Managing Credit Managers

Credit management requires that the manger both manage the receivables and manage a department. I have seen some good receivable managers who are unfortunately poor department managers. The results can be disastrous.

One manager simply divided the accounts and the duties among the three in the department. Each person then, was responsible for a portion of the receivables and everything that went along with it. Each processed their own area’s credit applications, set up their own accounts, dealt with their portion’s invoice and or proof of delivery retrieval, handled their area’s credit ratings, pending order releases and because this was a building material supplier, each was required to prepare the waivers and related forms that their customers required. Oh yes, they were also responsible for the collections. All it took to get the department on track was to bring in one clerical person to do all of the non-collection activity, thus allowing the collectors to spend the majority of their time collecting.

Another credit manager supervised three others. While they had designated duties: one applied cash, one did clerical, and another did collections, the credit manager had to control and closely supervise all functions. Therefore, the clerical person spent a great deal of time preparing credit ratings and processing credit applications. Then, before a rating could be sent on to the requesting party, or before an account could be set up, the manager had to review the clerical person’s work. However, as the work load increased along with the number of customers and the growing receivables, the credit manager rarely had any time for reviewing. The ratings and applications became tall towers of accumulated paper and the clerical function was largely wasted.

Too often, improper credit management is the fault of whoever is assigned to supervise the credit manager. Typically, this is a task that falls on the shoulders of the company controller. While a controller’s knowledge of accounting principals may be extensive, their knowledge of credit is miniscule. I once knew a controller who frequently complained that the credit / collectors were on the telephone too much.

Poor management of the credit department can start at the highest level. The owner of a small lumber company issued a list of customers the credit department was not allowed to call, fearing these customers would abandon the company if they were asked to pay their bills. Later he demanded to know who was responsible for the company’s delinquency. The credit manager handed back the list of customer he had been given by the owner.

Credit departments require efficient management just like any other department. Unfortunately, companies tend to either miss-manage or avoid the department all together because they simply don’t know how. Collectors must have goals, targets and priorities, or they will get burdened down with inconsequential matters. Labor resources must be properly allocated in order to be efficient and productive. Bench marks and a system of rewards should be set in place, in order to keep motivation up. This is where Strategic Credit Management Solutions can help. We’ve been doing it for thirty years. Contact us at http://powerscredit.com/or email us at patrickpowers@sbcglobal.net.

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