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Credit management is the process of granting credit, setting the terms on which it is granted, recovering this credit when it is due, and ensuring compliance with company credit policy, among other credit related functions. The goal within a bank or company, in controlling credit, is to improve revenues and profit by facilitating sales and reducing financial risks. A credit manager is a person employed by an organization to manage the credit department and make decisions concerning credit limits, acceptable levels of risk, terms of payment and enforcement actions with their customers. This function is often combined with Accounts Receivable and Collections into one department of a company. The role of credit manager is variable in its scope and Credit Managers are responsible for: *Controlling bad debt exposure and expenses, through the direct management of credit terms on the company's ledgers. *Maintaining strong cash flows through efficient collections. The efficiency of cash flow is measured using various methods, most common of which is
Days Sales Outstanding In accountancy, days sales outstanding (also called DSO and days receivables) is a calculation used by a company to estimate the size of their outstanding accounts receivable. It measures this size not in units of currency, but in average sales da ...
(DSO). *Ensuring an adequate Allowance for Doubtful Accounts is kept by the company. *Monitoring the Accounts Receivable portfolio for trends and warning signs. *Hiring and firing credit analysts, accounts receivable and collections personnel. *Enforcing the "stop list" of supply of goods and services to customers. *Removing bad debts from the ledger (Bad Debt Write-Offs). *Setting credit limits. *Setting credit terms beyond those within credit analysts' authority. *Setting
credit rating A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business, company or a government), predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting. ...
criteria. *Setting and ensuring compliance with a corporate credit policy. *Pursuing legal remedies for non-payers. *Obtaining security interests where necessary. Common examples of this could be PPSAs, letters of credit or personal guarantees. *Initiating legal or other recovery actions against customers who are delinquent. Credit managers tend to fall into one of three groups depending on the specific legal and jurisdictional knowledge required: # Commercial Credit Manager # Consumer Credit Managers # Construction Credit Managers


Professional Organizations


Australia

Credit managers in Australia obtain memberships from the Australian Institute of Credit Management (AICM). Qualifications and continuing education can also be obtained from here.


Canada

Credit professionals in Canada can obtain the official designation,
Certified Credit Professional Certified Credit Professional (CCP) is the Canadian designation awarded to professionals in the credit management field by the Credit Institute of Canada (CIC). A CCP designation holder is a member of the Credit Institute of Canada and is boun ...
- CCP (formerly known as the Fellow Credit Institute — FCI), from the
Credit Institute of Canada The Credit Institute of Canada (CIC) (french: Institut de crédit du Canada) is a not-for-profit organization created by a special Act of Parliament on June 11, 1928. The CIC provides credit management resources, education and certification to it ...
.


France

Credit professionals in France can obtain memberships, continuing education and certification through the French Association of Credit Managers, called Association Française des Credit Managers AFDCC.


United Kingdom

Credit managers operating within the United Kingdom can obtain accreditation from the Chartered Institute of Credit Management, called the Chartered Institute of Credit Management from 1 January 2015 after it was granted a Royal Charter.


United States

Credit managers in the United States can obtain memberships, continuing education and certification through the National Association of Credit Management. Certification levels include Credit Business Associate, Certified Credit and Risk Analyst, Credit Business Fellow, Certified Credit Executive, Certified International Credit Professional and International Certified Credit Executive.


Construction Credit Management

Construction Credit Management is considered an area of specialty as it encompasses some specific skill sets: 1) Strong knowledge of security and lien law within your province, state or territory, 2) The ability to understand how money moves through the construction pyramid, 3) People skills that go beyond traditional credit management in that the credit manager may be required to deal with Managerial and non-managerial staff of both the white and blue collar variety, 4) A basic knowledge of construction and the willingness to make site visits if needed.


See also

* Accountant * Bookkeeper * Billing * Credit assistant * Credit analyst *
Director of credit and collections A director of credit and collections is a senior-level employee in an organization's credit department. Job responsibilities may include: * Overseeing credit and collection functions * Hiring, firing, evaluating and promoting credit department emplo ...


References

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Credit Risk Management - Code of Best PracticeChartered Institute of Credit Management website
Banking occupations