| The credit manager |
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| Tuesday, 18 May 2010 02:00 |
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In the past, Credit Managers have been generally regarded with disinterest by senior management and occasional distrust by the sales teams. It usually takes an economic downturn or bad experiences with rogue debtors before there is an increase in recognition for the Credit Managers crucial role within the business. In today’s economic climate, Credit Control Departments are finally being properly appreciated as key to a company’s financial health and the best in the profession, are receiving the credit they are due. In today’s fast-paced financial environment, a credit manager’s role is constantly changing and becoming more and more complex. Among the credit manager’s many responsibilities, one of the most important is a balancing act—the credit manager must be able to take appropriate risks that will increase revenue and maximize shareholder value, while having the ability to use caution in order to minimize the company’s exposure to losses. Good credit decisions can no longer be made in a vacuum. Today’s credit manager is being asked to provide sound financial advice, identifying potential risk and then developing and suggesting creative solutions as to how one might do business with a risky customer. So, what is the mark of a good credit manager? Is it their ability to accurately assess credit risk; their success in collecting outstanding invoices; or even their mastery of relationship building? Personal Qualities: The description “the iron fist in a velvet glove” is applicable to the Credit Manager. But there is more, much more to the make up of a successful and sane Credit Manager. Chasing customers for payment is not for the fainthearted, whilst perseverance is undoubtedly a must. At times a good sense of humour is required when listening to excuses as to why payment has not yet been made, whilst gullibility is a definite no go! Diplomacy is a must when developing and maintaining a good customer relationship, whereas cynicism can only be detrimental. Being cool under pressure is vital. Over-familiarity with customers can lead to problems whereas displays of bad temper is criminal. Motivation: The job description of the Credit Manager and the goals and objectives of the credit policies and procedures demand not only a self motivated individual, but more importantly, one who can motivate their team. The personnel around them need to be motivated and feel valued. A team that is informed, skilled and have a common goal is a team that will be settled, well-motivated and who could offer continuity of service within the business and to customers. Establish Effective & Efficient Credit Processes: For the best Credit Managers, it is not enough to simply process invoices. They should have a good working relationship with the Sales Department and be involved in the sales process from the moment a customer is given credit terms. Remember, a sale is not a sale until it has been paid for. The good Credit professional will ensure that he utilises all his resources to ensure that the best way to minimise risk is to conduct a thorough check. Once terms have been agreed, the Credit Manager will monitor the customers and establish a good business relationship with them. It is hugely beneficial for the Credit Manager to physically visit the clients, get to know their business and to take the trouble to understand the peaks and troughs of their business. The ability to recognise the indications of financial difficulty as early as possible is key to successfully limiting losses. In addition, such tactics inevitably make it less awkward for customers to admit to having cash flow problems and make it easier to arrange a different payment schedule. The personal touch also really works when it comes to resolving disputes - when a customer won’t pay, a phone call will always produce results faster than an immediate attorney’s letter. Indeed, most organised Credit Control Departments now use electronic diary systems to plan which clients to call that day. Electronic systems can also pay dividends if used for the retrieval of invoices and signed orders in the event of any disputes. Given the level of safeguards, which should always be in place, bad debts are sometimes seen as a sign of failure by the Credit Manager. And yet all have to use their experience at some point to recognize when an invoice will not be paid and to judge whether to take expensive legal action, place the debt with a professional collection agency or to sell it on. The skill lies in identifying the most cost-effective solution and ensuring that every department, particularly sales, are aware of the action taken and why. Measure results: Credit Managers have large workload and therefore it is essential that accurate measures are used to gauge the effectiveness of the credit control policy and processes in place and establish benchmarks for future performance. Regular measures to determine the DSO (Days Sales Outstanding), cash collection (particularly as a percentage of the sales ledger) and the level of bad debts and credit notes issued, are a vital part of any Credit Manager’s duties. What’s more, without such data, it is often very difficult to persuade Sales Departments of the value of credit control procedures. For example, an experienced credit professional will often find it particularly useful to track all transactions that are approved against the advice of the Credit Department. Any time such a debt is written off, management and sales people should be made aware that the transaction was not credit approved. The tools that a Credit Manager can use to measure performance that are discussed in this book in more detail. Skills: Credit professionals are among the unsung drivers of the business world. They must be able to gauge the difference between fact and fraud, between hope and charity, and between faith and foolishness. Their seamless efforts to apply sound credit judgment can be an impetus to economic development and recovery. Here the Credit Manager AND his team need to have the tools, skills and education to be able to perform their task. • Can your credit manager detect fraudulent information on a credit application? • Can he interpret financial statements? • Does she have the knowledge to best protect your company from a customer’s • bankruptcy and subsequent preference claims? • Will he know how to unravel unexpected deductions while pursuing slow-paying debtors? A company whose credit and collections staff is ill-prepared to manage these tasks may ultimately face tougher challenges throughout the current economic climate. Through its accredited service providers, the ICM has a curriculum of certified and advanced certification courses consisting of core credit. Thousands of credit professionals have already completed these courses, and the number is growing annually as companies realise and understand the need for skills development in this important arena of the business. A well-rounded credit professional is a valuable company asset and is, in fact, responsible for a company’s largest asset—accounts receivable. Credit manager–noun 1. A person employed in a business firm to administer credit service to its customers, especially to valuate the extension and amount of credit to be granted 2. An employee who supervises the credit department in a bank or other business organisation Dictionary.com – Unabridged credit manager is a person employed by an organization to make credit decisions concerning credit limits and terms of payment to their customers. |
| Last Updated on Tuesday, 18 May 2010 14:15 |