of each other (maximum 100% when using percentages) 120% 100% 80% Goods returned 60% Incorrect Prices 40% Admin errors 20% 0% April Stacking bar Chart example • Using the NUMBER of credit notes instead of the percentage:(top of graph is 120 = total credits passed) 140 120 100 80 Goods returned 60 Incorrect prices 40 Admin Errors 20 0 April Multiple Stacking bar Chart example • More than one column 140 120 100 80 Goods returned 60 Incorrect prices 40 Admin Errors 20 0 April May ACTIVITIES • REFER TO PAGE 104 - 107 MARKED Assignment 3 • Complete this assignment • Compare your answers to your lecturers responses • Were you correct? Revisiting the legal environment • Revise all Acts from Credit 3 – SPECIFICALLY – Insolvency Act – Companies Act (We will revisit this) • We will examine: – – – – – – – – – – – SA Constitution National Small Business Act Non Profit Organisations Act Protected Disclosures Act Financial Intelligence Act Value Added Tax act Business names Act Promotion to access Information Act Electronic Communications Act Consumer Affairs Act –(Consumer Protection Act) CORPORATE GOVERNANCE Constitution of South Africa • A Constitution is: – A written record of fundamental principles or established precedents according to which a state or other organization is acknowledged to be governed. Objective of SA’s Constitution • • • • Heal the divisions of the past Establish a democratic society Protect all citizens equally Improve quality of life for all HUMAN RIGHTS under the Constitution include: • Right to: – – – – – – – – – – – – – – Equality and protection from discrimination Human dignity Life Freedom and security of person Privacy in body, home and relationships Freedom of conscience, religion, belief and opinion Freedom of expression Freedom of assembly, demonstration and picket Freedom of association Political freedom Freedom of movement and residence Freedom of trade, occupation and profession Healthcare, education and housing Access information Constitutional Court • CONSTITUTIONAL COURT is the highest court of the land – that can over rule all other courts where the protection of human rights is involved NATIONAL SMALL BUSINESS ACT • What challenges do you think are faced by small business in South Africa today? Challenges faced include; • • • • • Lack of funding opportunities Economic challenges Lack of adequate infrastructure Lack of guidance and mentors Legislation compliance Objective of the Act Promote small business Set up an agency that assists small business to expand and monitoring in the form of: Training Advice counselling Non financial services Non Profit Organisations Act • Who registers under this Act? – Non Profit ORGANISATIONS such as Fund raisers – Optional that Section 21 Companies may also register (as well as under the Companies Act rules) – Trusts (although must still register with the Master of High Court) – Voluntary Associations Objective of the Act • To provide an environment where such associations can flourish • To establish the framework under which these associations can conduct their affairs (rules) • To provide tax benefits to such associations Protected Disclosures Act • (Commonly referred to as the Whistle Blowers Act) Objective • Make provision for: – PROCEDURES to be followed by employees wishing to make a disclosure regarding information of unlawful and irregular conduct by employers or other employees – PROTECTION for employees who make a disclosure FINANCIAL INTELLIGENCE ACT (FICA) Money Laundering processes Objective of the Act • To establish a Financial Intelligence Centre and a money laundering Advisory Council to minimise money laundering by criminals • To impose certain duties / activities on institutions who may be used for money laundering • To amend the Prevention of Organised Crime and the Promotion to Access Information Act Institutions that must comply include: • Attorneys – as defined by the Attorneys Act 53 of 1979 • An Estate Agent • A Bank • Long Term Insurers • Foreign Exchange dealers • Investment advisors • Approved investment managers • A Board of Executors or a Trust company (under the Trust Property Control Act) What must these Institutions do? • Establish and verify: – the identity of the client – The legal residence of the client – The authority to act on some ones behalf where relevant • Where acting on some one else behalf – establish and verify the identity and the residence of that person/ business Value Added Tax Act (VAT) • Purpose of this Act – To regulate how the government will collect VALUE ADDED taxes on the sale of goods or services within South Africa • Exemptions: – Certain food stuffs – Goods that are exported directly from the supplier to the customer VAT Act requirements include: • • • • Registration‘ Tax invoices Returns Rate Registration of trading entities • Compulsory registration – Where turn over exceeds R1000 000 per annum • Choice registration – Where turnover is between R50 00 and R999 999 per annum • No registration – Where turnover is less than R50 000 Tax Invoices • Where a company is registered for tax – it is required to ensure