Credit Management
Credit Management
Credit management is a very important function within a company, especially if it wants to remain successful. Good credit management can mean the difference between a company becoming the most successful within their market, or one that's filing for bankruptcy.
The Importance of Good Credit Management
Good credit management is very important to a company in remaining successful. Many large companies will assign a credit management department whose main role is to make sure that their customers pay their bills on time and to chase up non-paying customers. Their role will also include avoiding instances of bad debt developing and keeping them to a minimum.
The roles carried out by the credit management department are very important, if customers do not pay their bills to the company on time, the company may not have the funds to be able to pay their suppliers. If a company does not pay their suppliers on time, this will affect the trust built up between them. The supplier may decide to reduce the credit account terms with the company, this may have the effect of forcing the company to reassess and reduce the credit terms they offer their customers. As an end result the company may lose loyal customers, see a fall in their credit rating and may not be offered favourable credit terms by potential suppliers. In some extreme cases, the company may have to sell off valuable assets to pay suppliers. It is therefore essential that companies carry out good credit management by ensuring that customers' accounts are paid up to date, and to prevent instances of bad debt developing.
Good credit management also means that a company ensures that they pay their suppliers on time. As well as building trust, this also builds a good credit rating for the company. A good credit rating will mean that other suppliers will look favourably towards the company, offering good credit terms.
In short, good credit management ensures that the company remains liquid and maintains a smooth running of the business.
Credit Management Functions within a Company
Many businesses today extend credit accounts to their existing and loyal customers. These customers will have a good proven record with the company of settling their bills on time. As a trust has been built between the company and the customer, the company can expect credit accounts to be paid on time. However circumstances with the customer can change and this can affect how quickly they are able to pay off accounts. Here the credit management department should be able to help the customer. It may be that the customer has been very busy and forgot to pay, sometimes they may have run into difficulties in being able to repay. The credit management department should be able to see this and meet with the customer to discuss various ways and options that can be taken repay the account. These actions should prevent any instances of bad debt from developing.
Good credit management also means that research is undertaken when considering extending credit to new and potential customers. Unlike existing customers who have built up trust with the company through past transactions, new customers may not be as trustworthy, there is therefore a risk involved when extending credit to them. To minimise this risk companies can obtain credit ratings on customers to guage how trustworthy they are. Companies may also refrain from extending credit until new customers have passed a "probationary" period.
Paying suppliers and settling the company's own accounts on time and within the payment period is another aspect of good credit management. This will ensure that the company maintains good trading relations with their suppliers and also improve their credit ratings.
Credit Management Online
Credit management can now be carried out online using checkSURE's services. checkSURE Ltd can provide full company credit reports on UK companies instantly to your desktop. You will save time waiting for credit ratings to be sent to you before making a decision to extend credit. It is free to register with checkSURE and all registrants will have their own personal portfolio online to keep copies of reports purchased.
Let checkSURE become part of your good credit management process and register here.
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