Credit management is a process of determining, establishing and implementing policies related to the timely recovery of credit that has been granted, setting appropriate terms for credit, and monitoring compliance with business credit policy, amongst many other credit related activities. A credit manager must also be prepared to take corrective action should policies not be properly implemented. They are often the first line of defense in preventing and managing potential problems with credit that a business may come up against.
Effective credit management solutions are usually designed to meet the requirements and goals of businesses. To this end, the processes involved may differ greatly. Some examples include: establishing an effective customer credit control program; developing an efficient collection management plan; and implementing debt collection. However, the three activities listed above are only a few of the steps involved when it comes to implementing an effective credit management system.
To establish an effective credit management plan, a business must first establish a strong customer credit management policy. This policy should outline how a business will monitor and control the activities related to its customers, including late payments and instances where customers fail to repay the debts they owe. The policy should also outline the procedures to be used when a business believes one of its customers has deliberately set out to avoid paying an obligation. In cases where the lender agrees to waive certain fees or charges, the business should also be charged for the service.
Collection activities should also be closely supervised and controlled. In fact, the most important activity for an effective credit management system is probably that of collecting outstanding accounts receivables. This is because accounts receivables are what funds the business can use to pay its bills. To this end, companies that offer collection services should be fully licensed and insured. These providers must also be fully trained to ensure effective credit control.
In addition to collection activities, businesses may also need to engage in customer credit management processes to reduce their risk of incurring debts. If a business fails to meet its financial obligations on time, it may be forced to declare bankruptcy. This process negatively impacts a company’s ability to borrow against future capital, so most lenders prefer to do business with organizations that are financially stable. It can also negatively affect a company’s goodwill and reputation. If a large number of accounts receivables related to a single customer arise due to delinquency, a business may not be able to obtain a loan from a lender in the future.
To protect its goodwill and reputation, businesses should implement an effective credit management system. This includes monitoring all accounts receivable and accounts payable by regularly communicating to customers. A credit management system should also include a way for customers to easily dispute delinquent accounts. Finally, a business should make sure that all data related to its finances and financial transactions is secure. By taking all of these steps, a business can ensure that it meets its financial obligations and protects its goodwill and reputation.You can download The Good Steward Financial System on your Iphone or Android device and start the credit score management process today.