In order to survive as a credit department today, you have to understand how your credit department fits into the bigger picture. Is it more important to minimize risk or promote growth? Do you sell a large amount of a smaller product or a small amount of a large product? Understanding these questions and more are key to improving your credit department. Here are some we find the most important.
1. Play it Safe or Promote Growth?
We briefly discussed this earlier, but it is the single most important thing to understand. Is your department there to take very few risks or is it important that you take calculated risks in order to help drive sales? Knowing this will guide your credit policy and thus affect every other question on this list. The answer is often not 100% one way or the other. For a typical business, the answer is found somewhere in the middle.
2. What does the Future Look Like?
Never make a plan based on current conditions. When making a plan of how to improve your credit department it is important to look at what future conditions you will have to deal with. Are economic conditions changing? What is the outlook of your industry as a whole? Do you expect to offer new products or services in the near future? What is the outlook on sales in the coming months? These are all important questions to consider when creating a credit plan going forward.
3. How much does it cost to run your department?
At the end of the day, your department is part of a business and a business needs to make money. While it is clearly hard to quantify how much a credit department “makes” for your business, the cost should be viewed in the context of your total sales. Obviously, the more sales you are making, the more you will need to spend on your credit department.
4. What do you Employees Have to Say?
The call is ultimately yours. This does not mean that your employees do not have key information or good ideas. If you are considering making changes to your credit department, you should consult both the people who work in it and also the other employees in the business who deal with the department. They may have a great idea you never thought of.
Credit departments are key to any business’s success and it is important to always think about how you could be doing it better. What are some questions you ask yourself when trying to improve your credit departments?