Good Afternoon,
Currently, I am managing a credit team that has both credit and collection responsibilities assigned to one person. I am seeking some feedback on the pros and cons of structuring a credit team where the credit and collection responsibilities would be separated, whereby one person manages credit (order holds, new applications, credit limit increase) and the other person manages collections (heavy focus on cash collection, dispute resolution, etc.).
I would like to know what worked well and what you found to be the most challenging with this type of structure. How did this impact your internal and external customers? Did this make your team more productive?
Thank you in advance,
Jeff Perlstein, Director of Credit, Berlin Packaging,
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I am sure answers will depend on the type of business you are in, the number of people in your credit department, the knowledge of those people, and the number of new customers you get.
For my team, I have several people assigned to cash collection and dispute resolution. One does not have to have the knowledge one would require to analyze financial statements, understand credit reports, or what the results mean. If these people have difficulties, they will escalate the matter to the credit manager. They will look to see if we have orders pending and request that the account be put on credit hold which will stop the shipment of the product.
Note that none of my team aspire to be credit managers or do more than they do. They are good at what they do and happy with the status quo. With my last hire, I expressed that I was hoping they would be able to take over for me. However, it turned out they are not management material. Good collector though.
The collecting of data for reviewing a credit application is done by one of those same people. We get about 30 to 40 credit apps a month. All higher-level things such as activate/inactivate accounts, credit holds and releases, credit reviews, limit increases, negotiation of deposits, management of credit master accounts, analysis of KPIs, etc. are done by the credit manager.
However, if you had people who were at a higher level than what I have you would be able to divide duties differently. I would think that currently, the biggest benefit from managing the way we do is lower salaries.
Cheryl Fischer CCP BA, Credit Manager/OE Manager, Krug Inc.
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Hi Jeff,
We've been considering this change for some time but have not at this time implemented it, so while I can't comment on actual experience my opinion is;
Pros:
- A consistent approach to review and analysis
- One contact to manage all reviews, releases, and new apps (benefit to internal customers)
- A credit analyst is focused on customer performance and objective analysis as opposed to personal relationships that may bias a decision one way or another
Cons:
- Knowledge gained through (potentially) years of experience with the customer is lost/not understood
- Customer needs to discuss credit needs with someone who is disconnected from their business and with whom they have no relationship
- Subjective assessment of a customer (based on other information not necessarily related to financial analysis or payment performance) is lost
You can see that many of the benefits may also be perceived as drawbacks, it depends on your perspective. If you have a large team and can have one or two people only managing the credit side of the business, I suspect it may be more efficient but you need volume (so the credit analyst is consistently busy) to achieve these efficiencies.
Paul Watters, Director Worldwide Credit & Treasury, MercuryMarine
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My setup is the same as Cheryl's, currently and throughout most of my career. It has worked; however, I am being tasked by our HQ office to change the structure and separate management of deductions as a separate team due to the high volume and need to specialize.
I would also be interested in continuing to hear which way most teams in a lean environment continue to operate?
Rosa, Ferraris, AR, Credit & Collections Manager, De'Longhi America Inc
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We have had our department separated like this for years and it works well. We have a very small department now with just 3 full-time people, and a part-timer, so it's a challenge and we wear many hats. But my assistant credit manager handles all the holds, credit reports, new accounts, and financial statement reviews unless it's over a certain dollar limit. Then I have to approve those.
Sometimes with a small staff, the analysis person has to take on some collection accounts or works the orders on hold for past dues. Plus, this person currently handles the sales tax forms and many other things. We all help each out in in many areas. I used to have 6.5 people prior to Covid.
Kim Newbury, Director of Credit/Customer Compliance, The Antigua Group, Inc.
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I have worked in several different environments throughout my career. I have definitely found that making the handling of deductions a specialized position (especially in high-volume environments) is beneficial. If Credit Analysts are responsible for Credit, Invoice Collections, and deduction management then getting around to handling deductions is usually the lowest priority. By segregating the function and making it someone's high priority you are better able to notice changes in trends and stop problems and prevent deductions from occurring in the first place.
Linda M. Morich, Credit Manager, Isolatek International
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