Life of the Credit and Collections Industry – Past, Present, and Future
...sed demands for increased revenues and profits, while decreasing losses; and · Increased demands and challenges of doing business in rapidly changing global markets. Credit professionals are dealing with these and other challenges daily. And, they must be victorious if they are to survive in this new millennium. In the immediate and necessary future, they must take the initiative to expand their skills base: learn new computer software for desktop and internet; communications and negotiations; leadership and team building; to embrace the concept of "thinking outside the box" to develop solutions to meet the ever increasing demands of both internal and external customers – including customer relationship management and the utilization of rapidly evolving technology to improve the operation of your credit department – while reducing costs; web-based electronic order receipt/entry, billing and payment receipt/application, and data imaging and document management.” In an interview with John McCann, Credit Manager for King Architectural Metals in Dallas, TX, he explains his goals over the next ten years to better the credit function of the company: “It is the responsibility of the manager of the credit department to plan and direct the activities of the credit function within the guidelines of company policy. The goals and objectives of my credit department in order to anticipate and adjust to the ever-changing business environment are to: · Increase sales and profit through a better understanding and skillful handling of all credit functions; · Match risk and reward through customer and financial analysis; · Monitor, protect and manage the company’s investment in accounts receivable; · Communicate the condition, cost and trend of the company’s investment in receivables to management; · Convert accounts receivable to cash in a timely manner; · Increase cooperation between sales and credit; · Maintain and increase goodwill in customer relations; · Coordinate credit activities with all departments; · Train and supervise credit department personnel; · Educate other departments about credit and the credit function; · Control operating costs and expenses; and · Reduce collections and bad debt. In order to accomplish these goals, employees of the Credit and Collections department must be competent in the following areas of knowledge or skill sets of: a thorough understanding of the accounting, financial analysis, and finance disciplines, a comprehensive understanding of business and credit law, business communication skills in writing and presentation, general management skills including negotiation skills, customer services skills, analytical skills, and computer skills.” According to Dun and Bradstreet (1998 2), “It has been a tumultuous year for the credit-and-collections industry. Consumer credit quality continues to decline as bankruptcies soar to record levels. Downward pressure on collections fees, increasing needs for investments in technology, continuing globalization of all industries, and the relentless pace of consolidation are forcing everyone from credit card issuers to sub-prime auto lenders, commercial creditors to credit bureaus, attorneys, and agencies to rethink their strategies.” Currently, in 2004, the credit and collections industry is still experiencing these same trends and forces, with an extreme and major hit to the economy after September 11, 2001. Marcus Evans Ltd. (2004 2) anticipates the current and future changes that the credit and collections field are and will be experiencing by stating, “As we face a tough economy, personal and commercial bankruptcies are on the rise. As a result, credit and collections professionals are under increased scrutiny to protect their companies from risk and to collect as much revenue as possible. Yet with pressures to decrease departmental costs, it becomes increasingly difficult to balance the investments involved with new methods, technologies or outsourcing partnerships. Increasing regulatory and competitive pressures are testing credit executives. Mounting compliance for tighter internal controls and a greater need for accuracy of accounts receivable including all actual and forecasted bad debt issues. Pressure from international markets has forced American businesses to be more competitive than ever. This pressure is intensified when regulatory requirements are imposed on American companies while similar restrictions do not exist for foreign corporations. Credit managers have seen their job transformed over the past few years with software providing a greater functionality, better analytic capabilities and the enhanced ability to transmit critical information where it is needed allowing credit professionals to focus on collections efforts. Business credit is the single largest source of business financing by volume, even exceeding bank loans. Congress has realized that in the Federal regulation of the credit reporting process, there is a greater need for business (as opposed to personal) informati...