Appropriate Goals for the Credit Department
By Steven Kozack and Michael C. Dennis MBA, CBF

Question: What are some appropriate goals for the credit department?

Answer: There are both specific and generic goals. Each company must establish goals specific to their operational needs. Here are some generic goals:

• Maintain DSO at or below industry norms

• Control bad debts to < .25% of total sales

• Reduce cycle time for application processing to one day or less

• Ensure that no order remains in the credit queue for more than one hour without being reviewed by credit department personnel

• Make certain that all active customer account files are updated and reviewed at least once a year

• Attend the annual sales meeting. Give an educational presentation to the salespeople

• Reduce complaints from sales about the credit department by taking the time to explain negative decisions in sufficient detail

• Work with sales to pre-qualify or tentatively qualify potential customers so that the sales department does not waste its time on unqualified candidate companies

• Update the credit manual as necessary to keep it current

• Look for and recommend cost saving ideas

• Work with collectors to make sure every account is called within ten days of becoming past due... irrespective of the amount owing

• Work with collectors to ensure collection calls are being prioritized

• Make certain cash is posted within 24 hours of receipt

• Cross train everyone in the department in at least one additional job title

• Create a cooperative working relationship with the sales department

• Encourage subordinates to attend night classes and other programs that improve their job skills

• Recommend opportunities to increase sales whenever you find them

• Ensure the goals of the credit department tie in closely with the goals of the company

• Understand the level of credit risk and the amount of payment delinquency the company can tolerate and keep below these levels at all times

• Give as much advanced notice of possible adverse action as possible to the sales department about their customers