The Credit Controller – The Unsung Hero

 “What’s wrong with my business?  I can’t understand it.” This is a comment I often hear from many business managers and owners. They know there is something wrong.  But they have spoken to the sales staff and production who assure them all is well. “Is my customer really happy with us or are they suffering any on going problems that are not being identified as they should be?.”

 An unhappy client will generally withhold payment to resolve a dispute they may have.  The dispute may have fallen on deaf ears through other departments of the company over a period of time. It is only when the company finds the account unpaid that it suddenly becomes very proactive with the customer to recover the over due account in the normal credit management manner.  This can further alienate the customer, often to a point of no return.

 The many reasons for a business down turn can be for a multitude of things.  But many of these problems are hidden within the company’s systems and procedures, or by the staff themselves.

 Have you ever thought of asking your credit manager? “Ridiculous” you say “what would they know about our business.  They just deal with the cash.”

 If business management asked the correct department (i.e. the credit department) they would know where and what problems exist within the company. The credit department is often the unseen sales department that constantly tidies up the finer details that sales, marketing and all the other departments don’t attend to or forget about until it’s time for payment.  It is then when the finer details of an agreement present themselves via payment not having been received and will eventually end up in the credit department to be resolved.

 When a customer rings up the credit department personnel screaming abuse down a telephone about the debt recovery letter sent to them, these customers do not care whether the credit person on the other end knows anything about any problem they may have.  But it is these people that are held responsible by the customer and will be blamed for allowing the situation to have escalated to where it is.

 It is often this department that is left to sort out the residual problems or unattended to error in the process of any business to enable payment to be obtained otherwise, it will become bad debt and could be written off. In addition to this, the one bad transaction could destroy the years of happy customer relationship the business has spent good money building.

 If handled professionally, the credit department can often win the customer back onside by working with them to resolve situations that occur outside of the normal procedures or their control.

 How long is it since you really looked at the value of your credit team or credit manager?  This team or person comes in contact with every department of the business for a huge variety of reasons. The credit department are constantly resolving problems for the business so they need to liaise with all other appropriate departments to resolve any situation as well as maintaining the company cash flow and customer relationship. 

 It should be remembered that this generally under-resourced department is also charged with defending the company from the unscrupulous.  The credit department has one of the most demanding positions in the company, a position that most people would not readily take on.

 Why do most senior management constantly ignore this department until there is a fluctuation in the receivables or debtors ledger?  Why do senior management then go head hunting for the culprit in that department when more than likely the problem originated back in sales, marketing or production? 

The credit department can be a wealth of knowledge both internally and externally to company management. Not only do these personnel have their own internal networks, but also they will have external networks that can be utilised in protecting the business. In addition to this, there is various legislation that must be abided by in any business.  The credit department need to be very conversant with this.  However, management will most likely go and consult with their company solicitor at considerable cost.  Moreover, the solicitor probably has no idea how this may affect the daily activity of the company or whether what may be suggested it is even practical in the applicable business situation.

 Before you run out and see your solicitor about improvements to documentation, check with your credit department to ensure that not only will it be functional, but enforceable. Resource needs to be added to this department even if it is for short-term projects to ensure consistency in cash flow while it is restructured to operate more efficiently. Once efficiently operating with the correct resource provided to the department, on most occasions it is likely the department will perform to a point where it will maintain or reduce costs once a constant predictable level is able to be maintained.

 The credit department or accounts receivable will often be able to tell you if there are sales people who constantly upset your customer by quoting incorrect rates, pricing or discounts, sometimes providing incorrect or faulty product or other aspects of the business that may have left the customer unhappy.  When a situation has deteriorated to this level it is common for the customer to take the stance that they do not feel they have an obligation to pay on the basis of “if you don’t care why should I?,” and “it is now your problem because I am not going to pay for it until someone takes me seriously and listens to my problem.”

 Large amounts of credits being passed by the department is something that always needs investigating rather than to be continually processed by staff in a mechanical manner.  Such occurrences are a sign something is clearly not working, but there is a need to have someone in authority to ask the question “why is this occurring?”and act upon it.  The credit personnel could tell you immediately of any problem as they are the ones that sort every problem in the business because if they don’t, the cost to the business is a lost customer.  In addition to this, it is highly likely you will lose further revenue while the debt remains unpaid and then spend further expense try to recover your funds through the court process.

 The credit department is rarely given the recognition it deserves.  How long is it since management of the company recognised the outstanding role that this department performs daily for the business?

 The credit personnel are every department in your company.  They have to be knowledgeable about every aspect of the business to know how to discuss these matters of dispute with the unhappy client.  Is it not time to give some credit where credit is due? (Excuse the pun).