12 Tips to Becoming a Better Business to Business Credit Risk Manager, by Michael C. Dennis

Michael C. Dennis

Even the most experienced credit professional can become a better risk manager. From the novice to the professional, learning new skills is crucial to ensuring that the risks of late payment or customer bankruptcy are mitigated. These simple tips are worth considering:

  1. Expect to Find Something Negative in each Customer Financial Statement You See
    Perform every review as though you expect to find something wrong/problematic. Doing so ensures a more thorough analysis, and may prevent overlooking a problem. If you don’t find one, check your work!
  2. Learn to Listen to What Your Collectors Tell You
    Let your collectors tell you what they think about their customers. Listening to them helps you be a better credit manager.
  3. Review Your Credit Policy Periodically
    When explaining difficult concepts internally, refer back to the written credit policy.
  4. Understand Various Risk Mitigation Strategies
    Credit pros need to have more than a basic understanding about a variety of different risk mitigation strategies, including ( but not limited to) the use of guarantees, letters of credit, the use of collateral or security and credit insurance.
  5. Make Every Phone Call a Learning Experience
    It is crucial to make every discussion with a delinquent debtor a learning experience. Learning what does and does not work well for you over time is an important learning process.
  6. Always Be Aware of What Your Collection Results are Telling You
    One of the primary measurements of your overall effectiveness is reflected in the Accounts Receivable aging report. To be a better manager, you need to know what your aging report is telling you.
  7. Ask for Help
    Never be ashamed to ask for help. Pride has probably cost more CM their jobs than any other factor. If you are not sure, seek help.
  8. Shorten Turnaround Time
    Take every opportunity to try to determine how to shorten turnaround time on decisions and actions taken by the credit team.
  9. Slow Down If You Feel Rushed
    Rushing will cause you to make mistakes. If you begin to feel rushed [example, by the salesperson] stop. Slow down, walk away, consider or reconsider your position.
  10. Precision is Critical
    To be a better CM, you want the actions taken by the Credit Department to be exactly as you expect it to be; not approximately what you expect to happen. Therefore, it is crucial to make sure that your standards are not declining over time.
  11. Continuously Refine
    Make changes in your department by making multiple minor tweaks rather than one big change, and by giving members of the department numerous small nudges as opposed to one big push in the right direction.
  12. Ask Questions
    It is impossible for even the best credit professional to know everything. Things happen from time to time that you don’t understand. If something makes you uneasy or looks unfamiliar, look it up or ask about it.

What would you add to this list? I welcome your feedback.

Michael C. Dennis is the author of the Encyclopedia of Credit (www.encyclopediaofcredit.com), a free, fast, internet resource for credit and collection professionals. He is a consultant, and the author of “Credit and Collection Forms and Procedures Manual” as well as a frequent instructor at CMA-sponsored educational events. He can be contacted at 949-584-9685.