Module 2 - The Credit Manager & The Credit and Collection Unit

The CREDIT MANAGER & the
CREDIT and COLLECTION UNIT

ALLAN CRIS RICAFORT
12 Mar 2022
2 ND sem, AY 2021-2022
FMGT 60 - RICAFORT 2
CREDIT vs COLLECTION
Credit – refers to the processing, evaluation and

extension of credit.
Collection – refers to the activities related to
collection of accounts.
TOP MANAGEMENT CONCERNS
1. Should credit function be separated from the

collection function?
2. Should the same set of personnel handle both
credit and collection function as their collective
responsibility?
3. Who will make the final credit decision?
DECISION-MAKING POINTS
o How trustworthy are the members of the staff?

o Operating costs should be considered.
o The ultimate decision would depend on the top
management which should consider all these
circumstances.
DECISION-MAKING POINTS
o Credit Managers do not make the final credit

decision.
o Theirs are merely recommendatory, the final
decision being reserved to a higher official.
o The investors feel a lot more secured if the final
credit decisions are made by higher officials.
WHERE SHOULD WE PLACE THIS DEPARTMENT?
 The owner of the business –is the one who

directed the three main activities of a business.
 Production, Marketing and Financing.
 Under what activity should Credit and
Collection Department be?
WHERE SHOULD WE PLACE THIS DEPARTMENT?
 It is part of the financing branch of the business

activity.
 Credit is temporarily substituted for money in
the sale of merchandise.
 The company’s financial plan and credit policy
are bound to each other.
RELATIONS TO SALES DEPARTMENT
• The credit department is normally under the

control of the finance man, but in other business
it is actually under the sales manager.
• It is claimed that harmony of action is much
more certain of attainment where both selling
and credit approval are under one department
head.
RELATIONS TO SALES DEPARTMENT
• But since the main pre-occupation of sales is to

increase the volume of sales, there is the
possibility and reality that the credit function is
relegated to the background.
THE INDEPENDENT CREDIT DEPARTMENT
• A credit manager must make some delicate credit

decisions which command the best efforts of
experienced and specially-trained minds.
• The credit manager should be unhampered by any
outside influence to a decision and only subject to
review by the chief operating executive.
THE INDEPENDENT CREDIT DEPARTMENT
• The credit manager still needs to keep in constant

and closest touch with other departments.
• Consultations and conferences are essential for the
good of a business.
SALES CREDIT CONFLICT
• There is the constant fight for the good graces of

top management.
• The sales people are usually the pampered ones.
Attempts at minimizing the conflict:
 Placing the two functions in one.
 Program of continuous dialogue between salesmen and
credit men.
TIPS IN MINIMIZING CONFLICT
1. Exchange problems 6. Accept responsibility for

failure
2. Give credit
7. Acknowledge
3. Avoid memos
suggestions
4. Bank goodwill
8. Be humble
5. Keep your collaborator
9. Recognize needs
informed
10. Build a record
TIPS IN MINIMIZING CONFLICT
o The most potent weapon a company can have is a

profit-minded sales force working in positive
collaboration with credit personnel.
o The credit men should be sales-oriented, financially-
oriented, business-oriented, public relations-oriented,
inquisitive in nature, a problem solver, one who has the
ability to say “no,” flexible, and one who can make a
an unpopular decision and stand behind it.
DIFFERENT TITLES FOR CREDIT POSITIONS
o Credit Manager o Credit Man

o Assistant Treasurer o Credit Correspondent
o General Credit Manager o Chief Bookkeeper
o Branch Credit Manager o Credit and Adjustment
Clerk
o Loans Manager
FUNCTIONS OF CREDIT MANAGERS
• Usually reports directly to the Chief Executive or

Chief Corporate officer
• Responsible for formulation of credit policies
• Administration of credit operations
Responsibilities are accomplished through:

o Pertinent research into economic conditions
and business practices
o By establishing policies, procedures and
practices with respect to sales terms, financing
arrangements, types of credit and use of
capital.
Responsibilities are accomplished through:

o By operating the credit on sound principles and
practices
o By maintaining with other departments and
agencies internal and external relations
The Credit Manager must know his total

environment:
1. Reads at least two newspaper a day, two
magazines a week and at least a book a
month.
2. Aware of the political, social and economic
forces at work and in his community.
The Credit Manager must know his total

environment:
3. Must keep abreast of the latest business
developments and trends.
4. Current credit management courses here and
abroad emphasize the need for credit managers
to know the larger economic and social picture.
THE CARDINAL C’S OF CREDIT MEN
1. Competence and Capability

 Must know the area of responsibility
 Credit men who belong to management team
must be involved
 Must also develop the capabilities of employees
under credit and collection unit
 Must be concerned with own self-development
2. Communication
 Must be a good communicator
 Must have the ability to effectively convey ideas
3. Constructiveness
 Must be positive and constructive in his
approach to both credit and collection
management
4. Creativity
 Keeping pace with changing time and changing
conditions
5. Conscientiousness
 Must be devoted and dedicated to his job
 Must be a strong proponent of cooperation and
coordination in the entire organization
6. Consistency
 Must be consistent in making credit decisions
7. Certitude and Celerity

 Credit man not only acts with certainty and
accuracy but also with swiftness and speed
8. Contact
 Must have good contact
 Must have good public relations both within and
outside business organization
9. Cost-Consciousness
 One of the principal objective of credit is to
minimize cost in order to attain the overall
objective, which is to maximize profit.
10. Character
 Must also have character, honesty, integrity and
reliability.
11. Confidence
 Only where there is reciprocity of confidence will
mutual understanding and mutual respect characterize
the relationship between the credit man and customer.
12. Computer literate

 Must have basic knowledge of computers and
the ins and outs of information technology.
13. Congeniality, etc.

 Refer to personal characteristics, namely,
congeniality, charming personality, cleanliness
and courage.
14. Considerateness
 Must keep in mind that failure of a debtor to pay
is not always the result of deceit or fraud
15. Common sense
 Common sense is a must
ESSENTIAL TRAITS AND CHARACTERISTICS
1. Poise 4. Analytical mind

2. Good articulations 5. Academic experience
3. An aggressive attitude and/or indicated
capable of interest should be in
maintaining persistent the subject areas
and continuous follow related to credit
up of the credit and 6. Personal ambition
collection problems
Php 570,000 – Php 989,000*
salary range for a Credit Manager per year
*according to payscale.com
END OF THIS MODULE.

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The CREDIT MANAGER & the

CREDIT and COLLECTION UNIT

Credit – refers to the processing, evaluation and

1. Should credit function be separated from the

o How trustworthy are the members of the staff?

o Credit Managers do not make the final credit

 The owner of the business –is the one who

 It is part of the financing branch of the business

• The credit department is normally under the

• But since the main pre-occupation of sales is to

• A credit manager must make some delicate credit

• The credit manager still needs to keep in constant

• There is the constant fight for the good graces of

1. Exchange problems 6. Accept responsibility for

o The most potent weapon a company can have is a

o Credit Manager o Credit Man

• Usually reports directly to the Chief Executive or

Responsibilities are accomplished through:

Responsibilities are accomplished through:

The Credit Manager must know his total

The Credit Manager must know his total

1. Competence and Capability

7. Certitude and Celerity

12. Computer literate

13. Congeniality, etc.

1. Poise 4. Analytical mind

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