Assuming that the basics of the credit department are ticking along, even if slightly less than satisfactory, these are the top ten things a new credit manager should do when starting a new role or acting as a credit manager for the first time:
1) Talk with Customers
When you have been in the role for a while it can sometimes be hard to do this is as much as you would like so make the most of the opportunities to talk with a broad spectrum of customers early on. Make sure they are not just the most important ones or key accounts as sometimes they may have different treatment than the norm. If you can get out to meet customers face to face then that can be great for understanding the business and theirs. Take phone calls where you can as not only will staff be relieved that you are making an effort to support them, it also puts you in the hot seat of dealing with issues as they arise, which in turn can be a great opportunity to change things at root cause. The way that customers are actually handled may differ from the way Team Leaders, Supervisors, and Other Managers think they are being handled so it is very powerful in my view to experience this first hand. Doing this early on in the job role is powerful too before you know this-is-how-things-work-around-here as you are likely to ask the most pertinent questions as this stage.
2) Get to grips with reporting
Data reports, analysis and evaluation is key to success. Understand where the bulk of the debtors are sitting within the sales ledger and look at this from all angles – age, value, demographic, industry, salesperson, collector, sales time period, marketing channel, distributor, branch/shop, dispute types, dispute values, and look at the number of invoices and customers as well as the values of invoices and customers. Use drill down techniques and cause analysis. If you need training and development in this area then get it! I firmly believe that reporting and analysis skills are an absolute must for successful credit managers. Directors of the board are not usually sympathetic to people who “don’t really do excel that well”!
3) Understand the sales process properly
By this I mean right from marketing plans (brand promotion, market segments and target audiences) right the way through to agreeing contracts and terms and conditions, placing the order, and the supply of services or despatch of goods. Most credit managers quickly realise that what they are dealing with in the sales ledger and collections processes is a “downstream impact” of what has gone on before within the sales processes. Be sure to look at areas such as what happens when things get busy, what corners get cut, or what workarounds are in place in the business.
4) Understand the big picture
Does the company have a mission statement? A 5 year plan? A vision? Properly understanding the planned direction of the organisation should shape the credit policy and your objectives as a credit manager, and in turn the targets and objectives of the credit department. This is the stuff that will make your boss look good if you align your goals with theirs, and it’s the stuff that wins pay rises or bonuses too! Hard work can sometimes be mis-directed so make sure you put your ladders up the right wall! If there are conflicting goals then talk with your boss about these early on for clarification. Seek clarification and guidance too from other divisional heads if you can on where the credit department can support their goals. This may be the way customers are treated, or any “touch points” relevant to sales and marketing. Understand how much it costs to acquire each customer and where the risks of losing them are in the credit department. A credit manager will be very unpopular if the credit policy does not support the overall business strategy and chances are the credit policy will get ignored as a result!
5) Understand the customer support functions
Customer services, complaints, and other operational units (shops, branches, repairs etc) as these could potentially act as “bottle-necks” for disputed debts.
6) Understanding the organisations people.
Don’t worry I am not expecting you to become a psychoanalyst, but it is important to understand how people are recruited into the organisation, and what their KPI’s or targets are. This is important as it drives the behaviour of those people. For example if a sales person is recruited, measured and rewarded purely on the basis of sales invoice values without any consideration for credit risk, bad debt, payment performance to terms, profit contribution or relationship management then it is an area to be aware of!
7) Develop your understanding of financial accounting
If you are allergic to numbers then you could find this painful but it is definitely on my list of things to understand unfortunately especially with regard to accounting practises for calculating debtor days, cash targets, cost of capital, provisions for credit notes and doubtful/bad debt, cashflow forecasts and budgets.
These are the things that measure the success of the credit department so it’s very important in my view to understand how this works and what things can effect the calculations and formulas used. The more these areas are understood, the more likely you will be able to identify how things in the credit department effect these numbers. Understand also how information is shared in executive and stakeholder reports. This can help to forecast for events impacting negatively on performance so it is not a surprise to people (execs hate surprises!). It can also be a good platform for a well needed pat on the back when things have gone well as useful to share as much as you are allowed with your team. It can be very motivational for top execs to be able to have conversations with your team members directly and give praise for something they have read in a report.
The last thing to mention about financial reporting and accounting is that this can be a very useful area to understand later on when it comes to building business cases for change and demonstrating return on investment. If you build up a good relationship with a FD/FC chances are they will be in a really good position to use their expertise to help you implement changes for the good of the organisation.
8) Prioritise and Communicate
For me these two go hand in hand especially in the early days so that as a Credit Manager you do not spend all your time fighting fires without making any real changes to prevent problems from reoccurring. To stop yourself from being pulled in all directions, it can be a good idea to prioritise initiatives by ROI and seek out views, contributions and support in a democratic way for the overall good of the organisation. Involving other people in this process is important too as they will know a lot more about their departments, processes, people and systems than you do and can help to get the initiative right from the outset, and it’s more likely to be supported by their bosses. Support on priorities as well as what needs to be achieved in the day job is key to setting expectations of things to come in the initial phases of a job role. Nobody likes ever-moving goal posts as it can cause impact on customers, staff and profits and it’s a horrible risk to have a project halted because the wheels have come off the track in the day job. If targets need to be reset whilst changes are in progress then get this support early on rather than have to explain a dip in performance as a surprise later!
9) Consider doing a Leadership course or getting yourself a coach or mentor
You need to be quite a strong character when you move into a new role to be able to listen to advice and opinions but form your own decisions and communicate these in a way that is well received and supported. Leadership courses can help with this but a coach or mentor can also be a great option. Don’t ever be frightened to ask for help as senior people don’t often expect you to know it all and they would probably rather you ask for help early on rather than when you have been in the role for a long time and ought to know better!
10) Measure and Review
Once you have set out the things you intend to do and have agreed your day to day objectives it is time then to measure your performance and seek regular reviews. As well as the hard financial facts or Key Performance Indicators make sure the review also includes the softer side of feedback from people such as your boss, his peers, your colleagues, your team, your customers, and your suppliers. Listen out for common messages and adapt accordingly. Don’t wait for feedback at a performance appraisal, ask for it as you go along either formally or informally but overall build up your self awareness of how you are doing in your new job.
Good luck!
