Credit Management March 2020

ASK THE EXPERTS
PEOPLE POWER
Developing a successful strategic
credit management department. Part One.
AUTHOR – Matt Godby MCICM (Grad)
SINCE the financial crisis in 2008, many
businesses have had less access to
the borrowing and credit required
that allows them to grow. There has
therefore been more pressure to get
paid on time, which provides the
cashflow necessary to reinvest in the business.
Studies have shown that whereas the focus on
working capital has increased sharply, this rarely
leads to significantly better results. For example,
in 2013, $1.3bn of unnecessary working capital was
still tied up in the top 2,000 companies worldwide,
partly in debtors. Researchers therefore question
whether the collections strategies of these
companies are effective.
A common mistake is that many credit
management departments still pursue a reactive
policy of jumping into action when a debt becomes
overdue or dealing with issues based on who shouts
the loudest. Such a lack of strategic direction is
both inefficient and counterproductive.
We’re all familiar with the adage ‘a sale isn’t a sale
until it’s been paid for’. A culture where departments
work in silos means that, by definition, they aren’t
necessarily working in the interests of the wider
business. All areas of a business are there to create
profit – sales exist to sell; marketing to drum up
new business; manufacturing to create the best
products. But if sales aren’t being paid for, then
these departments are wasting their time.
In order to do its job effectively, the credit
control department routinely encounters more
departments than most. A modern credit control
department should be at the heart of the business,
and it is therefore crucial for it to nurture support,
share information and build relationships with
other departments and the wider leadership team.
It is job of the credit manager to provide motivation
and clear, strategic direction to their staff. By
following a clear, consistent strategy, the credit
management department can guide business
behaviours, improve efficiencies and help develop
greater accountability both inside and outside of
the department.
Strategic credit management is a modern,
dynamic, outward thinking way of working. But
what does it actually look like? Well, let’s break this
down into a few separate parts:
Strategic credit management isn’t just a
tick list of ‘do’s’ and ‘don’ts’ – it’s a cultural
shift. It requires skilled staff, effective
systems and a supportive culture.
RELATIONSHIPS
We’ve all worked in organisations where
departments often complain that they only hear
from credit control when there is a problem.
There is some truth in that. So, nurture and build
relationships with key stakeholders (people and
departments) by understanding the challenges
they face. Avoid apportioning blame, but instead
Advancing the credit profession / www.cicm.com / March 2020 / PAGE 54