From insight to action: The reason benchmarking matters in credit

Benchmarking has long been a part of the credit management playbook. Tracking key performance indicators (KPIs) like days sales outstanding (DSO), bad debt to sales or average days delinquent (ADD) is standard practice in many credit departments.  

However, in today’s fast-paced environment, simply stacking your numbers against company or industry averages isn’t enough. As one credit leader put it, “Every metric should lead to an action within the credit department—otherwise, it’s meaningless.” 

Why it matters: The real value of benchmarking lies in how you use it—going beyond the numbers to use it as a catalyst for smarter credit strategies, stronger collaboration and measurable impact. 

Benchmarking comes in two forms: internal benchmarking, which compares changes within the organization over a specific period, and external benchmarking, which compares operations to other businesses in or outside the industry. Both approaches help credit professionals gauge performance—and more importantly, they help teams decide what needs attention and what to do next.  

“I think of benchmarking as a form of self-evaluation for the credit department, measuring how close we are to meeting our team’s goals,” said Kelly Simon, CCE, senior credit and collections manager at Outdoor Research (Seattle, WA). “If we’re not performing as we should, it can help us find ways to make adjustments. As a form of external evaluation, benchmarking reveals how competitive we are in the marketplace or if we’re on par with our competitors. Or it may help us discover that we offer something unique that they don’t.” 

Choosing the right metric 

The specific metric a credit department tracks will vary by organization, but ultimately, they should support the objectives of the company, the division, the department or the individual. To determine whether you’re using the right metric, consider what the results indicate and if it is a valid and reliable way to assess performance. 

“For my team, we use historical data to understand where we are and where we want to be,” said Asha Weekes, ICCE, senior manager, credit at Gildan (Christ Church, Barbados). “The company will usually set a direction—like, ‘We want to be at X level by the end of the year’—and that becomes our focal point. If things aren’t going as planned, we ask: Have we tried everything? Do we need to escalate? Should we involve third parties? The actions we take depend on how far off we are from our target and what’s causing the gap.” 

Next, reflect on whether the measure drives action or if a more relevant metric should be used instead. You’ll also want to consider whether the metric should be used alone or alongside others for context. 

For example, if a company’s objective is revenue growth, the credit department may regularly monitor the state of their accounts receivable (AR) aging to ensure timely cash flow and mitigate risk. Aging schedules, which categorize AR based on how long invoices remain unpaid, are often used to drive collection strategy. 

“We look at what’s current, 1-60 past due and 61 or more days past due for the entire portfolio,” said Anissa Martin, CCE, senior credit manager at Carhartt, Inc. (Dearborn, MI). “Then, we assess how the algorithms have been set based on our historical patterns of bad debt against net sales. We analyze our historical impact, incorporate that into our algorithm and adjust it accordingly.” 

Metrics that drive action 

Benchmarking helps highlight priorities, identify risks and decide when accounts need credit revisions. Most importantly, the results themselves help formulate a response and recommend a course of action. “We use Power BI to track sales, AR aging and pressure on credit limits within our portfolio,” said Marco Martignetti, credit manager at Agropur Cooperative (Longueuil, Quebec, Canada). “If a client exceeds their credit limit, that’s our cue to investigate. Based on internal and external reports, management may decide to revise their credit limit. These metrics also help us decide how many accounts to review each week.” 

Cross-functional value 

Sharing metrics with other departments helps justify credit decisions, build trust and gain support from stakeholders. For instance, sales and marketing teams are interested in metrics that affect their ability to sell, fulfill and get paid, such as credit holds, past due invoices and deductions. 

Upper management, however, is more interested in making quick, sound decisions in line with company growth and risk strategies. This includes tracking metrics like DSO, AR aging summary or bad debt write-offs as a percentage of sales. “I provide my CFO a month-over-month and year-over-year report to track department performance and identify areas of improvement,” Martin said. “For sales, I share detailed aging reports to identify customers requiring credit or order holds due to past-due balances. For our finance partners, we provide a bad debt analysis so they can ensure these potential expenses are properly recognized.” 

Reporting these metrics can not only help identify underlying issues, but it can reveal the potential causes, which can lead to more proactive solutions. “Sometimes, it’s just one account dragging down your DSO or days deduction outstanding (DDO),” Martin said. “In the process, you learn what is and isn’t working and this forces necessary action because if you don’t monitor your aging portfolio closely, a customer could go bankrupt before you even realize there’s a problem.” 

The bottom line: Benchmarking is only as powerful as the action it inspires. By choosing meaningful metrics, aligning them with company objectives and using them to inform timely credit decisions, benchmarking becomes more than performance tracking—it becomes a strategic advantage. When done right, it empowers credit professionals to be proactive, not reactive, and to turn insights into measurable results.