One of the jobs credit controllers spend a lot of time doing is “releasing orders”. In fact it is a task that is not even questioned anymore because it is so much part of the working day. Well I am going to question it! Why are you doing it? The only reason an account should go on hold is if the customer is either over the credit line set for the account or they are exceeding the number of days permitted. For each class of customer, depending on the risk category, you should build in a tolerance level showing how many days beyond terms you are prepared to let the customer go before you stop supplies or withhold service.
So, if these rules are being applied, the job of the credit controller should either be to review the amount of the line of credit, the customers risk category or the tolerance allowed.
If this important task is not completed on a daily basis in favor of releasing individual orders, then the problem will persist and what is even worse, the number of orders will eventually get out of control.
The function of management is to ensure that proper controls are in place and in my experience this is not always the case. In fact some don’t even keep logs of what orders were released or why. Anytime you constantly override your system you are losing control.
To maintain control of your exposure you have to have rules and stick to them. Of course there is a need for some flexibility in certain circumstances and credit control usually involves applying common sense in every situation. There are good reasons and downright lies and the role of the Credit Professional is to be able to differentiate between.
It is only when things go wrong, when a business closes or a company goes into liquidation that the senior management comes looking for answers and explanations. If an account goes with a balance exceeding the signed off line of credit then all concerned have very serious questions to answer.
My advice for what it is worth, spend less time dealing with the symptoms of a problem by constantly releasing orders and more time tackling the root cause and making better decisions every time. The alternative can be very expensive.
Irish Credit Management Training
121 Lower Baggot Street
M: 087 2447052
P: 01 659 9466
F: 01 659 9401
Declan Flood FIICM, Founder and Chief Executive of Irish Credit Management Training is a, renowned trainer, international speaker and author with over 20 years hands on experience in Credit Control and Credit Management with major Irish & International Companies.
He is a graduate of the IICM Education program and a Qualified Business Coach. He received his Qualification in Training & Development from National University of Ireland. He has been training in all aspects of credit management for many years, generating a sense of enthusiasm and urgency that has been experienced by all who have been through the training experience.