Monitor the financial performance of customer accounts
Overview
This standard is about monitoring the financial performance of customer accounts. It includes using financial tools to assess and prioritise new customers, assessing business and financial risks associated with customers, and maximising profit by monitoring profits from each customer account. This standard is for sales professionals who review the ongoing financial potential of customers.
Performance criteria
You must be able to:
1. use financial tools to assess and prioritise new customers to measure their potential value
2. estimate the lifetime value cash flow of customer accounts
3. calculate the sales volume required to achieve target profitability
4. calculate the potential profits from customers in the customer life cycle using discounted cash flow techniques
5. assess and continuously monitor the potential variable costs that could impact upon the profitability of customers
6. determine costs of fixed overheads and administrative support and apply them following company management accounting procedures
7. use financial ratios to analyse customer accounts to ensure the customer is financially secure, where appropriate
8. carry out external checks to assess customer creditworthiness and set appropriate credit limits
9. assess the business and financial risks associated with each customer and draw up a risk profile
10. estimate the value of each customer using financial and qualitative evidence
11. continuously review the financial performance and other features of each customer to identify key trends and variances
12. make business decisions about the future direction of a customer relationship based on history of their financial performance
13. prepare contingency plans if there are problems in financial performance of a customer
14. consult and communicate with stakeholders to ensure that they have access to appropriate financial performance data
Knowledge and Understanding
You need to know and understand:
1. the current legislation relating to customer finance arrangements, including Data Protection and Financial Services
2. the standards and regulations for financial accounting and reporting
3. the company financial reporting formats and processes for sales and customer data
4. the relationship between customer retention and enhanced profitability
5. the concepts of lifetime value and lifetime profitability as means of measuring customer value
6. the types of information required for carrying out financial evaluations
7. how to develop cash flow forecasts
8. the discounted cash flow techniques and why these are important for measuring the potential profits of customers
9. how to develop a profit statement for a customer
10. the difference between fixed and variable costs and how they can impact on customer profitability
11. the internal and external market and stakeholder causes of variable costs
12. how to use financial ratios to interpret the financial health of an organisation
13. the types of external credit checks
14. how to use financial information to determine credit limits and manage customer credit activities
15. how to undertake a risk assessment and develop risk criteria
16. the risk assessment and management tools and the risk criteria used
17. the methods of financial reporting and how these can be used to report customer information
18. how to undertake comparative assessments of financial information
19. how to undertake trend analysis
20. how to undertake contingency planning
21. how to carry out assessment and write financial reports