A friend of mine was invited to a meeting in his manager’s office. The VP of Sales and the Controller were waiting when he arrived. He was told that sales management had no confidence in the credit department because the decisions made by the four people in credit with the authority to release orders or increase or decrease credit limits were “wildly” inconsistent. I asked an obvious question: Is there a difference in the way you and the other approvers evaluate risk and make credit decisions? He admitted there were differences.
He then asked the tough question: What should I do now? I responded that he had to focus on winning back the trust of his manager and the sales department, and that this was not the time to do anything in half measures. I said it was important to review all ship / hold decisions being made along with the credit limits assigned as well as the risks associated with applicants rejected. I added that if the problem was not addressed quickly that my friend’s job is at risk.
In my opinion, when credit decisions being made are inconsistent from person to person, the decisions appear arbitrary and poorly understood. I think it is critical for every credit manager to review ship/hold decisions and credit limits approvals from time-to-time as a way to be sure that the decisions being made are consistent irrespective of which member of the credit department
made the decision.
That’s my opinion. How would you handle a vote of “no confidence”?
Michael Dennis’ Covering Credit Commentary. Michael’s website is www.coveringcredit.com.
The opinions presented are those of the author. The opinions and recommendations do not necessarily reflect the views of CMA, or their Officers and Directors. Readers are encouraged to evaluate any suggestions or recommendations made, and accept and adopt only those concepts that make sense to them.