Overpower your Credit Manager – at your Peril
I write this piece with all due respect to Owners of businesses who have invested their life savings and hard work in a business, or simply the respect due CEOs who manage businesses.
My experience in the Credit World for over 40 years is that those same Owners/CEOs often forget that they have hired experienced Credit Managers and staff to guard one of their most precious assets – THEIR ACCOUNTS RECEIVABLE – Probably one of the largest assets on the Balance Sheet.
A scenario that I have witnessed too often over the years is – The Owner/CEO overrides the Credit Manager on either setting a Credit Limit or Opening an Account, where the Credit Manager has investigated and finds the Account Not Creditworthy. The Owner/CEO insists he/she knows the owners of the Credit Applicant business, they are old friends or associates and “they are definitely good for the money”. Later often, too much later the New Account goes broke, declares Bankruptcy and leaves a huge debt outstanding.
Who do you think is held responsible – Yes you guessed it – the poor lowly Credit Manager. The person who was hired with excellent qualifications, with excellent experience and judgement who now gets fired from the job. He/she is the person who takes the blame. It never will be the Owner/CEO who “takes the rap” it will always be the Credit Manager. Recently in the transportation logistics industry I witnessed this exact scenario – the hired CEO is still there, the honest hard working dedicated Credit Manager has lost her job.
In this case whose reputation is a total loss – yes maybe the Credit Manager, BUT most definitely the company who took the loss – it is that Company’s reputation that takes the hit – that Company’s image and loss of face that really looses. That supplier’s reputation “as an easy mark” a company whose Credit policies are weak and easily beat that will take the serious image blow.
In most cases that is or can be the “beginning of the end” of a good supplier company. They will be noted as a “weak credit grantor” and they will be questioned as to the real financial stability strength of the business. (The case I noted above lost $1,000,000.00 and in this case the Credit Information agency even advised against selling the account, but you guessed it the Senior Management overrode the decision – to its peril).
In the first place when we sit back and analyze the situation, the Company hired a well qualified Credit Manager, paid them good money and should have allowed them to do their job. An Owner/CEO is “playing with fire” when they countermand their Credit Managers judgement and decisions. Yes, perhaps the Credit Manager received “faulty” information but, that is highly unlikely. More often it is the “relationship” of the Owner/CEO with the principals of the Customer company that are at stake. They have deluded themselves with past associations or friendships or golfing buddies and allowed their good judgement to get set aside – at their peril.
My sincere advice to Owners/CEOs is – When you hire a Credit Manager with good experience and credentials – Let the person do his/her job and stay OUT OF THE WAY – NEVER INTERFERE OR COUNTERMAND
COST of this MISTAKE IS – it will cost you money to fire the Credit Manager and it will cost you more money to accept the ultimate loss of funds from a Bankrupt customer. Then of course is the loss of image of YOU and YOUR COMPANY. When the Bankruptcy Creditors List is published Your Company name and amount you lost will be there for all the world to see. It can be tough to put that aside with your business associates and club friends.
Author: Neil Campbell- One World Credit Services – GCS partner in Canada