Accounts Receivable is your company's working capital lifeblood. During economic downturns, credit management becomes an even more essential function. It is likely to be a top priority for senior management. This is the time for credit managers to broadcast their value and exercise their professional skills.

Here are five tips on how you can maximize your critical contribution:

1. Increase Communication with top management, sales, other internal stakeholders, and customers.
   • Keep everyone aware of the risks related to payment delays or potential bad debts
   • Be sure that your customers understand what is needed to maintain a steady product or service flow
   • Emphasize internally and to customers the importance of keeping you informed of any potential issues

2. Leverage the Knowledge of Those Having a Direct Relationship with Customers.
   • Sales Management and Representatives, Program or Project Managers, Operations, and Customer Service staff all have direct relationships with your customers. They can be your eyes and ears, providing valuable information and early detection of issues that will affect prompt payment to terms.
   • Attend their team meetings. Make sure that they understand the value of what they know and how it would help you in anticipating risks and in understanding issues driving payment deterioration. Provide them with useful trends and customer status information.

3. Review Your Credit Policy and Procedures:
   • Make sure that your due diligence process, credit approval standards, and customer payment tracking match the current potential risks.
   • Check to see that actual procedures and practices are consistent with the written policies and procedures.
   • Make sure credit and collection staff are well versed in the policies and procedures?
   • Look for areas where additional skills training may be needed.

4. Make Sure Credit Reviews are Current:

• • Ask for Current Financials from customers, particularly those with large exposures. Review financial statements carefully to find potential risks
  • Even though business travel is limited, use all means available to connect with customers when you notice changes in payment patterns and red/yellow flags on their financials. It is a good practice to have regular connections even if you don't observe any risks. In these connections, review trends and forecasts, and ask clarifying questions if there are any inconsistencies.
  • Obtain current trade payment experiences and trends from public sources and industry peers.
  • Look at payment trends outside your own industry. You may find payment trends to core suppliers are more favorable than smaller, less important ones. This could be the first indication the company is closely managing cash. Be aware that disruptions in your customer's supply chain could rapidly cripple their business.
  • Look for material suits, new liens, or even judgments against the customer.
  • Understand your customer's customer. Assess the risk in their customer base.

5. Proactively Negotiate Risk Mitigation Collateral or Security:
   • Don't wait until the large order is on your desk.

By taking these five steps you will be a key player in maintaining your company's financial stability, using your professional knowledge, and by marshaling the information and resources needed.

Here's a 10-minute video on credit and collections strategies during an economic downturn.