Top Service News
Credit Management – Vital For Success
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According to a recent survey conducted by Top Service Ltd, 85% of individuals employed in credit management did not initially plan for it to be their chosen career path. A significant number of individuals working in credit management express feelings of being undervalued. In some cases, they believe that the sales function within a business receives more acknowledgment and appreciation, despite the fact that the challenges of reducing risk & maintaining cash flow are equally demanding.
Emma Reilly FCICM, CEO at Top Service Ltd explains why credit management is so important for businesses of all sizes.
Maintaining Cash Flow
One of the primary reasons credit management is essential is its impact on cash flow. To ensure a continuous flow of cash, it’s crucial to strike a balance between offering credit to attract customers and collecting payments promptly. Effective credit management helps businesses anticipate and manage their cash flow, allowing them to meet their operational and financial obligations.
Reducing Financial Risk
Every business faces the risk of non-payment or late payments from customers. This risk can increase with a lack of effective credit management. By implementing a robust credit management system that includes credit checks and setting appropriate credit limits, a business can reduce the risk of financial losses due to non-payment.
Recognising the initial indicators that a customer is facing cash flow challenges can significantly reduce your financial exposure in cases of insolvency. In the current economic climate, insolvency rates have reached unprecedented levels, making the reduction of financial exposure a pivotal aspect of credit management. Access to the best credit management tools to highlight early warnings & and the ability to react appropriately, without doubt results in less debt & more cash for your business.
Improving Profitability & Building Strong Customer Relationships
Proper credit management can also have a direct impact on a company’s profitability. By collecting payments on time and reducing exposure to bad debts, a business can maintain healthier profit margins.
Credit management is not solely about collecting payments; it’s also about building and maintaining strong customer relationships. When customers feel that their payment terms and credit limits are fair and flexible, they are more likely to remain loyal to your business. Effective credit management strategies can help strike a balance between financial prudence and customer satisfaction, fostering goodwill and trust.
Supporting Growth
Effective credit management can also support a business’s growth. By managing cash flow and reducing financial risk, a company can reinvest its profits into expanding operations, launching new products, or entering new markets. With strong credit management practices in place, businesses can better position themselves for long-term success.
Emma comments “One positive outcome of the 2019 pandemic was the shift in focus towards cash management. During this period (at the very least at the initial stages), selling activities were largely halted, trade counters closed, and sales representatives were unable to travel. As a result, the spotlight turned to the essential functions of collecting payments, bringing greater attention to the contributions of the accounts teams, credit controllers, and credit management functions. It’s my hope that the credit management function of a business continues to be celebrated and recognised for its contribution to business’.