The Under-appreciated art of Credit Management
These functions, while often overlooked, are crucial to a company's financial health and overall success. Yet, they remain underappreciated and underfunded, especially in the realm of professional development.
Why is Credit Management such an important function of business underappreciated?
-
Lack of visibility – These functions are often seen as transactional rather than strategic. Focus is given to day-to-day management of the Sales Ledger, rather than appreciating the broader impact the function has on the business.
-
Negative Connotations - Debt collection, in particular, can carry incorrect negative connotations, associated with aggressive tactics and customer dissatisfaction.
-
Short Term Focus - Many businesses prioritise revenue growth and cost reduction over long-term financial stability. Credit management and debt collection are seen as expenses, rather than investments, and many stakeholders do not embrace the role credit professionals can play as low risk revenue generators.
The Importance of Professional Development
Despite the underappreciation, effective credit management and debt collection require a high level of skill and knowledge. Professionals in these roles need to be well-versed in:
-
Risk Management: Managing the credit risk portfolio by identifying and mitigating risks associated with credit granting.
-
Credit Analysis: Assessing the creditworthiness of customers and determining appropriate credit limits and securities.
-
Debt Collection Strategies: Developing and implementing effective pathways and strategies to recover outstanding debts.
-
Legal Compliance: Adhering to relevant laws and regulations by staying up to date with changing legal landscapes and their effect on the business and customer base.
Investing in professional development for credit management and debt collection teams can yield significant benefits, including:
-
Improved Cash Flow: Appropriate risk assessment and efficient debt collection can accelerate cash flow, improving liquidity and financial flexibility.
-
Reduced Bad Debt: Effective credit analysis and risk management can help minimise bad debt losses.
-
Enhanced Customer Relationships: A well-managed credit and collection process can strengthen customer relationships by ensuring fair and transparent practices.
-
Strategic Decision-Making: Professionals with strong credit management and debt collection skills can provide valuable insights for strategic decision-making that support and assist the organisation’s overall goals.
Luckily for you, you’re in the right place! Upskill your teams with globally recognised CICM qualifications. Keep in line with best practice methods with CICM training and stay up to date with the latest insights and information with exclusive CICM Membership content.
