Defining the Role of a Credit Manager

Credit managers are the link between customers and many other business functions such as marketing, sales, logistics, customer service, accounts payable and treasury. The responsibilities of a credit manager often overlap with the traditional roles in other departments.

Why it matters: Understanding the interconnectedness of the credit department with other business functions is critical for effective collaboration and ensuring a smooth flow of operations.

Treasury vs Credit

Traditionally, the treasury department oversees the management of money and financial risks in a business. Its priority is to ensure the business has the money it needs to manage its day-to-day obligations, while also helping develop its long-term financial strategy and policies.

The credit department is responsible for the management of accounts receivable. It is involved with the order-to-cash cycle from placement of an order to the collection of payment. Credit professionals gather and analyze all information available about a customer, which culminates in the best possible position to mitigate risk.

However, as businesses modernize, these two roles become more intertwined. Credit managers often find themselves in charge of tasks that would typically be handled by treasury—like cash flow forecasting and hedging.

This integration of responsibilities highlights the need for credit managers to possess a comprehensive understanding of financial management principles and techniques.

Other treasury-related functions that the credit department may manage include:

• Protecting and managing the investment in the accounts receivable portfolio.
• The timely conversion of receivables into cash.
• Financial analysis.
• Handling of collateral that secures a customer’s account.
• Deposit of funds and the relationship with banks.

Due to their shared responsibilities, for some companies, the treasury and credit departments work together closely to accomplish financial goals. “The credit team provides insights into customer creditworthiness, helping treasury manage cash flow effectively,” said Joshua Nolan, CCE, senior director of financial operations at PrePass (Phoenix, AZ). “We’ve fostered a symbiotic relationship where credit decisions directly influence treasury activities, ensuring a harmonious financial strategy.”

The size and structure of your company may determine how closely the credit department and treasury department can work together. For example, in larger companies, the finance or treasury departments manage working capital. In smaller or family-owned businesses, the owners or top executives often manage working capital.

David Webber, VP of credit at Capital Lighting & Supply LLC (Upper Marlboro, MD) said his company works with a lot of small businesses and does not report to the treasury department. “I report to the operating company president, which is a sales alignment,” Webber said. “Our credit department’s mission is to bolster sales by providing ample credit for all sales opportunities, while also mitigating risk and conducting financial analysis. Occasionally, this involves redefining acceptable risk and contract terms to facilitate sales. Thus, the role of credit is more akin to an art than a rigid process.”

Defining the Role of a Credit Manager

The complex nature of the credit profession, owing to its integration with other business roles, results in a variety of job titles. These titles can range from more general ones, such as order-to-cash manager, to more specific ones like accounts receivable manager. This diversity can potentially confuse new hires as they attempt to grasp their role.

To alleviate confusion, it is important for companies to clearly define the role of the credit manager and provide a comprehensive job description that outlines their responsibilities, including their involvement in treasury-related functions and the collaborative nature of their work with other departments.

For example, Vimal Patel, CBF, regional credit manager at OneSource Distributors, LLC (Oceanside, CA), said his title as a credit and collections analyst for a previous employer was misleading. “The word ‘collections’ has a negative connotation and from a credit department perspective, it makes us seem like we’re a collection agency, which we aren’t,” Patel said. “I believe eliminating ‘collections’ from job titles in credit streamlines our focus and allows for other credit facets. We aim to establish tiers in our credit department, where beginners can start as a credit analyst or representative and so on. No matter the level, we want to make sure people have the chance to progress within the field.”

Despite their job title, potential hires and seasoned professionals must understand their roles as a credit professional in a company to be successful. “What sets the B2B credit profession apart is the ability to balance the company’s fiscal health while maintaining solid partnerships with their customers,” said Nolan. “Credit professionals are not just gatekeepers of credit—they’re architects of trust.”

The bottom line: Understanding the diverse roles and responsibilities within the credit department and its integration with other business functions is key for attracting and retaining talent in the credit profession.