Fluency in Finance: Learn to Speak the Language of Credit Managers

Learning a new language requires patience and practice to fully grasp its nuances. It is a form of communication with words, abbreviations and symbols to relay meaning. Even simpler abbreviations such as EOD (end of day) or WFH (work from home), acronyms simplify communication and present a sense of belonging when using the terms correctly—especially in your workplace. Credit professionals across all industries have their own abbreviations or terms to use relative to their department and customers, but some terms are universal—and every credit professional should have an idea of what they mean.

As technology continues to become more prevalent in the credit industry, automation has shifted the focus to a few new abbreviations such as EDI (Electronic Data Interchange) and ERP (Enterprise Resource Planning). EDIs are the concept of exchanging business documents through a standard electric format, while ERP [systems] is a software platform that provides features such as accounts receivable, accounts payable and payroll, and other modules such as tangible and intangible assets.

Learning new phrases, abbreviations or acronyms ties back to knowing the language of credit. Just like learning any other language, you must start off with understanding basic rules involved with the message that is trying to be conveyed. However, some abbreviations can be tricky because they look the same. For example, an LC (Letter of Credit) is different than a LOC (Line of Credit). Some credit professionals use LC as an abbreviation for both terms, even though they have two different meanings.

“There are a lot of acronyms we have when it comes to financials specifically,” said Kevin Stinner, CCE, CCRA, credit manager at J.R. Simplot Company (Loveland, CO). “Basic terms like LCs or AR (accounts receivables) are things a credit professional should know right off the bat so they can properly evaluate credit. But as you are in the industry for longer, you also need to start thinking of other things that may come up in collections.”

Another common acronym you may see on a credit reference is PA (paid as agreed), especially in the banking industry. It’s an important term to know because it shows if a customer has the ability to pay the bank and potentially pay you as the creditor. In the collections side of credit, there are usually collection notes left for credit managers about customers in order to be prepared and know how to address them. PIF (paid in full) and SIF (settled in full) are two common abbreviations that come up in these notes. “SIF is a key term to pay attention to when reestablishing a line of credit to a customer,” said Stinner. “I’m more likely to do business with a customer who’s PIF than SIF because SIF implies that the account was not paid in full but rather negotiated to some type of settlement which was less than the full amount.”

Beyond acronyms alone, there are a couple of common phrases or expressions credit professionals have heard or refer to. Scott Chase, CCE, CICP, global director of credit at Gibson Brands, Inc. (Nashville, TN) said he likes to refer to the saying, “You can’t squeeze blood from a turnip.” In the context of credit, it means you can’t get payment for a bill from someone who doesn’t have the capacity to pay. “The whole credit industry has become very acronym-oriented whether it’s BPDSO (best possible days sales outstanding), CIA (cash in advance) or COD (cash on delivery),” Chase said. “I tend to look at this as being more of a sensitive issue when we’re talking about terms of sale, but as we look at things generationally, some terms are no longer as valid and it’s comparative to the changes in the world and how we’ve done credit over the last several years.”

Some terms may not translate when talking to your sales team. Certain phrases, statements or acronyms in credit may mean something completely different to them. “The phrase that I have always liked is when a salesperson says a customer has never not paid us,” said Stinner. “And while that may be true, they never have paid either. That’s code to a credit manager that the customer never will pay us.”

Though most terms and acronyms in credit are related to their description or relation to customers, some credit professionals think understanding acronyms in credit for designations are just as important to be knowledgeable about in the industry. “If I’m hiring a credit person, it’s important for me to know that they know what a CCE (Certified Credit Executive) is,” said Kenny Wine, CCE, director of credit at Joseph T Ryerson & Son, Inc. (Little Rock, AR). “As a credit professional, someone new to the industry could miss an opportunity by not knowing what that designation holds and entails because it all ties back to credit.”

Every industry has their own language and way to communicate amongst each other—and knowing what that language means shows your understanding of what you do in your industry. “If you’re just new to the industry, you’re going to have to do some form of collections being in credit, so you must know the universal collection note acronyms,” said Stinner. “It’s our own little language we all understand and speak.”