Estimated reading time: 4 minutes
The role of credit manager is a challenging one. In the first part of this article we’ve already drawn up three duties or tasks, and we spoke about the required skills. In part two we talk about nine more duties of a credit manager.
Screen new customers for their creditworthiness
The credit manager stays in close contact with sales. When the sales team brings in a new customer, the credit manager checks their creditworthiness. Screening is based on data from trade information partners such as Altares, Dunn & Bradstreet or Credit Safe.
The trade report that these parties provide paints a picture of the new customer’s situation, both financially and in general. This allows the credit manager to make more targeted decisions with regard to credit risk, credit limit and payment terms. Does the credit manager adhere to advice on creditworthiness, or is a stricter policy or more flexible policy chosen based on other factors?
Ideally, the credit manager is involved in drawing up general payment terms and payment terms for specific customers. If the report shows a high risk or a record of late general payment behaviour, the credit manager will want to limit the business risk and in most cases the customer will have to pay in advance.
If, on the other hand, the report is positive, the customer may be allocated a longer payment term.
Sometimes adjusted terms and conditions can facilitate the sale and thus “increase” turnover.
Take out credit insurance
To insure against default or bankrupt customers, credit managers have the option of taking out credit insurance for all or part of the customer portfolio. If a customer then goes bankrupt, the company will be paid compensation, in accordance with a pre-agreed percentage of the outstanding invoices.
Factoring as an option
With factoring, the company sells its outstanding invoices to a factoring company – usually a bank or a business unit within it. At a contractually agreed cost, the company receives short-term financing based on the invoices that are drawn up.
The big advantage is that your company does not have to wait for payment from the customer. With factoring you already have the money in your account a few days after the invoice’s date of issue. This extra cash comes in handy, especially for companies that are growing fast.
Maintain customer relationships
The timely collection of invoices – in addition to monitoring credit risk – remains the principal task of the credit manager, but it is best not to annoy customers in pursuing this task. Friendly communication and settlement are recommended in almost all cases. In this sense, the position of credit manager involves a bit of commercial ingenuity.
Collect payments from non-paying customers
When payment problems arise, the credit manager must make every effort to obtain payment.
Different situations can be distinguished here:
- Drafting contracts for payment by instalment
- Drawing up instalment plans
- Preparation of debt-claims
- Preparing files for lawyers or debt collection agencies
Involvement in the order-to-cash process
Ideally the credit manager is involved in the entire order-to-cash process. After all, one of the reasons for non-payment may lie there. Orders may have been blocked for some reason. Invoicing can go wrong when, for example, the purchase order number is missing or too many items have been charged.
If the credit manager has a good view of this entire process, errors can be detected and corrected in time.
Depending on the company, the credit manager may also be used to book payments. That is not unimportant, becauseif payments are booked to the wrong customer, this will affect the entire collection process.
Prepare reporting and metrics
The DSO (Days Sales Outstanding) is an important KPI that should not be missing from any analysis. The DSO indicates the average time it takes for an invoice to be paid after a product or service has been delivered. But smarter analyses are also possible using technologies such as AI, RPA and big data. The right software can help with this.
Data exchange with sales and marketing
If the credit manager has an overview of the entire order-to-cash process, this normally provides a lot of data. Such data is very interesting for sales and marketing. They can see which sectors may be having difficulties with payments, or, conversely, which sectors are prompt payers and perhaps open to upselling. They can act on this information with targeted sales and marketing campaigns.
Today a lot is expected from a modern credit manager. He or she can use all the help they can get. With the iController software automatisation is key. That way there is more time for analysis and client retention.