An enormous amount of time and energy is involved in the follow-up of outstanding invoices. Every financial manager can confirm that. In addition, outstanding debts slow down cash flow and you need your money to pay your own suppliers. Hence the success and the necessity of a well-balanced credit management.
Credit management ensures that you receive procedures and analysis tools with which your company can determine the risk position of its customers very precisely.
In this way you can minimize debtor risks and, if necessary, quickly intervene when things go wrong. The result: you retain control of your cash flow, your profit margin remains intact, you do not have to look for additional loans yourself, etc.
Although credit management and credit management are often used as synonyms for each other, they are by no means the same concept. On the contrary, debtor management is reactive in nature. It mainly deals with collecting unpaid invoices.
It is therefore at the end of the sales cycle. Credit management goes much further than that. Many more departments are involved. It defines a proactive credit policy, adjusted to the risks and opportunities associated with specific customers and prospects.
Knowledge = control = power
The benefits of strong credit management are countless. In the first place, you can estimate and control debtor risks, because you know exactly how things stand with the solvency of your customers. You will also notice changes in your client portfolio on time.
You also get a clear view on the financial strength or weakness of your allies and competitors, on sector fluctuations and payment patterns. Efficient credit management also gives you confidence with suppliers and other important partners.
They will definitely appreciate that you are concerned and that you are making efforts to get your money in time. And, last but not least, you guarantee the continuity of your cash flow, since the scope and frequency of problematic disputes will be reduced to a minimum. In other words, the recovery periods decrease and your profit increases.
Crucial role for marketing and sales
To be efficient, all employees, in all positions and at every level, must be familiar with the basic principles and procedures of credit management. As a credit manager, you can play an advisory role in this by putting this topic on the agenda.
The marketing and sales team in particular has an important role to play. It is their job to analyze the market in detail and to detect opportunities and opportunities and to carefully choose which clients and prospects deserve attention, based on their creditworthiness and growth prospects.