After an interesting career as the senior Management Accountant in an international food flavours business, John* knew that the merger of his company with a competitor was going to mean his role was disappearing. He braced himself for the inevitable redundancy but to his surprise he was not sacked but sent back to college!

His bosses had noticed his tenacity and attention to detail and wisely realised that he was just the man to take on the much needed Credit Controller role. The company had, to be honest, been a little lax in getting their invoices paid promptly and John’s role was to fix that. John was euphemistically asked to take over the Credit Management Dept but in fact it meant setting up the Credit Management Dept! Companies that are cash rich are not always as bothered as they should be about cash flow.

Whilst John had to get qualified as a Credit Controller which he thoroughly enjoyed, he did bring to his new role his time in purchasing for a small cash strapped company many years before. He claims to have created most of the reasons why firms don’t pay their bills. The most ridiculous he came up with was “the dog has chewed up the cheque and the boss isn’t in so he can’t send another one”.

Having passed his exams, back at the office in his new role he began to look at the “aged debt”. To his  amazement there was a significant amount in the “over 120 day” column. Further investigation revealed some of these were 3 years old!

So over now to John to continue the story in his own words and share a few insights that help keep the aged debt report neat and tidy and the bank balance in a reasonable state:

“Knowing that the reason the majority of small companies fold is because of poor cash flow, the apparent reluctance to ask their customers for money which rightly belonged to them, left me, as a new recruit to credit control, speechless! Taking on credit management was a steep learning curve for me but the top ten things I learnt were:

  1. One thing I quickly had to learn was that I was only asking for money that belonged to my company. I was not asking for a favour so why should I feel embarrassed? And yet this was the main reason calls were not made.
  2. Make sure your credit terms are discussed at the same meeting as price and delivery. A frequent oversight is when your Account Manager wins a piece of business but overlooks the credit terms. Boring or what, but this is a very significant part of the agreement that is often forgotten. This immediately puts the Credit Manager at a disadvantage, by not knowing when an amount of money is due for payment.
  3. Next comes the invoice with errors on it. This immediately gives the recipient a get out of jail card. An error on a price led me as the raw recruit to ask “Well pay me the correct amount and I’ll organise a credit note”. “Sorry the system won’t allow it” is the reply. How many times have we all heard that?
  4. Work with your Sales Office to ensure all invoices sent are “clean” invoices and clearly show the payment terms.
  5. Reminder letters are usually filed in the bin so I didn’t bother with these too much. There is nothing better than a good old fashioned phone call!
  6. In most companies, the Credit Manager has the authority to block deliveries should payment not be received. In global companies this is a powerful tool and should only be used as a last resort. Meetings or conversations with the Account Manager are the first approach. Expect a lot of opposition in this area of business. No Account Manager will like their customer put on hold for fear of losing the business. You could also encounter abuse from the customer. On one occasion a customer threatened to report me to my Company Chairman in New York. I gave him his telephone number but to my knowledge the Company Chairman was not dragged away from his duties!
  7. Be careful before you go down the CCJ route (County Court Judgement) which is a way of getting your money if all else fails. I recall a particular customer being in all sorts of financial difficulties so he decided to call a suppliers’ meeting. We all met in a London hotel and the CEO made a presentation about the future plans. It was so bad and unbelievable every customer there dashed down the motorway to their office to organise CCJs on the customer. Needless to say I ended up with a bad debt.
  8. Be prepared to work patiently sometimes with a customer who genuinely wants to pay. I recall working with a customer who had cash flow problems and by working with him over a period of time he pulled it round. I did this by receiving regular payments that were slightly more than the new orders until he returned to an even keel.
  9. The Government does a lot of huffing and puffing about late payments from the large global companies but when all is said and done powerful companies are in a position to bankrupt any one of their smaller suppliers because they have become too large a part of that business. I recall meeting one of my regular suppliers who told me he had just won a very large piece of business. Having congratulated him I was amazed when he said he was not going to take it up. Asked why he responded by saying “I will not take on a piece of business that I can’t afford to lose” Without question they are very wise words.
  10. In spite of a large number of business failures through poor cash flow, the penny has yet to drop with most companies that good Credit Managers are worth their weight in gold. Whilst remuneration packages for those working in Credit Management area remain lamentable, the best people will work in other areas. Wake up business, and, who knows, you may be still trading at the end of this millennium!

When all was said and done I thoroughly enjoyed my few years in Credit Management and believe it can be a great career. I encourage more young people into the profession.”

*John Snell is now happily retired as Credit Controller at IFF and has a new retirement career running, with his wife Sharyn, Ixworth House, a B&B in Ixworth Suffolk. He is well known for keeping guests’ breakfast orders on an Excel spreadsheet! Ixworth House is winner of the Channel 4 “Four in a bed” programme.

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