What skills credit managers possess in order to manage the credit function efficiently?
Credit Management: Credit management is the process of collecting and controlling payments from the customers. Credit management is one of the functions of the banks or companies to control credit policies, to improve the revenues and reduce financial risks (Burt, 2004). A good credit management system is an essential part of an organisation, as it reduces the amount of capital tied up with the debtors and minimise the company’s exposure to the bad debts and doubtful debts, it is also important when considering the cash flow, as it is profitable for the company, and also helps the business to continue its operation, without any fear of insufficient cash (Government of Western Australia, n. d.).
Credit Manager: A credit manager is a person who is employed in an organization to make proper credit related decisions, like setting credit limits, acceptable levels of risk and return, and terms of payment of the customers, and to manage and control credits to increase the revenue (Government of Western Australia, n. d.). There are many other skills and functions of the credit manager, as said that the role of a credit manager is variable in its scope, as the credit manager also manages all the credit service lifecycle related activities, and directs the other staff to increase the operational efficiency and service standards (Burt, 2004).
Responsibility of credit managers:
– Controlling bad debt expenses and exposure through managing directly the dredit terms of company’s ledger
– Efficiently carrying out collections to ensure maintaining strong cash flows.
– Imposing the ” stop list” of supply of goods and services to customer (Burt, 2004).
– Determining the credit ceilings.
– Setting up a credit-rating criterion.
– Developing and complying with a credit policy and legal requirements.
– Obtaining necessary security interests Common examples of this can be letters of credit or personal guarantees.
The main skills required in credit management:
In the credit management profession, a credit manager should possess a number of skills and attributes that are highly essential, and are valued by companies looking for credit professionals. Some skills are:
– Problem solving skills
– Creativity and innovativeness
– Technical skills and knowledge in areas of customer financial statement analysis and interpretation
– Excellent verbal and written communication skills (Northouse, 2010)
– The ability to manage and motivate subordinates and delegate the duties accordingly
– A track record of documented successes, rewards and achievements
– The skills and knowledge, needed to increase the effectiveness and efficiency of credit department’s without increasing costs (Bullivant, 2009)
– Shareholders wealth maximisation, cost minimisation and profit maximisation
– A commitment towards professional development, along with the growth of the organisation
– The maturity and understandings required to recognize the actual importance of the credit department, that it is a part of the organisation as a whole and not apart from the rest of the company and it must be committed to helping the company in achieving its sales and profit targets (Bullivant, 2009)
– The flexibility necessary in adapting quickly to the changing business conditions as well as to changing priorities.
– Awareness is the most important skill which is necessary for the business to run continuously (Bullivant, 2009).
The importance of technical as well as personal skills in the management of credit:
Technical skills and personal skills are important in management of credit. Making people do a certain task, or fulfil the company’s expectation needs skills. For example leadership skills are important in this aspect (Northouse, 2010). For example ‘ Self Esteem’ is when a person makes someone feel important, he gains their willingness to work for him, and improving self-esteem has some techniques, like asking advice, discussing subjects of importance, respect, showing interest or willing to listen when the other speaks, etc. A good listener is also important. Decision making, planning, motivating others, communicating between all the levels of management, control and discipline are few skills which are needed in the management process. As without any of this, the management process is incomplete (Northouse, 2010).
Assess the development opportunities available for credit professionals:
The Credit Institute of Canada (CIC), created by an act of parliament, in the year 1928 is a non-profit professional association. The Certified Credit Professional (CCP) Designation is awarded to the members of the credit institute of Canada, who have acquired the necessary education and job experience, this designation indicates that the individual has enough knowledge and skills which is required for the role of credit management (Official website of credit institute of Canada, n. d.). This type of education emphasises on the in-depth knowledge of credit management courses along with the core education and knowledge in economics, accounting, finance, law, communications, and management information systems. The CCP Program aims to provide the management skills in a role of credit management, and is generally delivered through distance learning systems having support from the internet based discussion boards, and in class rooms (Official website of credit institute of Canada, n. d.). This requires an experience of five years in credit position. CCP is a recognised designation. These programs are delivered in University of Toronto, McMaster University, Simon Fraser University, Southern Alberta Institute of Technology, Northern Alberta Institute of Technology, and in Fanshaw College.
The other membership and designations are Certified Credit Professional, CCP (Emeritus), Credit Specialist Certificate, CRSP, and Associate Credit Institute, ACI. Affiliate membership is also granted to the persons who are interested in the credit-related seminars, conferences, networking opportunities and the balance of membership benefits available to Credit Institute of Canada members (Official website of credit institute of Canada, n. d.).
Importance of organisational culture in credit management:
Organisational culture is important in credit management as lending opportunities for banks and other organisations have been on the rise in recent years which is needed to be managed effectively efficiently and systematically, utilising proper credit criteria. This is mainly necessary to avoid from being carried away by “ irrational exuberance” which evaporates when recessionsor depression occur (Colquitt, 2007). It is the need of the present situation that all banks must need to create a culture of prudent lending, which till date many of the banks do not appear to be doing. The failure of the few smaller private banks and a steady backlog of a heavily infected bad debt portfolio in the banking sector reinforce and strengthen the need for a much improved credit culture (Colquitt, 2007)`.
Burt, E. (2004). Credit management handbook. Gower Publishing
Bullivant, G. (2009). Credit management. Gower Publishing
Colquitt, J. (2007). Credit risk management. McGraw-Hill
Government of Western Australia. (n. d.). Credit management tips. Small Business Development Corporation. Retrieved from http://www. smallbusiness. wa. gov. au/credit-management-tips/
Northouse, P. G., 2010, Leadership: Theory and Practice. London: SAGE.
Official Website of the Credit Institute of Canada. (n. d.). Retrieved from http://www. creditedu. org/