Business Practices Archive

The nature of credit and collections requires credit managers to always keep an eye out for risk on the horizon, whether it’s concern towards a customer’s persistent cash flow issues or a weariness towards extending credit in a country with growing geopolitical instability.  

Assessing a customer’s creditworthiness and deciding on a credit line that protects your company from risk without hindering profits is no easy task. When a salesperson is asking for a credit manager to complete their credit investigation quickly so they can close the sale, it is important that credit managers find a balance between speed and risk. 

After a period of strong growth in late 2023 and early 2024, the U.S. economy has shown signs of slowing. Gross domestic product (GDP) declined by 0.5% in Q1 2025, raising concerns about the country’s economic resiliency. Inflation rose to 2.7% year-over-year in June, up from 2.4%, while unemployment has remained stable between 4.0% and 4.2% since May 2024, according to the U.S. Bureau of Labor Statistics. Ongoing geopolitical tensions and regulatory changes continue to add uncertainty to the broader macroeconomic outlook. 

Sales and credit are two sides of the same coin, both aiming to grow the business, but from different perspectives. While sales focuses on closing deals, the credit team works to manage risk, ensuring customers are financially reliable and contract terms are sound. These different priorities can often lead to tension. 

Imagine a business thriving at the peak of its busiest season. Sales are booming, and the future looks bright, until their largest customer suddenly files for bankruptcy. Overnight, expected revenue vanishes and invoices go unpaid. Unable to absorb the blow, the business soon faces bankruptcy too, leaving suppliers unpaid and triggering a ripple of financial losses throughout the supply chain. 

As a credit professional, conflict comes with the territory of credit management; you can’t always avoid it. It becomes even more challenging when customers are being uncooperative or responding with aggression. In these situations, credit professionals can either react emotionally or take a strategic approach to work toward a solution that benefits both the customer and the business. 

Artificial intelligence (AI) has transformed how the world operates, integrating itself into nearly every facet of business. For credit departments, AI is being used to enhance email communication, draft demand letters, review contracts and even predict collection trends. As AI continues to evolve and expand across industries, many organizations are developing formal policies and procedures to guide its use. 

As economic uncertainty rises and markets lose stability, many companies anticipating cash flow issues will be looking for areas of the budget to slash to soften the blow. Discretionary funds, which can cover a variety of professional endeavors, from education to customer visits to professional development, are often the first on the chopping block when the economic outlook looks bleak.