In credit management, one lapse in judgement [one mistake] can
more than outweigh one hundred good decisions. When the stakes
are this high, it is important to avoid basic errors such as these:
Unnecessarily holding orders. Order holds should be used
as a larst resort. They should be used sparingly. Only a senior
member of the credit department should approve them. Customers
should be notified. Sales should be told of the decision first
- if possible.
Allowing too many orders go into the order approval queue.
This means that unless there is sufficient staff to keep up,
the credit department will fall behind releasing orders. Don't
make the automatic approval process too restrictive.
Engaging in reckless behavior - such as speaking your mind
about a customer at a credit group meeting. Your words have
a way of coming back to bite you. Stick to the facts... meaning
stick to specific [provable] historical information. Don't
opinions and do not speculate about what might happen or what
you might do.
Failing to treat every customer with respect. Retaining customer
goodwill is everyone in a company's job.
Failing to learn from your mistakes. The only thing worse
than making an error is repeating it.
Allowing and accepting mediocrity from your department staff
- or worse incompetence. If someone does not care or cannot do
a good job, get rid of them as soon as you can.
Calling customers or sending dunning notices to customers
about disputed balances.
Failing to take customer complaints seriously. Respond appropriately,
and notify the customer about what you find, what you can do,
and how soon it will be done. Take complaints from your sales
department equally seriously.
Depersonalizing the credit function in order to avoid stressing
interactions. Examples would include litigating rather than negotiating,
and corresponding with customers rather than calling them.
Mishandling customer contacts. Examples include:
Interrupting an irate customer
Failing to listen attentively
Failing to ask appropriate questions
Accepting without protest a customer's first payment
Failing to recognize the fact that the credit department is
required to interact with customers, salespeople, and co-workers
professionally, openly, proactively and courteously.
Allowing an Us Against Them attitude to develop in the credit
department between credit and sales, credit and customers, or
credit and other departments.
One final thought: Although the business-to-business credit function
is largely unregulated, there are certain federal laws that apply
to the activities of the department at all times. For example,
the credit department can never be a party to any agreement or
conspiracy to restrain trade, fix prices, or act in unison with
competitors against a particular customer or group of customers.
While it is not unusual for a credit manager to have a good working
relationship with his or her counterpart at a competitor company
it is virtually important that this relationship never be allowed to
transition into one in which two competitors are conspiring against
customers - which is likely to be a violation of one or more of
the federal antitrust laws [or the shadow regulations passed under
various State laws.
© 2001 All Rights Reserved