Tag: Credit

Those in credit management know the feeling of dread that comes from a slow-paying customer, or the anxiety sparked by a customer who doesn’t pay at all. Troublesome payment habits can weigh on credit professionals, but they also prompt an important question: when is it time to pursue legal action?

Even after checking every box—financials, references, payment history—there’s always that lingering question for every credit manager: What if? What if the customer fails to pay? What if circumstances suddenly change? For moments like these, letters of credit and bank guarantees aren’t just optional—they’re essential tools to protect a company in an unpredictable world.

Not every customer has a perfect credit score or strong balance sheet, but that doesn’t mean they aren’t worth doing business with. Marginal customers often stand in a gray area: high potential, but higher risk. The challenge is to identify whether open, unsecured credit can be extended to a marginal customer or whether other tools must be used to create guardrails around the transaction.

When most people think of a credit professional, they picture someone focused on collecting payments and monitoring customer balances or credit scores. In reality, the job extends far beyond credit and collections. From negotiating terms and managing customer relationships to training and developing their teams, credit professionals juggle many responsibilities. The higher their position, the more hats they wear.

Working in credit brings new challenges each day, whether you are deciding on the ideal credit line for a risky customer or analyzing complicated financial statements. With the role of credit managers expanding each day with new responsibilities, outsourcing tasks within the credit department can be a key part of the risk mitigation strategy.

No other department’s work impacts the day-to-day of the credit team quite like the sales department. As the credit team works to mitigate risk by carefully considering the possible ramifications of each transaction, they rely on the sales team to bring in customers. The work of each department is inextricably tied to the other, so it is only natural that sales would be credit’s closest ally when advocating for system upgrades.

Extending credit is, in many ways, a calculated risk. You’re relying on your customer’s ability and willingness to pay on time, if at all. But smart credit professionals don’t move forward without clarity. By analyzing a customer’s financials, they get a clearer view of the hand they’re being dealt to make more informed credit decisions. But what happens if a customer refuses to share financials?

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.