Credit management is undergoing a real transformation. Traditionally, the credit professional has been seen as a referee in transactions. However, the gatekeeper function and making decisions for individual cases, are behind them. In fact, credit management is on its way to becoming a strategic growth function. The new, strategic credit team can be the mainstay for growth. With an abundance of data that spans the entire organization, the strategic credit team is a key player - and thus mainstay - that can identify new business opportunities and grow both net and gross revenues. Credit management has the potential to be a growth engine by accelerating sales and reducing risk as a supplier.
More and more, credit management is expected to support and meet the company's growth objectives. To meet those goals, credit teams must change their way of thinking. Is the credit role therefore threatened with extinction? Not necessarily, but credit management does need to reinvent itself in this complex and risky era. Fortunately, the credit leader has all the skills and tools necessary to evolve from a transactional credit professional to a strategic growth facilitator.
The changing role of credit management
When credit management has to act as a gatekeeper, growth stagnates. The credit department as well as other growth-oriented departments, such as sales, should have complementary goals: to generate revenue and increase profits. Traditional credit teams are responsible for reducing losses and risk. However, the new strategic credit team is responsible for both risk management and detecting new business opportunities. Credit management is uniquely positioned to help sales and marketing find new opportunities and profitable relationships.
Credit management and finance boost sales
Credit and sales teams working together drive growth. The new strategic credit team has financial information on payment behavior, profitability and risk of failure. These can be used by the sales and marketing colleagues to tap into new revenue sources and business relationships. Credit teams can drive growth by:
- Analyze their customer data to identify new business opportunities;
- Segment their data to describe the ideal customer;
- Increase reliance on automation to achieve more efficient decisions.
Better sales starts with your data. But a lack of integration of the information systems and databases of the credit management and sales teams limits the ability of the two teams to work together. Fortunately, there is a solution to this. If the credit department wants to boost sales, the data exchanged between the two departments must be centralized and enriched. Once this is done, the information must be linked. With linked data and information, sales can call on the insights of the credit management department to understand the lifecycle of their customers and identify those businesses and industries that will provide the greatest strategic growth. With data-driven credit analytics, credit and sales teams can maximize marketing investments and set the right priorities within the sales department. These include improving cash flow, shortening the sales cycle, building better customer relationships or generating more leads.
More growth through evaluation of supplier risk
Heightened international tensions and an uncertain economic future, make growth unpredictable. Companies are looking for new ways to increase profits and make their working capital more available. As with credit management, the goal of collecting outstanding accounts receivable and supply chain receivables is to manage risk, improve cost efficiency and implement optimizations. One way credit management can help procurement and supply chain teams is by being stricter on customer payment terms. If credit management can access the supplier's payment information, the purchasing department can establish a standardized payment term. This benefits the entire company. By standardizing payment terms, companies avoid having their working capital tied up and can invest it in more profitable activities.
"Heightened international tensions and an uncertain economic future, make growth unpredictable. Companies are looking for new ways to make more profit and free up working capital."
One of the traditional tasks of the credit department is to produce reports on expenses. An expense report usually focuses on historical payment behavior. By analyzing expenses, the credit team can have a direct impact by reducing purchase costs, improving efficiency, and controlling spending.
Credit management as a source of profitable growth
The credit team is an essential ingredient for profitable growth. By adopting the mindset of a strategic leader rather than that of a transactional referee, the credit department can uncover new business opportunities and become the spearhead of growth within the organization. With access to a wealth of data across the organization, credit management is uniquely positioned to provide other departments with the information, skills and insights needed to create new opportunities. By applying those same skills, credit teams gain a leading role in driving sales and managing supplier risk. The metamorphosis of the credit department will not only benefit its own customer portfolio, but change the way companies grow.