A Personal Note to Credit Managers

Credit Granting and Collecting

This series of articles come from a fantastic publication put out by the IACC  (International Association of Credit Collectors).   It is well grounded and fundamental advise that should be ready by any professional involved in credit collections.

The  (IACC) is the largest community of commercial collection professionals in the world. IACC members serve nearly every major metropolitan area and thousands of small communities throughout the United States, Canada and 37 other countries.

This figure fluctuates as our economy expands or contracts Increased competition, diversification of product lines and/or governmental pump-priming to industry all seem to indicate, however, that these figures will continue to move upward.

Commercial Collection Guidelines is not intended to teach professional credit managers how to operate in their specialized fields. Rather, the purpose is to provide guidelines for the extension of credit. In addition, this booklet provides information on how and when to enlist  professional commercial collection services.

IACC members share with others in the credit industry recognition of the important position of commercial credit managers and their staffs. The increasing number of seminars, conferences and graduate courses offered to commercial credit personnel is a good indicator of the importance of your function.

We hope that this series will be of assistance to you in establishing and following effective credit department policies and procedures, especially those involved with slow-paying accounts.

It is estimated that literally tens of billions of dollars in delinquent commercial credit is currently being carried on the books of both American and international businesses.

Regardless of the state of either the national or international economy, the necessity to grant credit and to collect receivables using professional methods remains important to all businesses.

Volume of Credit Sales Are Significant

Most commercial companies sell about 2 to 5 percent of their products for cash. The credit department is responsible for the other 95 to 98 percent of the goods and/or services sold.  Businesses have varying percentages of their liquid financial resources tied up in receivables. Actual losses might range from one-half of 1 percent to 5 percent of sales without serious results. This depends on mark-up for profit and other factors. Losses can grow to significant sums very rapidly if not controlled by the credit manager.

Accounting and Finance Knowledge is Needed

Knowledge of accounting and finance, along with tact and foresight in customer relations, are qualities that characterize the professional commercial credit manager    You should have some background in accounting in order to evaluate financial statements submitted by prospective customers. You should have additional financial background or training so that you can estimate risk factors, company profits and recovery rates. In this capacity, you must be knowledgeable about the cost of money outstanding and its value to your employer.

Good Customer Relations Are Important

You and your department must also be attuned to customer relations. This quality is absolutely necessary in order for the company to prosper through growth. It is very easy to say “no” to prospective customers, and it is very easy to firmly demand payment. But, if this attitude raises havoc with sales, then the credit department is not performing its complete function, which is to create a balance between sales and recovery of money.

The job of the credit manager is an important position in this industry. The credit manager’s effectiveness is crucial to the success of the company, and because of this, management will seek help from the credit manager when making important business decisions.

We will be continuing with the series and diving deeper into creating Credit Granting Policies as Collections strategies.   We hope you enjoy this series, & find it useful.   We wish to thank the IACC for the content, and express our continued gratification for all the services that this wonderful organization performs.

 

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