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What is the Credit Management Process and Why Does it Matter?

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The Credit Management Process

Simply put, good credit management is extending payment terms to customers and all of them pay their invoices on time, within the terms and conditions. That’s the dream. In reality, it’s very unlikely all customers will pay all outstanding invoices in full, at the time it’s due. Which is why you need a good credit management program.

Why It Matters

Credit management is important because it reinforces a company’s liquidity. If done correctly it will improve cash flow and lower the rate of late payments. It’s the difference between a high or low DSO, amount of bad debt a financial portfolio presents and even negative or positive customer relations. We’ve pulled together a few questions to help determine quality of your current credit management.

  • How are you evaluating customer credit? When new customers are applying for credit, you’ll need a system, manual or automated, to determine creditworthiness. Then a process in place to monitor over time.
  • What is your invoicing process like? This can also be manual or automated, paper or electronic. It’s important to keep in mind, nearly 1/3 of B2B organizations report more than 50% of their customers have unique invoice requirements.
  • Who handles the collections? It’s inevitable that customers will fall behind on payments. You’ll need staff to track down payments and apply them correctly. It takes on average more than 18 hours per week of a full-time employee to collect payments and more than four days to onboard new customers.
  • What is the role of your employees in this issue? A chronic reliance on manual A/R processes takes a human toll. A/R teams struggle to keep up with the high volume of customer requests and disputes as well as the increasing amount of invoice and billing errors that require attention.

If the above tasks do not fall under your core competencies, it’s time to consider credit management support. Each question is interlinked and can be automated or outsourced with an accounts receivable partner like TreviPay.

Choosing a Credit Management Provider

Once you’ve decided to seek a third party to help management your credit program, look for a provider with a comprehensive service and platform. TreviPay’s solution extends risk-free credit and automates A/R under your brand while providing protections against bad debt. TreviPay handles the underwriting, credit lines, onboarding, collections, invoicing requirements and more.

Schedule a demo today to see first-hand how TreviPay can help your business grow.

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