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Credit Granting and Collecting

It is estimated that literally tens of billions of dollars in delinquent commercial credit is currently being carried on the books of both American and international businesses. This figure fluctuates as our economy expands or contracts. Increased competition, diversification of product lines and/or governmental pump-priming to industry all seem to indicate, however, that these figures will continue to move upward. Regardless of the state of either the national or international economy, the necessity to grant credit and to collect receivables using professional methods remains important to all businesses.

Volume of Credit Sales Are Significant
Most commercial companies sell about two to five percent of their products for cash. The credit department is responsible for the other 95 to 98 percent of the goods and/or services sold. Businesses have varying percentages of their liquid financial resources tied up in receivables. Actual losses might range from one-half of one percent to five percent of sales without serious results. This depends on mark-up for profit and other factors. Losses can grow to significant sums very rapidly if not controlled by the credit manager.

Accounting and Finance Knowledge is Needed
Knowledge of accounting and finance, along with tact and foresight in customer relations, are qualities that characterize the professional commercial credit manager. You should have some background in accounting in order to evaluate financial statements submitted by prospective customers. You should have additional financial background or training so that you can estimate risk factors, company profits and recovery rates. In this capacity, you must be knowledgeable about the cost of money outstanding and its value to your employer.

Good Customer Relations Are Important
You and your department must also be attuned to customer relations. This quality is absolutely necessary in order for the company to prosper through growth. It is very easy to say "no" to prospective customers, and it is very easy to firmly demand payment. But, if this attitude raises havoc with sales, then the credit department is not performing its complete function, which is to create a balance between sales and recovery of money. The job of the credit manager is an important position in industry. Because your effectiveness is crucial to the success of your company, management will seek help from the credit manager when making important business decisions.

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