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A Blog from David Thornley at the Chartered Institute of Credit Management

18 May 2017

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If you are a director or a CEO of a company which sells its goods or services on deferred payment terms, then you are necessarily in the position of having to manage the attendant risk of default.

Through this article I would like to invite all of you who are charged with this responsibility to lend some thought as to how you go about managing this.

Hopefully, you will employ a qualified and experienced credit professional and provide him or her with the necessary resources and offer the appropriate level of support to enable them to perform their task. But the wider question is how much is the contribution of the credit department valued in terms of how best to utilise this crucial function in order to reach the organisation’s objectives? And is this reflected in the remuneration package and career development?

The answers surely lie in what the credit department is expected to deliver within the framework of the company and the market in which it operates. If the function of the credit team is viewed merely in terms of chasing down overdue balances, then it is likely that the staff populating that team will be treated within the same narrow confines.

If, however, the credit manager is allowed the scope to draft, develop and implement the company’s credit policy and if he or she is allowed to recruit and train the staff in their team, then the credit department will contribute massively to the success of the company. A good credit team will ensure strong cash flow and minimise the effects of bad debts during tough times and provide the platform and the impetus to the sales team to allow them to seize opportunities and gain new business.

As an example, a friend and CICM colleague of mine recently related a story to me of an MD who was aghast when the credit manager requested the sales projection figures for the following year; considering it to be beyond the Credit Manager’s remit. But without that information, how can the Credit Manager be expected to accurately assess the credit he or she will be asked to grant? And why should he or she not be trusted to receive the sales projections?

A good, well-trained credit professional is a genuine all-rounder; he or she is part accountant, part lawyer, part negotiator and part customer service expert. Such qualities are well worth investing in and developing for any organisation.

All too often, however, it is easy to neglect the credit department. Excellence comes as standard and they typically perform their duties quietly and unobtrusively, only receiving attention when something goes wrong. There is no criticism intended, CEO’s and MD’s have enough on their plates, and a well-performing, low maintenance credit department represents one less thing to worry about. But credit professionals, like everyone else, need to feel valued and know that there is scope and prospects for career development. Sadly, this is not always the case.

The Chartered Institute of Credit Management is an organisation on whose national advisory council I am honoured to serve. We are committed to promoting best practice in credit management, through such initiatives as our apprenticeship scheme, our learning and development courses and our CICMQ accreditation programme.

If you are a business owner or CEO and are keen to develop your credit management profile, then please get in touch with the CICM

Remember, cash is the lifeblood of any business and businesses which fail often do so through lack of it. Good credit management can go a long way towards preventing this.

David Thornley

Chartered Institute of Credit Management, North West


IoD North West welcomes blogs from organisations seeking to promote responsible business practice and sustainable growth. If you would like to share a blog with us, please contact Claire Ebrey with your idea. 

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