There is more to being a credit manager than meets the eye. Many credit managers have honed specific skills in order to optimize sales and reduce debt losses for their companies.
These skills include developing useful personality traits, keeping organized, and pursuing continuing education. Developing a roadmap for your personal education plan and networking partnerships are some of the best things you can do to ensure you remain at the top of your field and be the best credit manager you can be.
But what does a credit manager do? Let’s take a broad look at the credit manager’s job overall, some policies and procedures all credit managers need to be familiar with, as well as regular job responsibilities.
Dig deeper: How to be a better credit manager
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Policies and procedures for all credit managers
In my time as a credit manager, there has been a constant need to stay on top of and up to date with laws and procedures as the years pass.
Policies and procedures lay the ground rules for everything that the credit team does. The credit world is not black-and-white — every customer who walks through the door will bring varying shades of creditworthiness.
Clear credit policies and procedures make sure everyone is on the same page, so two different people reviewing a potential customer would reach the same conclusion. The following are some of the policies and procedures that a credit manager is responsible for at their company.
The credit policy spells out the business’s approach to extending credit. This includes terms and conditions, contractual terms, collections, and accounts receivable.
A credit manager will ideally review this policy at least once a year and update it to reflect any changes in the company’s goals.
Learn more: How to write a credit policy
Credit procedures involve things that a credit manager will monitor, verify, and handle on all customer accounts. This includes processing credit applications, invoicing, dispute resolution, credit hold release, payment plans, third-party collections, and bad debt management.
Lien policies and procedures
Protecting the company’s lien rights on every project is essential. Even the most reliable, long-standing customers can go belly up without warning. A mechanics lien provides powerful protection to fall back on if and when you need to.
A credit manager will use the mechanics lien policy to make decisions about when to send notices or file liens. For example, your company might decide to send notices on all jobs, or only on contracts over $5,000. Having a typical policy in place will also set a timeline for taking action when payment is late. When do you send a demand letter? When do you send a Notice of Intent to Lien? At what point do you actually file a lien?
Lien procedures include collecting and verifying all job information before it starts, sending notices, and tracking deadlines to ensure lien rights are constantly protected.
‘Red Flags Rule’ policy
The red flag rules policy was implemented by the Federal Trade Commission. It requires businesses to adopt, implement, and identify fraud programs to help prevent and detect potentials for identity fraud. A written policy is required during training for all employees.
Construction is a risky industry: Nearly 1 in 3 construction businesses fail in their first five years — and that’s in a normal economy.
Even well-established companies went under during the pandemic. Having a set plan for when a bankruptcy notice is received on a customer of yours is a great way to maintain control of the risk level for your company.
Your bankruptcy policy will cover everything from filing claims, to establishing a creditor committee, to filing for an exemption due to trust funds.
What a credit manager does on the job
There are many daily, weekly, and monthly tasks every credit manager has to complete and keep track of as part of their job duties. These include setting, tracking, and reporting credit goals, dealing with credit reports, communicating with other teams, and more.
Here are some responsibilities credit managers have that help keep a business thriving.
Metrics are vital as they provide up-to-date data to make informed decisions as well as develop key areas for improvement. Some of the most used metrics are:
- Days sales outstanding (DSO)
- Collection effectiveness index (CEI)
- Accounts receivable turnover rate (ART)
- Average days delinquent (ADD)
- Right party contacted (RPC)
- Promise to pay rate (PTP)
Attending meetings with management and sales
When you are responsible for accounts receivable, it is expected that you will have continuous meetings with your sales departments to discuss AR status, potential mechanics lien filings, any new customer information, and the risk of new jobs coming in.
Depending on your company, meetings like this can take place on a monthly or even weekly basis.
Management meetings are also vital: They’re where the specifics of risk assessment are discussed — such as targets for metrics, bad debt forecasting, and collection team status.
Prequalifying customers and reviewing credit applications
Prequalifying customers is a vital part of the credit manager job, and the credit application is one of the essential tools. The credit app collects business and personal information that you’ll need to research a potential customer’s financial history and reputation.
There are many sources you can utilize when pulling credit reports — and understanding what you receive is of utmost importance.
When pulling credit reports, pay attention to the personal guarantee, verify information with the Secretary of State, review the length any credit accounts have been open, and calculate the average days to pay in the industry. You’ll also be able to see bankruptcies and tax liens, which you’ll want to watch carefully — they greatly impact your risk level.
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Verifying references is when you get to find out true insider information on a potential customer. Use your industry group network, contact competitors, and check those listed by your customer.
You can use other tools, such as checking a company’s financial statements, UCC liens, and even letting management review the information of a potential customer to make the right decision. Some companies use the management review to extend higher credit limits than they want their credit manager able to approve. They also use this process when a customer is denied credit to ensure all possible options were reviewed.
A credit manager’s daily tasks
Managing day-to-day tasks becomes repetitive — but easy to manage. Dealing with collections, accounts receivable, lien tracking, and taking on new jobs are all part of the credit manager’s schedule.
Credit managers deal with collections — reviewing your accounts receivable aging, making collection calls, sending emails, mailing out demand letters, and tracking down skips — on the daily.
As a credit manager, you will be receiving mail, posting payments, depositing checks into the bank. Additionally, you will be responsible for account reconciliations and dispute resolution.
You will constantly be entering new jobs, verifying appraisal district owner information, confirming general contractors, and finding bond information.
Another regular duty for the credit manager is dealing with mechanics liens: You will be tracking lien deadlines on all jobs in your system, drafting notices, and mailing out notices prior to lien deadlines.
Credit managers help a company succeed
As you can see, being a credit manager is no small role! A credit manager plays and integral part in their company’s financial success.
If you are interested in becoming a credit manager, it is important to learn about all your possible duties and responsibilities so that you can make a sound choice. In addition to a high average salary, a successful credit manager can attain personal job satisfaction as well as relative security in the field. For someone with the right qualities, a credit management career will prove to be a rewarding choice.
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