Dear Crabby,
I’ve been reading your column for several years and have always valued your advice, but I never thought I would actually need to write for myself. Let me start from the beginning.
I have been working at my company for almost ten years. We are a mid-size electronics distributor and have customers all over the world. When I was hired, I was the company’s first credit manager and before then, the credit function was managed between the sales and accounting departments. With almost 15 years of prior credit risk management experience under my belt, I immediately went to work to establish, maintain, and continuously improve our credit functions, controls, tools, and system.
Some of the notable accomplishments include:
Created and implemented a full-scale credit policy – For the first time the company had a written road map of how to maximize sales safely while minimizing the risk of selling on credit.
Implemented an on-line application portal – This not only enabled customers to onboard more easily, but the data also facilitated:
- linking to the credit bureaus and easily obtaining credit reports and other information
- contacting bank and trade references and
- verifying other details to confirm credit worthiness
Established a credit scoring model – By digitizing the credit application data on new customers, as well as payment history on existing customers, we were able to feed this data into a credit scoring model which helped to assign how much credit to provide to our customers.
Trained sales on how to be credit sleuths – As I accompanied our sales team members on customer visits, I pointed out what to look for while at the company. Are there employees who look busy and motivated? Are the phones ringing? Is the place orderly or disorganized? These were just a few of the non-financial details that can tell a lot about a customer’s viability.
Trained our staff on effective collection techniques – Having worked successfully in third party commercial collections for five years, I was able to use that experience in training our staff on effective collection techniques.
Integrated our collection system with a 3rd party collection provider – We created a secure and restricted link from our accounting system to our 3rd party collection provider’s system. This eliminated delays in transferring past due accounts and provided real time access to each account’s collection status.
Brought DSO down to under 30 days – I should mention that when I arrived on the scene, DSO was close to 50 days. The problem was that sales was often too generous in granting credit in order to incentivize customers to sign on. Gradually, by offering normal terms of 30 days to new customers and requiring certain existing customers to adhere to the same time frame, the DSO came down significantly.
Offered various payment methods – For customers who purchased less than $1,000 once or twice per year, purchases by credit card were required. This in turn also greatly reduced our DSO which used to include a voluminous number of outstanding small balance accounts.
Demonstrated how the credit department was contributing to company profits – With all our automation and system improvements, we greatly lowered the cost of the credit department by over 40%, saving the company hundreds of thousands of dollars per year.
And many more.
So now, perhaps you are thinking that with all of these accomplishments, I should be getting a Nobel Prize in credit risk management. Sadly, and even shockingly, I was informed a few weeks ago that the credit department function is reverting to the management of the sales and accounting departments.
I have not only expressed my dismay to our executive management, but also my disappointment for not being considered for at least another position at the company. Although they hugely appreciate my excellent contributions, they claim they are trying to only downsize and streamline the company in all departments and aspects.
Honestly, I feel completely lost with this outcome. What should I do?
Signed: Feeling betrayed
Dear Betrayed,
My heart goes out to you.
You had mentioned that their goal is to streamline and downsize the company in all departments and other aspects. Maybe this is true across the board or maybe it’s only applicable to your department, especially since there was a history of credit being under the control of sales and accounting.
Either way, I foresee problems on the horizon, especially if sales is given more of a free rein in making credit decisions. You may have improved the credit department to the extent that they feel it can run on auto pilot, but I believe that after you are no longer there, your talents, perseverance, and creativity will be sorely missed. In particular, there will be credit situations that will require your level of experience and expertise. Moreover, the notion that decentralizing the credit function between two departments will make it more efficient, seems counterintuitive to me.
After you give yourself a little more time to process this big change, please understand that there are an endless number of companies out there that need someone just like you. Someone who can set up and develop a credit department just as you have done. I have seen many credit risk management positions available on LinkedIn and I know that in a very short period of time, you’ll be back in the ball game hitting many more credit home runs.
You have a lot to offer!
Please keep me up to date as to what happens.
Dear Crabby is a credit, collection, and human resources advice column by Nancy Seiverd President CMI Credit Mediators Inc. Your thoughts and comments (nseiverd@cmiweb.com) are most welcome!
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