Role of the Credit and

Collection Department

GLADYS B. DIALINO
•Many companies, banks and other financing
institutions are now saddled with tremendous
receivables.

•The credit function is usually assumed by

the sales staff, and that credit extension is
only considered as incident to sales

•The creation of Credit and Collection unit

becomes an important need for any firm
engaged in credit extensions.
Basic Function of Credit
and Collection
•
To maximize profits and minimize bad
debts losses through proper credit
evaluation of each application and through
efficient and consistent collection follow-
ups.
Maximizing Sales
•Credit plays an important role in
attracting more sales.
•
•It is a reality that only about 10% of the
entire Philippine population may be
considered as can afford to buy on cash
basis durable goods which are medium or
high-priced.
Maximizing Sales
•The credit department must be a
business-better, not in the manner of
the sales department tactics, but by its
fair action and friendly attitude which
pave the way for the sales department.
•
•Chief functions of the credit
department – bind more closely the
customers to the institution.
Cooperation with Other
Department

•Another essential factor in effecting maximum

profits and minimum losses is cooperation with
other credit departments and other credit men.
•
•Credit men is dependent upon other credit men
for information and cooperative action.
Cooperation with Other
Department
•
•All credit managers are interested in the
same goal, namely, to raise the standard of
credit and thereby remove as much of the
risk from credit as possible.
Credit Department as a
Profit Center
•Top management are treating the credit department not merely as
a cost center, but as a profit center as well.
•
•Thecredit management is tasked with the job of subjecting the
investment in receivable to the test of profitability.
•
•Old approach - “What can credit do for sales.”
•
•More important - “What can credit do for profits.”
•
•Credit has its initial impact on sales but the ultimate goal should
be to increase profits
 Contribution of Credit Department to Other Areas

Support to Sales Effort Customer Counseling

management should encourage the credit department to provide a wise counseling may lead to saving of many customers and
balance to the sales effort. preserving profitable sales.

Contribution to Finance Task Force Assignments

Securing prompt conversion of receivable into cash and aid in the credit men can be in the forefront of new managerial
preparation of cash budget. developments.