that it issues an original tax invoice: – Invoice must show both the SELLER’s and the BUYER’s (if applicable) tax number RETURNS • Those registered need to do TAX RETURNS on a regular basis – Regularity of returns depends on type of business / turnover level (example – every 3rd month) • Must declare the OUTPUT and the INPUT tax – and the difference between the two – OUTPUT TAX = the tax charged by a seller – INPUT TAX = the tax paid by the seller to his suppliers • ‘Must pay over this difference to the Receiver • Penalties and interest apply if returns not done and paid Returns • Small business may apply to have all their taxes (ie VAT and profit tax) combined – called TURNOVER TAX – Their turnover must be less than R1 million per annum Business Names Act • Objective: – To regulate business names (make sure that they are not offensive) – Provide protection for business to ensure no one else uses their name – The following is prohibited from being used in business names: • Government • State • United Nations PROMOTION TO ACCESS INFORMATION ACT • Regulates – Individuals rights to access information held by the State and other companies (public and private) – When access to information can legally be refused – Legal remedies in cases where information is illegally withheld • Registration required – Companies must register with the Human Rights Commission and provide standard information about themselves (excludes financial information) • Objective of the Act – To promote transparency in the spirit of the Constitution (ie for the intention of protection of human rights) See additional notes emailed ELECTRONIC COMMUNICATIONS ACT • To provide for the facilitation and regulation of electronic communications and transactions; to provide for the development of a national e-strategy for the Republic; to promote universal access to electronic communications and transactions and the use of electronic transactions by SMMEs; to provide for human resource development in electronic transactions; to prevent abuse of information systems; to encourage the use of e-government services; and to provide for matters connected therewith. – Consumer Affairs Act • Protect consumers from UNFAIR BUSINESS PRACTICES – Example: negative marketing CORPORATE GOVERNANCE • The King reports were drafted to outlay the basic moral and the rules that all business should comply with (not a law – known as Code of Ethics) – Listed companies HAD to comply’ – other companies were given the recommendation that they should comply • Some of these “rules” have now been incorporated into the new Companies Act These rules are based on • Responsibility and accountability of Directors • Sound Risk management • Internal Audits • Integrated, sustainable reporting • Account and external auditing rules • Compliance • Enforcement The 7 fundamental rules of GOOD CORPORATE GOVERNANCE • • • • • • • Management discipline Management independence Management transparency Management accountability Management responsibility Fairness of activities Social responsibility Remaining info • Module Four – Introduction to Business Economics • Definitions • Economic systems – Free market – Command (Communism) – Socialism • Economic Cycle • 3 main sectors – Monetary – Public – Foreign • Macro & Micro • Labour market & Trade Unions – The Labour Market – Trade Unions » Craft Unions » Industrial Unions What is Economics all about? • As studied briefly before: – Need to Balance the SUPPLY of money, goods and services within a country – to the DEMAND by the people of the country - for those goods, services and money Economics is the study of all the activities that impact on the supply and demand of these commodities KEY Terminology (revision) • GDP (Gross Domestic Product) – Measure the productivity levels of a country – and the country is “graded” according to productivity levels by the rest of the World. This will affect foreign investment – the more productive a country is – the more attractive it is for investors Methods of calculating GDP • Value added method • Incomes earned method • Expenditure method Key terminology • Income per Capita – Calculated by dividing GDP by the number of people of working age in a country • Inflation – The increase in price of goods due to influencing factors – without there being an increase in the value of those goods • (ie paying more for a loaf of bread this week than you did last week) Economic systems • methods of controlling the production activities within a country – FREE MARKET (Capitalism) – COMMAND – SOCIALISM Current protestors in England and across the world – AGAINST a Capitalism system Free Market (Capitalism) • The citizens of the country are free to do business and to gather personal wealth • Most of the products that are needed by the population are provided by privately owned companies • Most of the key product areas – such as mining/ forestry / agriculture etc are privately owned • THEORETICALLY:– Benefit of this system is that people are in control of their own wealth and they can accumulate wealth for themselves – Disadvantage of this system – can have