Perceive and apprehend the meaning, process, and benefits of credit management

Credit Management is considered to be a significant element of organizational operations. The function of credit management integrates abundant activities of any organization that makes sure that consumers and users clear their bills in a fixed payment term and conditions. An effective credit management assists in preventing delayed or slow payment. Obtaining it right strengthens the firm’s financial state or we can say the liquidity position as well. All these activities make it a crucial element in any business. However, credit management is often considered to be a tricky task. On the one hand a person wants to ensure the positive payment from customers and on the other hand that person should also be conscious enough to not to bother them continuously for making the pending payments.

The importance of Credit Management

Most of the companies do their peak best with an aim to bring in new business, but may limp at the concluding obstacle of ascertaining that converted into ‘paid deals’. It has been observed that more than half of all liquidations are a result of poor credit management and it showcases the relevancy of an appropriate credit management. The process of credit management comprises a lot more than just recalling the ultimate customers to pay. It comprises obtaining an in-depth scrutiny and the procedure of noticing the probable grounds and claims of non-payment. An efficient credit management is an absolute thorough process inclusive of significant aspects such as:

1. The process of credit management helps in ascertaining the credit rating of the customer in advance.

2. Frequently scrutinizing and supervising the customers for credit stake and risks is a part of an efficient credit management.

3. It supports in upholding the customer relations.

4. Detection of delayed and late payments can also be ascertained in advance.

5. Detecting complaints in due time.

6. An effective credit management eradicates the chances of any debts.

The process of Credit Management

The process of an impeccable credit management involves two fundamental steps.

1. Determination of the strategy – This step involves the keen analysis and observation of the aspects like the category of customers to be engaged with and under particular circumstances. The conditions and circumstances are also needed to be apprehended. Exclusion of certain customers over a particular time period also gets monitored in this step of credit management.

2. Preparation of legitimate procedures – The second and final step in the creation process of credit management involves the process of invoicing, types of invoice, customer reminders both telephonic and in writing, set of legal proceedings etc. All such aspects and procedures are analyzed in the concluding step of good credit management creation.

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