Overview of Credit Management
Credit management is the process of granting credit terms and ensuring payment is collected when an invoice becomes due. Key principles include:
- Establish credit policy with limits, terms, and criteria
- Monitor credit exposure and risk
Stages of Credit Management
- Determine customer credit rating
- Frequently monitor customers for risks
- Detect issues promptly
- Improve accounts receivable
- Set credit limits based on payment history
Other Aspects
- Credit checks to assess creditworthiness
- Monitoring payment history
- Establishing debt collection policies
The Aim of the Process
- Increase revenues
- Reduce costs
- Improve liquidity and profitability
Key Traits for Credit Managers
- Communication skills
- Analytical skills to make decisions
- Maintaining customer relationships
Steps in the Process
- Generate loan opportunity
- Review 5 C’s – capacity, capital, conditions, character, collateral
- Structure the loan
- Control credit to improve revenue and profit
Goals of Credit Management
- Prevent late payment
- Increase profitability
- Finance accounts payable