Credit Managers?

Here are a few ways that customer credit limits established by the credit department can and should be used to help streamline the order release process while helping to control credit risk:

  • Establish a credit line for every active customer, including COD customers. Make certain customers are aware that credit lines can be changed from time to time, with or without advanced notice at the sole discretion of the credit department.
  • Always remember that credit line established for a customer is intended only as a guideline, and should not be used arbitrarily to deny credit to a customer.
  • It is important to update credit files and review credit lines at least once a year and adjust them based on the amount of credit risk associated with doing business with a customer. Major credit lines may need to be reviewed quarterly.
  • Work proactively with sales to determine what credit limit customers will need. Try to qualify customers in advance for higher credit limits. Why? Because it places a serious strain on the business relationship if orders are held by the credit department pending receipt of additional information needed to make an informed decision about whether or not to release the pending order.
  • Don’t rely on personal guarantees to ‘shore up’ a high-risk account when establishing a credit limit. In a worst case scenario both the company and the individual guarantor will file for bankruptcy protection.
  • When establishing a credit limit for a high-risk applicant that is a subsidiary of a low risk parent company, recognize that a parent company normally has no liability for the debts incurred by its subsidiaries.
  • Don’t over-use credit limits. Establishing appropriate credit limits will reduce the number of orders that end up on credit hold.

Category Categories: Financial

credit: Now I Can Say What I Really Think

After thirty years in credit and collection, I retired late last year and now I have the opportunity to say to other credit professionals the things that I could not say before. For example, I believe that the key to success is surrounding yourself with the best people you can find. You might be saying to yourself: That is hardly a revelation. You would be right, but the corollaries to this piece of advice include:

  • Terminate anyone who is not a team player, who is not enthusiastic, who is not doing the job or who will not do the job the way you want it done.
  • If keeping your best employee means promoting them over someone else with more time on the job, then do it. There will be consequences – but this the price you are going to have to pay if you are going to be a leader instead of a manager.
  • Never lower your standards simply to fill a position. Keep the job open until the right candidate presents himself or herself and ignore pressure from your employer to settle for someone that does not meet your minimum qualifications.

Another tip is to make sure there are individual goals as well as department-wide targets. In my experience, most employers are big on individual goals, but tend to assign the departmental goals only to the credit manager. You can be more successful by establishing both individual and team goals. These team goals should mirror the goals assigned to you. Expect resistance to the idea of team goals. It is likely that one or more of your subordinates is going to tell you they cannot control what happens in the department and that it is unfair for them to be evaluated based on how other employees perform. I suggest you tell them that this process is just as fair or unfair to them as it is to you, and that the only way that you can guarantee teamwork is to establish team goals.

If you want something done right, delegate it to the person with the right attitude – and not necessarily to the employee with the best credentials. Assign work to individuals interested in making a positive impression on you and on senior management. It might sound manipulative, but it is not. The person given the assignment has the opportunity to receive the recognition they want. An additional benefit involves the fact that you will be delegating the task to someone who is enthusiastic rather than someone who is resentful.

Stay positive, even if it requires that you avoid a co-worker who is not. Everywhere I have worked, there was always at least one person who did not want to be there. These people always seem to have something negative to say about the company and its plans – or about a coworker or management. These people seem to energy from the people around them, and the only way to avoid the energy drain is to avoid these people. You also risk being labeled a malcontent if you hang around with a malcontent.

In hindsight, I realize I made a number of mistakes along the way that hindered my advancement. For example, I did understand that there is no such thing as an optional company holiday party, picnic or similar event. Not only should credit professionals plan to attend; they should not leave early because their absence being noticed and noted by subordinates and superiors.

Category Categories: Credit

Manage Credit Card Debt

Carrying balances on credit accounts is a notoriously unwise credit usage decision, but it’s a trap into which many young money-users fall. If you have accrued a pile of credit card debt, it is vital that you turn your financial ways around and properly manage this debt to ensure that it is paid off as quickly as possible. By managing this debt intelligently, you can overcome it and venture into your financial future a reformed credit card user who is free from your previously overwhelming credit card debt.

  • Pay more than the minimum each month. If you pay only the minimum, paying off your credit card debt will be a lengthy process. Bankrate.com illustrates this by explaining that a $2,000 purchase will end up taking you 30 years to pay off if you only make the minimum payments on an 18-percent interest rate account.
  • Steer clear of your credit limits. If you haven’t already maxed out your accounts, don’t. The closer your balance is to your credit limit, the worse the impact on your credit score. Balances that nestle up to the credit limit are seen as a sign of over-extension.
  • Check your credit account statements several times a month. If you are still using your credit accounts, keep on top of your purchases by using your credit company’s online system to check on the account. This will help you keep track of how much you have spent and act as a reminder not to amass even more debt.
  • Keep a balance sheet if you find yourself frequently overcharging on your credit cards. Use an empty check register or a similar financial documentation sheet to keep a tally sheet of your credit card purchases. At the beginning of the month, write the amount that you can afford to charge and pay off that month at the top of the sheet, as if it were your account balance. As you make charges on the card, deduct these amounts from this available amount. When it gets to zero, stop charging; you are out of money.

Category Categories: Credit

How to Overcome Debt Problems

According to CNN Money, the average American family holds over $10,000 dollars in credit card debt alone. The average interest rate on cards is in the mid teens with some cards exceeding 20 percent. Overcoming debt problems seems impossible for some but the truth is it’s quite simple. It just takes time, discipline and patience.

Track Your Spending

  1. Make a list of everything you spend in a month. At the end of the month, review your list. You will likely find several items that easily can be cut from your spending.
  2. Create a list of bills and other expenses. Gather all of your bills and place them in a pile. List who you owe money to, the total amount and the amount due each month. With credit card and loan agreements list, also the interest rate.
  3. Pay down your highest interest debts first. These cost you far more money in the long run and usually carry heavy penalties for late payments. The sooner you can pay these off the better.
  4. Avoid paying just the minimum. With credit cards, the minimum payment just covers the interest. Pay more than the minimum each month if you can afford it. You’ll start clearing the balance faster.
  5. Put any left over cash in a savings account. Even small amounts start to add up. As the money accumulates you’ll have an emergency fund or extra cash to put toward debt.
  6. Ask for help. If your income isn’t sufficient to cover your monthly outgoings then consider credit counseling. A good credit counseling service can negotiate with your creditors and try to freeze interest and late fees. They can also help you with creating a reasonable budget.

Category Categories: Financial

Debt and Despair

The final problem with credit card purchases is directly related to a more emotional dimension of these purchases — debt. Americans are accumulating record amounts of debt at breakneck speed, perhaps because of the overabundance of great credit card offers. Credit card companies love to target college students, because they know that college students are notoriously poor and unrealistic. If these companies can “help” college students to spend money that they don’t yet have, they can be assured of monthly payments, and better yet, they can freely raise APR rates when those payments don’t come in on time.

These companies can also train young people to live by a debt mentality, so that even if they can get out of debt at certain phases of life, they will inevitably fall back into debt when the lure of certain items becomes too much for them. If you train people to buy more than they can afford — or to live by “soft,” unrealistic numbers instead of limited resources — you can keep them in a continual position of dependency.

Ideally, before you make a credit card purchase, consider the emotional and economical costs of the purchase. Ask yourself how you will feel after you purchase the item, after you bring it home and begin to grapple with its real cost. This simple question can prevent purchases that may cause regret over the long haul.

Category Categories: Debt and Loan