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 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 increasingly popular in France. Due to the customer risk which has increased in recent years. Its main purpose is to monitor cash receipts.
Good management includes :
- Monitoring customer compliance with terms and conditions,
- Assessment of payment risks,
- Conditions for amicable collection,
- Recovery methods,
- Monitoring deadlines,
- Payment terms and conditions,
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,
- Customer reminder management,
- Follow-up on payment disputes,
- 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 possible non-payment. It defines a customer type 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 business relationship cycle, he ensures that invoices are paid on time. He reminds customers if necessary. And begins 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. This financial indicator is used to measure the speed with which a company is able to collect receivables from its customers.
- Profilingprofiling. In other words, we establish a type of contract and a payment term based on the customer’s creditworthiness. 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. This is the total amount of trade receivables, i.e. the total amount owed by customers to a company.
- The working capital requirement. It’s a company’s key resource. Its aim 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. Collection CRM offers you an intelligent agenda. Sorting between priority actions and mass processing, enabling over 80% automation. In particular, dunning/collection tasks.
With Aston AI, you can concentrate on tasks with high added value.
Essential help for every credit manager who wants to monitor key financial management indicators management.
