CHAPTER 4: CREDIT MANAGEMENT
Policy and procedures should be clear and precise to make sure that each credit manager analyzes and assigns a line of credit applying a consistent approach according to company policy. To help ensure that new accounts are analyzed consistently, many companies use a credit score tool. Don’t confuse this with a “credit score” that is assigned by a credit bureau like Dunn & Bradstreet, Equifax, or Experian—and, for consumers, TransUnion, Equifax, or Experian). A credit score tool is a way to assign a score to the important components of the customer’s creditworthiness, including but not limited to a credit bureau score, financial information, references, and bank account status. An internal score is assigned based on a matrix, which can be used to assign the terms and credit line that can be offered to that customer. When writing the policy and procedures to protect cash, it is important in today’s business environment to also have methods available that allow goods and services to be sold to even a customer with a poor credit history. In this very competitive world, how often can you afford to say “no” to a customer? Why not assign a zero line of credit with credit-card terms? In order to have a robust credit policy, provide a framework for:
Planned ongoing review of its effectiveness; Challenger and champion strategies; and Ability to react to changing circumstances.
Don’t forget that the nature of the credit manager’s job is not merely credit. Just as important are due diligence to protect against fraud and implementing strategies to attract clients with potential for ongoing profitable business. Credit managers should have high ethical standards and excellent communication skills. They should also be analytical, good negotiators, detailed, task-oriented, persistent, self-starters, aggressive but professional, and have excellent computer skills. CONFIDENTIALITY CONTRACT It is critical that each employee in credit management sign a confidentiality contract every year. All of the data in the credit department is confidential, whether it is about the consumer or a business. The customer file contains financial statements, credit card numbers, banking information, tax identification numbers, and copies of passports and driver’s licenses. While many companies only require employees to sign a confidentiality contract at hiring, implementing a policy of signing the contract every year is a reminder how important it is not to divulge this information to anyone who is not part of the process.
4.3 Policy & Procedures (P&P) for the Credit Manager
A well-defined and actionable set of credit policies and procedures is written to provide the platform for the credit manager to analyze potential and existing customers to grant them a credit line that will support sales goals while protecting the company’s cash.
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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