The Next New Development in Credit Management
By Michael Dennis MBA,CBF

As Frank Lowe pointed out in a previous article, some companies are always looking at the latest fad as a way to increase profit and productivity. In my opinion, there needs to be a movement back to the basics --- the fundamentals of credit risk management and effective commercial debt collection. In my consulting business, I have seen companies almost abandon these fundamentals in favor of new technologies and new fads such as:

• Consolidating credit and customer support functions within a company

• Centralizing a formerly decentralized credit operation

• Using decision support software to establish credit limits and periodically review active accounts

• Send automated dunning notices to be transmitted by email and/or FAX

• Purchasing an ERP system that purport to do everything but brew coffee, but which rarely deliver on the promised gains - at least not for the credit department

The point is not to abandon new technologies, but to ensure that they are used in an environment in which the credit department staff and credit managers understand that technology will not replace the need to talk to delinquent customers, and decision support software will not eliminate the need for someone to make the tough decisions involving scenarios in which the credit manager must reconcile or at least address these competing goals:

• To minimize credit risk, and

• Optimize cash inflows, and

• Retain customer goodwill whenever possible, and

• Sell customers as much merchandise as they are willing to buy

Credit managers and their subordinates remain responsible for ensuring the collect ability of the accounts receivable portfolio. Before you start implementing sweeping new changes, before you rewrite the department's policies and procedures, before you put your trust in new software make certain that you have a fallback position and that each member of the credit department staff has been trained in the fundamentals - and that their appreciation of these fundamentals has been reinforced through ongoing training and education.