In short: credit management is the management of accounts receivable. It minimizes the risk of nonpayment and protects cash flow by ensuring that invoices are paid on time.
- Before the sale: assess the customer’s creditworthiness;
- During the relationship: follow up on disputes and payment plans;
- In the event of non-payment: initiate collection proceedings;
- Next: DSO, credit scoring, late payments, accounts receivable, and working capital needs.
Credit Management
Contents :
- What is credit management?
- What is the role of a credit manager?
- What are the key credit management indicators?
Every business relationship has its share of difficulties. Some companies take out a customer receivablei.e. the non-recovery of a customer invoice.
The credit management ensures the proper financial management and covers the entireOrder to Cash. This cycle covers all tasks from the delivery of a product or service to the balance of the invoice. invoice balance.
To put it more simply credit management aims to collect sales avoid cash shortages and reduce DSO. reduce DSO.
What is credit management?
Credit management is the management of customer receivables of a company. This practice originated in the United States. It is becoming increasingly popular in France. Due to the customer risk which has increased in recent years. Its main aims are to monitor cash receipts.
Une bonne gestion inclut :
- Monitoring customer compliance with terms and conditions,
- L’évaluation des risques liés au délai de paiement,
- Conditions for amicable collection,
- Recovery methods,
- Monitoring deadlines,
- Les modalités de paiement,
Credit management aims to minimize the risk of default and maximize cash flow.
All the while ensuring that invoices are paid on time.
What is the role of a credit manager?
The role of a credit manager is to monitor :
- Negotiation of payment plans for collections,
- La gestion des relances clients,
- Le suivi des litiges de paiement,
- Customer evaluation,
The credit management is therefore involved both upstream and downstream of the customer relationship.
Before each business relationshipit is involved insolvency analysis to avoid unpleasant surprises and unpaid bills. He defines a type of customer and applies the best contract and payment terms according to your needs.
This requires an excellent ability to analyze and synthesize information, a good knowledge of accounting, and a close relationship with the sales department. relationship with the sales department.
During the sales cycle, he ensures that invoices are paid on time. He reminds customers if necessary. And initiates a collection procedure in the event of payment default.
This phase requires great diplomacya sharp mind for negotiationand great empathy as well as relationship with customers.
What are the key credit management indicators?
To improve financial management, the credit manager must monitor a number of KPIs:
- Visit DSO. This is the average customer payment time. Cet financial indicator is used to measure the speed with which a company is able to collect receivables from its customers.
- Profilingprofiling. In other words, establishing a type of contract and a payment term based on the creditworthiness of the client company. This is also known as company scoring.
- Visit late payments. This is the number of days after the due date stipulated in the clauses of a contracta customer company takes to honor an invoice.
- Visit outstanding invoices. This is also known asoutstanding receivables. C’est le montant total des créances client, à savoir la total amount owed by customers to a company.
- The working capital requirement. This is a company’s key resource. Its purpose is to cover the financial need resulting from cash flow mismatchessuch as late payment or outstanding invoices.
The credit manager can rely on collection software in his daily tasks.
Aston Ai helps you track your customer relationships both upstream and downstream. The collection CRM offers you an intelligent agenda. Sorting between priority actions and mass processing enables over 80% automation. Particularly for dunning/collection tasks.
Avec Aston AI vous vous concentrez sur les tâches à fortes valeurs ajoutées.
Essential help for every credit manager who wants to monitor key financial management indicators management.
See also: Aston AI’s support for credit managers and the credit manager white paper.
Frequently Asked Questions About Credit Management
What is credit management?
It refers to a company’s management of accounts receivable. Its goal is to minimize the risk of nonpayment and maximize cash flow by ensuring that invoices are paid on time.
What is the role of a credit manager?
He assesses customers’ creditworthiness before a sale and then follows up on payment reminders, disputes, and payment plans. In the event of a payment default, he initiates the collection process.
What metrics should you track in credit management?
DSO, customer credit scoring, late payments, accounts receivable (unpaid invoices), and working capital requirements.
Can software help a credit manager?
Yes. Debt collection software like Aston AI offers a smart calendar and automates more than 80% of follow-up tasks. The credit manager can focus on high-value cases.
