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Payment behavior facts in The Netherlands
What is Credit Management
Most people think that the Accounts Receivable or Credit Management department are the same. Unfortunately this is a common misconception. Credit Management is more comprehensive and Accounts Receivable is an important part of it.
What are the responsibilities of a Credit Management department?
The most important aspects of a Credit Management department are: sending out correct invoices, timely collection of open invoices, assessing credit risks, hold or release goods and maintain customer contact. With these tasks, a Credit Management department is able to ensure the continuity of cash flow.
A Credit Management department often oversees the entire Order-to-Cash (O2C) process and can therefore ensure that risks are already excluded before an order is placed and or products / services are sold. Think about a credit worthiness check upfront.
What good is Credit Management?
Within any organization, all roles and departments are important and add value.
Unfortunately Credit Management is often not (yet) seen as a separate department independent of the Finance department and therefore does not get the attention it deserves. Despite the fact that this department can make a positive contribution to the cash flow of an organization. And improving your cash flow means that there is more money to invest, pay vendors and / or repay loans.
But what about Credit Management as a tool for customer satisfaction?
Invoices often remain unpaid or get paid past due date due to incorrect invoicing, incomplete delivery of goods, or services that have not been provided. An active Credit Management department can track down such issues by pro-actively get in contact with their customers (even before an invoice gets due) and to solve such problems. Doing this pro-active will benefit in terms of customer satisfaction.
So as you see, nowadays a Credit Manager / Credit Controller is not just someone who processes invoices and call customers for overdue invoices. It’s someone that has commercial skills, customer orientated and of course has a financial background.