Get paid faster - and keep the customer!

Credit Management, Oct 2004

The management of trade and consumer credit is complicated. Getting paid faster requires the successful implementation of a series of events. Appropriate systems, risk assessment, exemplary cash collection skills, and an understanding of the legal issues all play their part, ICM trainer Mike Dixon FICM examines how a formal training programme is even more crucial to a credit department's success.

It is my conviction that one key factor handicaps our profession's aim to raise standards more than any other. In my 16 years as a trainer, I have yet to find a member of the credit fraternity who left school with an ambition to join the world of credit, in any capacity! Several thousand delegates later, I know that too many of us got into this thing by accident - sowing the seed for the lurking problem of standards, as well as individual performance and effectiveness. Only a worthwhile training policy can combat these issues.

It was back in 1988 that I first trod the boards as a trainer - and it wasn't a happy experience. Apprehension, fuelled by a belief that the delegates would be unwilling attendees, more knowledgeable than me, conspired to make it a less than confident debut. However 1 was soon to learn that my founding fears were unwarranted. Out there in 'Credit Land' was an army of untrained, but motivated staff, eager to learn how to be more efficient in their work. Today's delegates are no different. They too are eager trainees, anxious to give their employees, and themselves, the benefits of good training.

Like everybody else, I arrived in the world of credit by accident, but I had the good fortune to learn my trade under the watchful eye of possibly the most educationally aware credit manager of them all. Not for Burt Edwards the bland "a sale is not a sale until it is paid for... " No, in 'Burt speak' this motto became "a worthwhile sale is one that is paid for promptly... " And this was exactly the right kind of fine-tuning message that begins to get the business done. In my case, this outlook spurred me into a thoroughly enjoyable, and - dare I say it - successful, career.

For most of us, the accidental arrival into credit, without any prospect of formal training, leaves us open to On the job training', inevitably steeped in the current employer's routines, culture, and politics. Believe it or not, most of the delegates I meet, even the battle-hardened ones, believe that to ask a customer to pay on time is inviting them to take their business elsewhere! Quality third party training is a proven antidote to such beliefs - and the rewards on offer are potentially immense.

Back to basics

To consider the importance of the credit function we need to go back to basics. The primary reason for any business being in business is to make a profit, and if you want to make a profit you have to sell things, be it goods or services. Sales people are therefore very important. However, as we all know, there is of course the small matter of prompt payment that must occur if a profit is to be made from the sale. Step forward the credit department. The credit and the sales department are arguably the two most important functions within any business. The implications of getting either process wrong do not bear thinking about.

Credit management is easy to define. Whether we are talking about risk assessment, or cash collections, the art of influencing or persuading the customer to pay their account more quickly than they intended is crucial, as is retaining the customer. That is a difficult call, involving a number of communication and technical skills. It cannot be done without confidence, and that confidence follows good training.

A self-financing solution

A credit department can improve profitability by influencing one customer to pay an account just one day earlier. With effective training, that same department has the potential to ensure that a lot more than one account pays several days earlier. From my years in the industry and the results I have seen, the training of credit staff is demonstrably a selffinancing, practical, and effective route to better results, and higher standing in the organisation.

The 'accidental arrival' factor, and the lack of the follow-up training, has made it more difficult to achieve faster payment, largely because of the inherent lack of credibility. Over time, the Opposition' has learned that it is relatively simple to stall a justified request for payment. Most credit controllers, under the assumption that if they push the point they will lose, or at least antagonise, the customer, do tend to back off, no matter how irrelevant the excuse for delay. Those responsible for making payments do not therefore feel an enhanced obligation to satisfy an overdue debt immediately. Supplier accounts tend to be paid as and when the buyer's system dictates, rather than through unblinking acceptance of the supplier's payment terms. You don't believe me? Ask any payables staff!

Consumer or trade, there's no difference