The role of credit manager is more important than ever (1/2)

Nov 8, 2021

credit manager

Estimated reading time: 4 minutes

In large companies, the credit manager is often a separate function. Such companies cannot do without a specific debtor management employee. This is due to the fact that there are often hundreds of customers and multiple debtors. Following up on these debtors cannot simply be taken on by other employees, such as those within the accounting or finance department.

It could also be that the customer base is very small, but with some very large customers. If there is one bad payer among them, business risk increases quickly. A credit manager may also be assigned in this situation.

Good business management at medium and large companies benefits from someone who correctly assesses the business risks and takes action, such as the credit manager or debtor manager.

Defining the credit manager today as a mere accounts receivable manager would do them a disservice. Credit management starts with prospects and new customers who have to be assessed for their credit risk and the involvement continues throughout the order-to-cash process.

But what exactly is the function of a credit manager? Which tasks fall under their authority?

The function of a credit manager

A credit manager’s main task is to ensure that outstanding invoices are paid. The faster, the better. They always try to keep communication with debtors going.

Not only contact with the debtors, but also relationships with credit insurance companies, banks, collection agencies and other financial players are within the credit manager’s range of tasks.

The credit manager also plays an important internal role for the company. For example, the credit manager is an advisor to the board of directors and executes the company’s debtor policy.

Their role consists of directing internal employees such as the credit controllers, coordinating with other colleagues including sales, and reporting to the management. He or she always tries to strike a balance between sales (assessing new customers) and financial security (limiting credit risks).

Required skills

The credit manager’s mantra is to reduce or limit the number of outstanding invoices, and to keep the total outstanding amount within limits. Motivation, perseverance and the drive to pursue those outstanding amounts are excellent qualities of a good credit manager.

Financial literacy through studies in business management, commercial sciences, economics or finance or a healthy interest in numbers are almost a “must-have” to be able to fulfill the job as a credit manager properly.

Other skills such as proficiency in languages (if there are many foreign debtors in the customer base), technical know-how and legal knowledge are also pluses.

Because they come into contact with a lot of different parties, internally and externally, a credit manager must also have strong communication skills and be customer-oriented.

What are the duties of a credit manager?

Now let’s dive a little deeper into the duties of the credit manager. These are quite extensive, because today more and more is expected of a modern credit manager.

The specific tasks we list below are in any case not exhaustive. Every company has its own operations and nuances, and the interpretation of debtor management and credit management therefore differs greatly. The tasks below can also be performed by other employees in the company, and not just by the credit manager alone.

Draw up and implement a clear debtor policy

One of the core tasks is drawing up and determining a good, clear debtor policy. And ensuring that its implementation is managed properly within the company.

Regular consultation with the internal sales department (back office), external sales (agents) and/or with the CEO is essential. Especially when it comes to making important credit decisions or whether or not to block new deliveries for customers with overdue invoices.

Automate debtor management

The defined debtor policy has a much better chance of success when you opt for full automation. Using the right software is crucial here. At iController we see credit management as part of a broader approach to the order-to-cash process.

Thanks to the extensive automation of follow-up actions, time is freed up for the credit manager to make thorough analyses and reports, and to make improvements to the debtor follow-up and/or the company policy regarding credit risks.

Create payment profiles

There are many different types of customers within the debtor portfolio. Customers who pay exceptionally late, but also customers who can be categorised as less good and even bad payers. This customer segmentation can be done manually, but it can also be done automatically based on an analysis of, among other things, past payment experiences

By drawing up payment profiles and assigning the debtors to them, decisions can be made in a much more targeted way. A specific category of customers then gets its own follow-up approach via a specific communication channel, specific message content, and so on.

In part 2 of this article we further explore the duties of a credit manager.

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