Inside Credit Management
Credit managers oversee the credit lending process for banks, credit card companies and other financial institutions that issue or deal with credit. Managers may develop credit rating criteria, define credit ceilings and oversee credit collection accounts. Both small and large financial institutions utilize credit management specialists, and those who work for smaller institutions are usually also responsible for assisting customers in filling out credit applications, responding to complaints made by customers and determining the company’s credit regulations. Credits managers can be found working in banks, credit card companies, credit unions, investment firms or in non-financial institutions that deal with consumer credit or investments, such as corporations, universities and hospitals.
How is credit management defined?
There is no clear definition of what credit management is. It is usually regarded as assuring that buyers pay on time, credit costs are kept low, and poor debts are managed in such a manner that payment is received without damaging the relationship with that buyer. A trade credit insurance company does all that. Either directly or in conjunction with a company’s credit department. An approved credit management policy can offer assurances to a financing bank, which may facilitate financing.
What credit management tools are available to the credit manager?
Suppliers that deliver goods and/or services on credit will have to manage this credit risk to ensure that payment is received on time. Several tools come to the aid of today’s credit manager. These can be used as additional security to existing credit management procedures. If no procedures are in place, these tools can assist in setting these up.
One of the most important credit management tools is reliable up to date buyer information. A supplier only sees one side of his buyer. Independent information is essential for efficient credit management.
A buyer may be sound, but the country he is in may be experiencing problems. Country reports detect trends and alert exporters before serious problems arise in a particular country.
Suppliers need to manage their outstanding receivables. This can be done through complex financial solutions. Alternatively companies can insure against bad debts through a trade credit insurance policy, obtain detailed market intelligence, implement ledger management, factor, or seek professional help in recovering debts.
Pro-active debt collection procedure has a high success rate. A buyer may be in difficulty, but the supplier can still control payments, provided professional debt collection procedures are in place. Most trade credit insurance companies either offer debt collection services, or have partnered with specialised collections firms.
By transferring receivables, this financial technique makes it possible for companies to fund all or some of their invoices and thus cover their operating capital requirements; obtain cover against their customers’ insolvency; obtain payment of receivables with shorter payment terms; obtain information on their customers’ financial soundness; outsource or vary their administrative expenses; and optimize current assets and liabilities.