How to Raise Awareness of Credit Management by Philip King

The award of the Royal Charter to the Institute of Credit Management to become a Chartered Institute in 2015 demonstrated the importance of credit management within the world of business. But how do we go on raising the awareness of such a vitally important profession?

The simple answer is by continuing to promote what a good credit manager does, and by understanding the real ‘value’ that best-practice credit management can deliver.

The Credit Manager is the individual tasked with putting credit policies and practices in place and ensuring they are effectively implemented. Whether the economy is turbulent or benign, these need to be reviewed and adapted to meet the changing needs of the business.

Credit Managers also proactively and positively input to many departments and business areas to improve workflow and customer service, as well as focusing on their main role of protecting their organization’s investment by recovering debt. Reporting to Directors on cash collection and forecasts, age and profile of debt, potential risks of bad debt, overtrading accounts, areas of suggested training and general customer service observations are also all in a day’s work.

Staying ‘close’ to a business helps the Credit Manager to recognize any warning signs early. As well as assessing risk on new accounts and existing customers by way of credit information providers, reading financial accounts and establishing trading histories, they will also be negotiating and agreeing terms of business with new and existing customers, including payment terms and setting up service level agreements and credit limits. They will be to the fore in difficult negotiations where extended payment terms are requested or customers seek longer to pay existing debts.

Good credit management, however, is not just about policies, credit terms and minimizing bad debts, but rather maximizing sales and making optimum use of new technology, products and services that are there to drive a business forward. Promoting good credit management is a shared responsibility that comes from a better understanding of what a credit manager does, and devising measurement tools that illustrate their true ‘value’ and in a currency that a business understands. If you’re a haulage business, that means demonstrating the ‘value’ of every vehicle on the road; if you’re a sales business, it’s showing the value of every rep; if you’re a hospital, it’s the value of every bed and so on.

The days of credit management being seen as a ‘back office’ function that few people understand are fast receding, but there is no place for complacency. Putting a real ‘value’ on credit management will ensure it achieves a status that no-one can afford to ignore.

By Philip King, Chief Executive of the Chartered Institute of Credit Management