Fact and Fiction About The Credit Function
By Michael C. Dennis, MBA, CBF

Contrary to popular myth the credit department does far more than harass customers for money. A modern credit department will proactively manage risk by:

• Setting rational credit terms.

• Strengthening business relationships with key customers.

• Forecasting cash inflows.

• Updating credit policies.

• Performing risk analysis on new applicants and on active customers.

• Pre-qualify prospective customers.

• Consider all options before any applicant is rejected for open account terms.

• Meeting periodically with sales management to understand the sales department's goals and objectives [and vice-versa].

• Strive to accelerate the order approval process in particular --- and the credit decision-making processes in general.

• Educate sales about how credit decisions are made.

• Eliminate bias from the credit decision-making process.

Reprinted with permission from the Covering Credit Newsletter 8/28/02 Edition
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