very rice people and also very poor people in the country COMMAND Economy (Communism) • This type of economy places the control firmly in the hands of the STATE (Government) • THEY decided WHAT products need to be produced – and they CONTROL the production of all products and services including banks • The INTENTION of this type of system is to make everyone equal in wealth – BUT generally it results in making everyone equally poor! • THEORETICALLY – Benefit is that everyone would have access to the necessities of life – Disadvantage is that no-one can accumulate their own wealth – can only have what the State provides for them – at the price the State decides. This encourages the development of a black market- where goods can be obtained – for a high price – under the radar of the Government SOCIALISM • This type of system puts all the essential products and services – such as mining, transport, agriculture etc under the ownership and control of the State – but then allows the people to trade on other goods and still accumulate wealth for themselves (almost a mixture between free market and command economies) • Theoretically – The benefits of this system are that the cstizens will always have access to the key products and services – at a fair price – The disadvantage of this system is that mismanagement, corruption and self interest often plays a large role in the state’s activities with these resources – leaving the people with little or inadequate resources in the end. Therefore – this system in theory is a good one – if all were honest and experienced in managing the countries assets and activities South African System • Free market / socialism mix – More on the Free market side – with some key products owned by the State (Trans Net) Where are we headed? ??? Economic Cycle • Refer to notes 3 main sectors of the economy Public Foreign Monetary Labour Market • People in the workplace – Have already studied the labour laws of South Africa – intended for the protection of the rights of employees – TRADE UNIONs represent employees • CRAFT Unions • INDUSTRIAL Unions Craft Unions • Are formed for the benefit of a group of people who perform the same activity – such as PLUMBERS INDUSTRIAL UNIONS • Are formed for the benefit of a group of employees who are all employed within the same INDUSTRY – Clothing & textile industry – Steel Industry RECAP ON TRADE UNIONS • Rights • Obligations – Freedom of Association – Closed shop agreements – Agency shop agreements REVISION FOR THE EXAM! KEY AREAS OF STUDY LEGLISLATION • • • • • • • • • BCEA LABOUR RELATIONS ACT EMPLOYMENT EQUITY ACT SKILLS DEVELOPMENT ACT UNEMPLOYMENT INSURANCE ACT FICA PROTECTED DISCLOSURES ACT Review of THE INSOLVENCY ACT VALUE ADDED TAX ACT You need to be able to give information on: • Purpose of the Acts • Content • Comparisons between the Acts Managing the Credit Team • Plan, Lead, Organise (provide practical examples from the work place) – Performance measurements – identify, explain, compare and give practical work related examples – Include motivational theories that must be explained and compared – and have practical examples from the work environment – DSO targets KNOW how to calculate a target for the reduction of days sales outstanding – Methods of measuring performance in consumer / retail and commercial environment – compare these Managing the Credit Team • Control – Assess what has been achieved (using performance appraisals) – Compare it against targets set / effectiveness/ quality/ etc – Analyse the results – REPORT results using various types of graphs! • Learn the type of graphs – and practical examples of when they can be used to portray information from the credit environment – Coaching/ Counselling / Training (types) and Mentoring • Explain , compare and give examples from the work environment Corporate Governance • Explain • List and explain the 7 factors required Economics • Terminology – GDP explanation and calculations – Income per Capita – explanation and calculation – Inflation – explanation Economic Systems - explain, compare – give advantages and disadvantages STUDY TIPS • ORGANISE your study time – have a plan • EAT before you study (preferably fresh fruit) • DRINK WATER (250 ml for every hour of study – keeps your brain focused) • TAKE REGULAR BREAKS (5 minutes every half hour) • PRACTICE answering past questions Exam Day Tips • Get AT LEAST 6 HOURS sleep the night before • EAT before the exam (Protein and fruit) • WEAR comfortable clothes • SIT as close to the front as possible (less distractions) • UNDERSTAND all verbal instructions given by the invigilator Exam Day Tips contd • READ the full paper before you begin & make brief notes • READ QUESTIONS CAREFULLY • Answer the easiest ones first (mark your question numbers carefully & correctly) • CHECK THAT YOU HAVE ANSWERED ALL QUESTIONS BEFORE YOU HAND IN YOUR PAPER! • BE POSITIVE - & try to stay relaxed! Hang out with other positive people –# DO NOT enter into any course related discussions whilst waiting to go into the exam hall! GOOD LUCK! Thank you for choosing CSM as your study partner!