Required Areas of Knowledge for a Credit Professional

To accomplish the goals established for the credit department and to perform the necessary core activities including collections including deduction management and credit risk mitigation, the following areas of knowledge and/or skill sets are required:

A Thorough Understanding of the Accounting, Financial Analysis and Finance Disciplines

All three of these disciplines come into play during the analysis of the customer. A mastery of both accounting and financial analysis is needed in the interpretation of a customer’s financial reports. Basic concepts in the area of finance, such as the time value of money, assist in determining the cost of offering credit terms for the perspective of both the buyer and seller.

A Comprehensive Understanding of Business and Credit Law

Many elements of the credit function require a thorough understanding of legal concepts. For example, a credit application can be used as a contract between the seller and the buyer. A cardinal rule of any credit investigation is: Know Your Customer. Is the customer a corporation, partnership or sole proprietor? Who are the owners? Antitrust laws, the Equal Credit Opportunity Act and the Fair Credit Reporting Act all have an impact on what the credit department can and cannot do. Securing a credit transaction involves the Uniform Commercial Code. Most of the legal issues affecting the credit function are discussed in this text.

Sound Business Communication Skills (writing and presentation)

The credit department must compose and send a variety of written communications to the customer as well as create meaningful reports to management. In management meetings, credit managers must be able to clearly explain credit issues in order to have input in general business policies and practices. Excellent verbal communication skills are critical when dealing with both internal business functions and with customers.

General Management Skills and Strong Negotiation Skills

As with most business functions, general management skills are a must. The ability to effectively manage, inspire and motivate credit department personnel is critical to the success of any credit department. As business changes, so do management techniques. There has been a shift to the team concept, which demands an understanding of how teams interface and work. Additionally, expert negotiation skills are invaluable in the collection area. General management skills also include the ability to assign responsibility, delegate authority and maintain accountability for the results.

Customer Service Skills

The credit department interacts with the customer and as discussed, also serves as the intermediary with a variety of other business units such as the sales department, the purchasing department, manufacturing or production and so on.  A customer is anyone to whom the credit department provides services or information meaning that the sales department and the shipping department, to name only two, are customers.  It is critical for every member of the credit department to recognize that interactions and communication with internal customers are just as important as their dealings with external customers.

Analytical Skills

The ability to analyze both the customer’s financial condition and general economic conditions and trends is key to a successful credit department.

Computer Skills

Many large companies have company-wide, integrated computer systems which enable the credit department to check on the status of an order at any point in time. In smaller companies, the use of stand-alone computer programs such as Lotus® or Excel® provide tools that are key to the credit function. Many companies use credit scoring programs to evaluate credit applicants. The explosive growth of the World Wide Web or the Internet have increased the need for computer skills. Information abounds on the Web; financial information on most publicly held companies is readily accessible. Additionally, participation in or the management of computer conversions are becoming common place in the every day activities of the credit department.

These skills will provide a credit manager with the tools to analyze, plan and develop credit department objectives, policies and programs to ensure its success within the business organization.

Edited by Michael Dennis. Mr. Dennis is a business consultant. Please direct questions or comments to him at mcdennis13@yahoo.com