The first step in creating a credit policy is crafting a Mission Statement for the credit department. While it may seem like a waste of time, or some pointless corporate exercise that has no relation to or benefit in the real world, a well-crafted Mission Statement can provide value to your credit department as a whole, and provide an anchor for the credit policy.
Why Create a Credit Department Mission Statement?
The reason a Mission Statement provides a benefit to the credit department, is the same reason that a set of core values is valuable to the business as a whole. It provides a distillation of the role of the department, and provides an outline for the way in which that role is to be accomplished. Besides being a mere theoretical foundation, though, a well-drafted Mission Statement can provide real-world, day-to-day guidance for the credit department. When a question of how to handle a certain situation is raised, a review of the Mission Statement, may provide some insight as to the best way to get it handled. By deciding to operate within the purview of the Mission Statement, the credit department has a ready-made guide.
Crafting a Credit Department Mission Statement
- A mission statement should be drafted after careful consideration of your company’s unique position in the market, and the company’s goals as a whole. This is not merely a list of things to accomplish, or goals to be met, but a description of the vision of the credit department, and how the credit department relates to or supports the mission of the company.
- The mission statement should reflect the company’s mindset, and describe how the credit department will fit within that viewpoint. If the company has aggressive growth goals, the credit department’s mission statement will necessarily be different than in a company with more modest growth goals.
- A mission statement is also dependent on the internal company structure — for example, if your company has an internal collections department separate from the credit department, the collection of past due accounts will clearly not be an aspect of the mission statement.
- While the marketplace and competitors should be considered on a general level in the crafting of a mission statement, the statement should be internally focused and drafted through the lens of the company’s views and direction — not be determined by outside pressure.
Sample Credit Department Mission Statement
The ___________ credit department’s mission is to facilitate sustainable growth, develop strong customer relationships, and protect the company’s margins and profits to maximize the value of the company’s accounts receivable. This is accomplished by minimizing exposure to bad debt and maintaining an acceptable level of risk by quickly and accurately processing credit applications, reviewing the credit worthiness of new and existing customers, setting appropriate credit limits and terms, securing extensions of credit, and collecting overdue accounts.