Written by Nick Brown
Posted on 15/03/2016

How to move on to the next stage in the Credit Maturity Model

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The impetus needed to move from stage to stage up through our Credit Maturity Model is knowledge. Once people realise and understand the advantages of attaining the next stage, and the next, they will be motivated to progress. The impact – and the costs – of bad debt are holding the organisation back and stunting growth, credit management information is lying fallow when it could be used as collaborative market intelligence, the error rate is higher than it might be…when everyone recognises these points and accepts the solution, your journey can begin.

To start moving, you need first to know where you are. Which stage reflects your current status? Where is your company on the roadmap? The Credit Maturity Model is designed to highlight the route to optimum customer management, pinpointing where investment is needed and underlining the benefits. It will also help to make clear which stage the business has reached. To progress smoothly, there will need to be a pervading culture change, with everyone ‘on the same page’.

Explore the stages of the Credit Maturity Model in full detail at our download centre where you’ll discover our incisive white paper: Credit Maturity Model. A roadmap to successful credit management. You can clearly see the stages on our infographic: Credit Maturity Model. Four phases to optimal credit management.

Start credit management culture change

If your business is in the starting phase, the first stage of our model, your credit management culture will be shaped by debt chasing and reacting to unpaid invoices. Credit management operates in virtual isolation and doesn’t collaborate with sales and marketing. To move towards professionalisation, the second phase in the Credit Maturity Model, you will need to create a truly independent department, where debtor management has a real identity. Vitally there should be a greater emphasis placed on analysis, so that more is understood about customers and their payment behaviour. The days of automatically granting extra credit, without checks, are gone. Here we are still essentially reactive and very much at the back of the sales process – there is still quite a long way to go.

Focus on opportunity and collaboration

To move into the preventative phase, your company’s credit management culture will need to concentrate much more on spotting and capitalising on opportunity and far less on tracking those bad debtors. Naturally this will demand investment in both training and infrastructure. Then you will be equipped to build a much clearer picture of customer status, behaviour and future potential.

Your credit management team now moves towards a more multi-faceted set of tasks. They are looking at the bigger picture, which is made up of a wider, deeper pool of data. They are studying sectors and regions, patterns and trends – making decisions based on a world of information that they just didn’t use in earlier stages. Naturally they cannot do this alone. To mine this multi-dimensional wealth of information and make the best use of it, they are collaborating with colleagues from sales and marketing. Together they can now look at your customer base in terms of opportunities.

Invest in technology

For your company to reach and prosper at stage four in the model, it will need to be genuinely data-driven. Credit management will be a properly autonomous discipline, always collaborating closely with sales and marketing and of course the finance department. Now the challenge is truly a commercial one and focuses on strengthening the business through identifying and developing potential. To succeed at this level you will need to build a well coordinated IT infrastructure, and your ethos will be shaped by Customer Value Management [CVM]. This is an approach that centres around a detailed understanding of customer profiles. It demands the highest quality customer and prospect data that can only be supplied and exploited once you have invested in the right technology. Ultimately here, credit management can maintain a high degree of objectivity through rich, accurate data and plot a course between the subjective enthusiasm of the sales team and the risk-averse nature of finance colleagues.

Believe that insight is priceless

The size of your enterprise will greatly influence where you are in the Credit Maturity Model of course. It’s easier for larger organisations to invest in new technology for example, yet spreading culture change might prove easier in a smaller less complex business. The central message is the same whatever the scale however. Everyone needs to understand that information is a precious raw material, and it can be transformed, through analysis and enlightened use of data into penetrating, profitable insights.

Related topics

To see where your company is now and how it can move on up, visit our download centre where you’ll find the insightful guide: Credit Maturity Model. A roadmap to successful credit management and a clear infographic: Credit Maturity Model. Four phases to optimal credit management.

Interested in more information regarding Credit Management? Download our e-book here!