Credit and an attitude

The role of Credit management and its impact on growth and profitability was not often lauded but recognised nonetheless, even in businesses where the profile was low, buried often in the bowels of finance or commerce. In recent years however, its ascendancy and rise in both prominence and importance has been dramatic, more so in some Industry Sectors than others and it can be argued the Electronics and IT sector have been a major influence, and this merits some thought.

Credit has a primary responsibility for the largest asset a company has, its trade receivables or debtors. It impacts greatly not only in terms of who or when a business trades with and to what level, but also the terms on which business will be transacted. It is essentially involved in the full cycle of a sale transaction from the cradle to the grave. It assesses clients prior to the commencement of trade and during the entire life cycle of activity ensuring optimum sales effort and management of cash, the life-blood of a business.

In recent times, the role has extended, embracing broader commercial responsibility and indeed customer service. The latter is easy to understand given regular and frequent contact with clients in relation to trade and dispute resolution, all key factors in the management of receivables and cash. It is also true to say that continuity in client relationships are more stable than those perhaps held with sales as change and churn rate in that area is invariably high over a trading life cycle.

To be successful in Credit Management and more specifically Distribution, one needs to fully understand not only the business, needs and aspirations of the company, but also the market in which it operates, its fluctuations, pressures and opportunities and more importantly its suppliers and clients. Only through objective wider fields of vision can Credit readily contribute to growth and profitability and indeed lead the client relationship and the sale itself on many occasions. This is an extremely new challenging and exciting development for those engaged in Credit Management.

Being labelled singularly as a debt collection function or robotic credit assessor and provider is no longer an option. Sales creation and opportunity as opposed to sales prevention must be a priority. Sitting alongside and occasionally between a free spirit of sales and more reserved and austere finance activity requires great skill in balancing the needs of both sides and this simply cannot be achieved without greater knowledge, a sense of detachment perhaps and a wider understanding of business affairs.

The Electronics and IT sector, even before the pariah of the dot-com era had begun to shape and determine the role of Credit. The sheer pace of technological development and demands made of Distribution by this market meant traditional routines were no longer good enough. Credit was forced to raise its head above the parapet and get involved or face the consequence of burying its head in the sand. They essentially had to come and join the party, bring a bottle or two and contribute.

This was quite a transition and led to situations in which a credit face was more frequent or consistent in client doorways. Getting to know clients and understanding their peaks and troughs has become the norm. Credit has and always will be a valuable commodity and the ability and willingness to provide it is greatly enhanced by much closer working client relationships. This is a sector in which a Director may approach a Credit contact for guidance, support and indeed ideas on how to best move their business forward. Good Credit contacts can and should influence their clients, more so when there is a need to enhance profitability and growth; the net result is increased business activity, growing respect, understanding and mutual dependence.

The pressure on credit availability may be less but accumulated debt, rising interest rates, suppressed hardware volumes and moves to services will all present their share of problems in future years. The demand on Credit Management during this period will be even greater but the Channel can derive considerable comfort in the growing specialisation and refinement of Credit Management in Distribution.