Any one of these credit and collection goals is perfectly acceptable. If you try to do two or more, you’re really cooking! But perhaps just maintaining the status quo is also acceptable. Sometimes we create more problems for ourselves in trying to reinvent the wheel. The old expression, “If it’s not broken, don’t fix it.”
But generally speaking, our credit and collection function is a work in progress and there are always areas that can use some improvement. Sometimes, one little idea could turn out to have a huge impact. Let’s take a look at each of the above goals and see what could possibly be improved.
1) Collect more dollars with less resources – This really encompasses so many ideas, strategies, and systems. Sending invoices by email, setting up regular payments by automatic bank withdrawal, integrating your A/R system with a third-party collection entity that can seamlessly manage your receivables are all ways, large and small, that could help you to collect more with less resources.
2) Improve on existing controls or implement new ones – When I talk about credit controls, I’m referring to how credit is researched, approved, and monitored. Are credit limits reviewed at least annually? Is a personal guarantee written into the credit application and clearly signed off by the president or other member of the executive team? Any item that will help to understand if credit should still be granted, as well as how to preserve the payment obligation, should be part of the credit control safety net.
3) Keep customers and sales reps happy – As we’ve heard many times, there often seems to be a bit of tension between credit and the sales reps and their customers. As credit and collection professionals, we regularly find ourselves between a rock and a hard place. On one hand, we’re trying to support our sales professionals and customers, but on the other hand, we’re also trying to safeguard the company’s assets, namely, A/R, cash, and inventory. In the course of our work, there’s always room for refining the tone of our communication when dealing with all parties related to the granting of credit and collecting on a past due account.
4) Minimize the risk of selling on credit – This goal ties into the others because when our credit and collection system has controls that maximizes sales safely, by default, we are at the same minimizing the risk of selling on credit.
5) Keep things on an even-keel – There’s absolutely nothing wrong with this goal. In fact, if everything is working well, we might consider ourselves to be in good shape. The only downside of this is the possibility that by not keeping your eyes peeled for potential problems, you might get an unexpected hiccup, or even a huge setback, that could seriously hamper your credit operation.
Good luck to you in 2022!
Nancy Seiverd, President, CMI Credit Mediators, Inc.