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The modern-day credit manager

Credit managers play a critical role in keeping their company’s finances well-balanced and positioned for growth. The modern-day credit manager controls their company’s credit policies, establishes optimum levels of risk and decides how much credit to extend to customers – as well as the terms of payments.

Credit risk management

Managing credit risk effectively will ensure that a company has healthy cash flow and working capital, a good Days Sales Outstanding ratio and a supportive credit strategy to boost sales. Rather than preventing sales, credit risk management is about encouraging the right sales to make sure the company receives payment on time. It can then reinvest this money in inventory and meet operational costs, like wages.

Credit managers are responsible for making sure that the credit risk policy isn’t too restrictive and encourages sales and growth. Indeed, one of the most challenging areas of credit management is considering a customer from both a sales perspective and a risk perspective – and finding a way to harmonise both views. By approaching credit management with an integrated view of the customer, the company’s sales, marketing, risk and finance targets remain aligned.

Credit management objectives

One of the key goals of the modern credit manager is to reduce bad debt and minimise the losses that stem from this. They also need to reduce the company’s capital tied up in debt and improve its liquidity.

To manage credit effectively, it helps to have a dynamic approach to monitoring creditworthiness. This means being proactive in responding to changes to a client’s circumstances and financial behaviour – whether that means creating more favourable terms for clients whose creditworthiness has improved or responding swiftly to situations where credit risk has increased.

Early warning systems

As businesses benefit more and more from emerging technology, a number of companies are investing in credit software solutions that provide early warning systems for credit risk. Not only can this software assess potential customers for credit risk during the application stage, it can also predict and manage payment risk throughout the customer relationship. It also supports credit managers, helping them to make accurate credit decisions by generating dynamic credit limits which evolve according to a customer’s spend and payment behaviour. Much like with credit cards, customers who pay promptly are rewarded with higher credit limits. What’s more, these softwares provide advanced warning if a credit limit is likely to be breached – before the end of the billing period.

Today’s modern day credit manager

The modern-day credit manager has a diverse role that involves working closely with sales, marketing, risk and finance departments to produce the best outcome for the company. An increasing part of this is integrating the right technology to make sure they stay ahead of the competition and can optimise their sales and financial health. After the financial crisis, effective credit management – balancing credit extension with liquidity – is more crucial than ever. If companies want to reach their full potential, an intelligent credit management system is critical, and the modern day credit manager is a key part of this.

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