Ten Comments on the Roles and Responsibilities of the Credit Department

In today's credit department, the risk of slow payment or payment default is a factor in almost every decision the department makes and every action members of the credit team take.  The department's success depends in large part on the ability of the credit and collection team to understand risks, operate in environment in which uncertaintly is the rule and not the exception, and where disaster could strike at any moment. With this in mind, the roles and responsibilities of the credit department in this business environment include:

1. Limiting uncertainty about the collectability of accounts receivable.
2. Evaluating loss exposures and addressing those risks proactively.
3. Applying various risk management techniques to control risk.
4. Implement a proactive risk management program.
5. Adjusting existing processes and procedures to address changing business conditions.
6. Being prepared to evaluate new opportunities and the risks that accompany them.
7. Controlling the direct costs associated with the risk management process.
8. Determining the appropriate level of bad debt reserves.
9. Managing the risks and rewards of extending open account credit.
10. Following an established, defined and refined risk management process.

© 2010 by Michael C. Dennis.  All Rights Reserved