A Vote Of No Confidence – Michael Dennis, CBF

Inconsistent Choices

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

Michael Dennis, MBA, CBF, LCM

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.

One Reply to “A Vote Of No Confidence – Michael Dennis, CBF”

  1. I think you are correct his job could be in jeopardy if he continues with no consistency.

    A written credit policy should be available to all credit personnel,outling the process and procedure with a credit scoring criteria to base a decision.

    It should be a required process for all of his credit personnel to complete the credit scoring process of an account which intigrates all applicable trades/bank/credit reports/industry data/financials etc.

    The results should be submitted to the manager for him/her to make the final decision on a credit line to authorize the release of shipment holds.

Leave a Reply

Your email address will not be published. Required fields are marked *