Written by Will Aitkenhead
Posted on 01/04/2015

The ins and outs of strategic credit management

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A good relationship between finance and sales teams can deliver high yields. But it seems that such a relationship is hard to come by, even though they are operating in the same organisation. As a result, companies miss out on potential opportunities.

strategic credit management

Strategic credit management is all-important

A survey sent by Graydon to 5,750 companies in the Netherlands has highlighted that as many as 60 percent of credit managers give little or no time to the importance of timely payment during sales talks. This can lead to problems in the future, and according to entrepreneur and independent consultant Marcel Wiedenbrugge, too many companies steer too much for revenue rather than focusing on the quality and profitability of the revenue.

He says: “An organisation that fails to build up good and permanent cooperation between its finance department and commercial departments is missing out on many opportunities. This also includes the lost time spent on visiting companies that turn out not to be creditworthy or not to be profitable.”

Don’t get cold feet

The commercial workers of a business can often find it unpleasant and off-putting when somebody from finance interferes in their work. At the same time, commercial workers can be afraid of finance departments. This can lead to cold feet when it comes to sealing a deal, meaning potentially lucrative opportunities are missed.

The best credit managers will be skilled in the art of commercial understanding. They must view clients as clients, not debtors, which will help them to think in terms of opportunity and not just risk. In turn, the commercial team will understand that they are not having a financial straightjacket applied all the time. As the awareness of each other’s role becomes greater, the organisational structure will work much better.

Integration will lead to solution

Strategic talks between finance and sales are very important, and according to the research these talks only happen in about half of Dutch companies. An incredibly high 40 percent of credit managers also felt that management underestimated their professional field. Credit management expert and research and learning manager at Graydon, Frans van den Heuvel, described this as ‘shocking’. He also added: “Working capital is one of the most important financial objectives in virtually all companies. Credit managers need to claim more authority and at the same time, show a little more assertiveness.”

Differentiate between risks and opportunities

Splitting client portfolios according to risks and opportunities is very important for credit managers. It means they can give more guidance to the sales department and a more proactive working method can be adopted. Finance also need to provide support in advance, informing the sales team who they recommend negotiating with.

Access the data

Having the chance to look at and analyse financial data is crucial. This data can be used by credit managers to support their sales colleagues, giving them access to databases with financial information on clients and prospects during the pre-sales phase. Sales teams can then decide which clients to pay more attention to. This may require adjustments in administrative systems, but companies will be able to use resources much better with qualified information behind them.

Share the responsibility

The key thing to take away is that strategic credit management is about cooperation. Both the sales and finance teams need to feel involved. Aim for a small target first and make sure it is a success, that way both teams will get to know each other and find out how they can work together. Celebrating this success together will lead to a good working environment which you can build on.