What is Credit Management?

If credit management was purely about reminding customers to pay, then more businesses would succeed. Adopt a credit management policy into your business, and it will prove invaluable to you.

The thing to remember is credit management also involves the below:

  • The process of granting credit to your customers
  • Your action plan to guard against late payments
  • Establishing payment terms
  • Recovering payments
  • Ensuring customers and staff comply with your policy

In effect, you are providing customers with credit. Ergo, credit management is a plan to safeguard your company from late payments/defaults from customers.

Basically, it is about being proactive and protecting all your hard work and investment, not only financially, but emotionally in your business by weighing up risks and averting losses:

  • How solvent are your customers?
  • What are the risks involved in extending their credit?

What are the benefits?

Good credit management starts even before closing the sale.

Be proactive by running credit checks on your customers; in doing so, you could avoid unnecessary risk to your business.

With a strong credit management policy and process, forward financial planning becomes easier because you know when payments are due in from customers.

Tied into the above, because you can forecast your payments due, and because you have a strong process in place, finance lenders are going to feel more secure lending to you.

Protecting your cashflow! With continual assessment in this area, you can ensure your income is higher than your out-goings. Meaning you can pay your bills, salaries, etc in a timely manner.

Improved DSO (Days Sales Outstanding). 

DSO is an indicator as to the average time of payment for invoices. You can compare your DSO score with your industry average online. In doing so you can understand whether or not there is room for improvement within your processes and credit control.

Business liquidity is increased! Put simply, liquidity relates to the ease in which assets are turned into cash.

All the above helps to portray a confident and professional image of your business. What you do feel when you experience a confident and professional company? Trust? Reliability? Safe knowing these things?

How can we help

Talk to us at FJCM to understand in greater detail how we can work together to support your business. We provide strong credit management policies and consultancy, outsourced credit control and debt recovery services to businesses throughout the UK.