In Focus Commercial Credit
C-suite expectations of credit
This year will see a renewed focus on credit as a driver of profitable growth and faster cash recovery
Sam Dhingra AVP, solution engineering, HighRadius
www.highradius.com
Myopic perception of the credit department in the past We reached out to 100+ credit leaders from different organisations globally and asked the same question - “ what does your finance, sales, and other internal teamleaders think about the credit department” and Figure 1 shows some popular responses received. 'No news is good news' - it is a view of the
credit team shared by most senior executives with a sales background in the past. However, with an unexpected economic downturn in 2020, most organisations realised that credit teams hold the potential to do a lot more than number-crunching and updating spreadsheets. Credit's has changed from a back-office
function, limited to assessing customers' creditworthiness on spreadsheets, to something much more strategic. They must manage risk management while supporting working capital optimisation and enabling sales growth.
Credit departments are challenged to prove greater value in a volatile economy Credit teams have long played a crucial role in helping their companies avoid unnecessary
risks by providing clear-eyed analyses of prospective customers, managing risks, and collecting payments from existing buyers. But as corporations face increasing pressure
to reduce costs and find new sources of revenue, the credit department, like every aspect of the business, is under pressure to demonstrate increased value to the company's bottom line. It is not enough for credit departments to act as gatekeepers to prevent bad credit decisions; they are also expected to support company efforts to expand sales and meet growth targets. Today, leading credit teams are trying to
change this myopic executive perception while commanding tremendous leadership respect. They are collaborating with sales and FP&A teams and contributing towards cautious and profitable growth of their organisations, even in a volatile economy.
Credit can drive profitable growth by mitigating risk in real-time, onboarding customers faster and identifying sales opportunities In 2020 alone, according to the latest survey report by Forbes, 130 major companies filed
Figure 1: Perceptions from finance and sales of the credit department
for bankruptcy. This includes discount retailer Century 21 and Chuck E. Cheese’s parent company, CEC Entertainment. To handle events like these, short-term contingency methods like ensuring the credit team spends more and more time analysing credit data, increasing the number of customer reviews, or blocking more orders, using the same traditional processes, tools, and resources, are not sustainable or practical solutions. The credit management process needs a
reliable and long term solution to defend their capital during volatile times and ensure risk mitigation is based on real, current data. Revenue growth functions are also supported and efficient enough to facilitate smooth operations, even under duress. This requires: l Discarding outdated credit strategies and scoring methods l Laying a scalable and standardised digital foundation across all the credit operations l Optimising the credit evaluation process and credit approval workflows l Having real-time visibility into changing financial health of all customer portfolios, risk indicators and key performance indicators. According to our latest Automation Survey in
March 2020, two-thirds of respondents said their organisations have already implemented or are in the process of piloting automation in their credit and collection process. Today, credit teams are spending more
time studying their customer portfolios to truly understand what cash flows might look like to support working capital optimisation. They are now sought out as sources of insight and knowledge, becoming advisors for both sales and finance departments. For identifying the right commercial
opportunities, credit managers are analysing information from different credit bureaus
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www.CCRMagazine.com February 2021
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