Credit management

Credit management is a broad topic and can even be so large and comprehensive that some companies choose to dedicate staff to solely handle the company's credit management.

Credit management, also known as accounts receivable management, is the process of managing credit to customers.

Credit management is based on the company's credit policies - and the more detailed the company's credit policies are, the better credit can be managed.

The vast majority of companies have little, if any, credit management - and may have only a brief credit policy.

How credit management works

Credit management can take many forms and varies from industry to industry and company to company. For example, banks and lenders have employees to handle corporate credit management, while few small businesses have a credit policy at all.

Credit management basically works on the basis of the company's credit policy and helps to control and maintain it.

A simple credit management in a company could for example be to manage and monitor its credits; credit times, credit sizes - but especially to make sure that the right customers have the right credit sizes and credit times.

If the company has liquidity challenges, tighter credit management is more important than if the company has high liquidity.

A large part of credit management is based on understanding the individual customer; knowing their payment history, if any, knowing their public accounts - and possibly performing a credit assessment of the customer. All to ensure that the customer does not get too much credit or too long a credit period.

Monitoring can also be built into credit management so that the customer is continuously monitored - and interesting facts about the company's status, financial situation, owners and the like can be followed. This monitored information can then be updated on the customer - and thus change or update which credits the company wants to grant the customer.

The purpose of credit management

The purpose of credit management is to minimize losses on debtors and customers.

All credit comes with a risk - a risk that the debtor dies, goes bankrupt or doesn't pay your invoices at all.

With effective credit management, you can reduce or even avoid bad debtors.

In practice, it's difficult, if not impossible, to avoid bad debtors, as many factors can change the debtor's financial situation. But all practice and theory shows that effective credit management will significantly minimize your losses.

Get help with credit management with Qatchr

Qatchr er et online værktøj til at indhente kreditoplysninger, som du kan bruge i din kreditvurdering af privatpersoner og kreditvurdering af virksomheder. Qatchr giver dig et indblik i dine kunders økonomiske situation og kan eksempelvis oplyse dig, om din kunde står opført i et gældsregister.

If so, you have the opportunity to use this knowledge actively in your credit management.

Contact us today if you're interested in learning more about how Qatchr can help you with your credit management.