What Are The Roles/Function Of Credit Management Department

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It might be a surprise that some companies do not emphasis or support the roles or function of their credit management/control department. This is especially true for sales personnel when they think that credit department is an obstacle towards achieving their sales target. To some they still do not understand the concept of Profit versus Cash re: a company can be very profitable but cannot survive without adequate cash.

Therefore a company should focus more attention on the credit function as its role affects the company profits ( in the event the sales become bad debt) and liquidity ( unable to collect in time to pay urgent payments).

Below is a summary of the roles or functions of credit management:

• To contribute to the company’s growth and profits by managing the company’s second largest assets namely the trade debtors or trade/accounts receivable,
• To facilitate sales growth without increasing the risk potential of accounts receivable,
• To think proactively to “save” potential sales in relation to those marginal case customers using alternatives like personal guarantee, corporate guarantee, letter of credit to fulfil the order,
• Approval of New accounts based on the financial strength, payment history and risk potential,
• To determine credit limit and credit term,
• Collection of due or overdue accounts,
• Liasing with the debtor’s ledger department to ensure up-to-date debtors informations are available,
• Answering promply and accurately pertaining to customer queries relating to invoices, statements, payments, credit note by liasing with the debtor’s ledger/sales processing department,
• To assist in the prompt follow-up on deliquent accounts,
• To ensure prompt and properly executed legal action taken on deliquent accounts,
• Assist the treasurer to plan for its cash flow and cash management,