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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

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